HealthStore in Print

Franchising Provides Prescription for Africa's Poor

Published: Franchise Times
Date: April 2004

It was 1995 and Scott Hillstrom was living the good life: He was 42 and independently wealthy. An attorney by training, he had just sold his company, a physician network of multi-state rehab medical practices he started with his brother and a friend who were both doctors from the Mayo Clinic. He had retired and moved his wife and three teenaged daughters to the coast of New Zealand from the cold frigid, winters of Minnesota.

But, one day, that good life was threatened. He was laying on a road. It was raining. He was wet and cold-there was a strong breeze and he was at risk of hypothermia, and, probably, going into shock. His face was cut and he was bleeding a lot from his head, as head wounds will do-he just had a head -on collision with a truck on a mountain road in New Zealand, and had crawled out of his car.

Amazingly, he says, he was "totally lucid." And as he waited for help, he had time to think about his life. He had status, nice cars and achievement. It sounds cliché, but when you think you might not see your family again, you start weighing things in the balance, and nice cars, well, they just don't stack up.

Fast forward, Hillstrom recovers, but because of the accident, decided he needed to make a bigger impact in life. And he's using franchising to do it.

Currently, his non-profit organization, SHEF (Sustainable Healthcare Enterprise Foundation) has franchised 61 micro-pharmacies called CFWshops in Kenya, Africa. This is Hillstrom's way of getting inexpensive-but essential-drugs to rural areas in that country.

His "Ah-ha" moment arrived while he read the morning paper. A fact: 25,000 children die everyday because they don't have access to medicine that would save them-medicine he says costs less than a cup of coffee. One of those killer diseases is malaria.

He researched and discovered franchising might be a way to regulate drug distribution and get the product to poor, rural communities safely and efficiently. After many discussions with franchise developers in his adopted country of New Zealand, he founded the non-profit SHEF, the franchisor of CFWshops pharmacies, and headquartered in Minneapolis.

By the end of 2004, SHEF will have more than 100 shops operating and will have served a total of 1 million patients-all for less than $2 million, he says.

"This is what franchising has done," he reports. "Something that large organizations and governments haven't been able to do."

This is how it works: CFW combines well-established micro-enterprise and franchise business models to enable heath-care workers-and now nurses-to own and operate their own business supplying medicine and medial services to poor communities in Kenya. They cover the cost by accessing a micro-loan, which they can usually pay off in two years or less, and their own equity. SHEF trains them, and controls the supply and cost of the drugs, making it affordable for residents in the rural community to get rehydration therapy, malaria medicine and painkillers.

The start-up cost for each shop is about $5,000. Franchisees spend $200 of their own working capital and borrow about $1,000 more to pay out of pocket costs, including training, essential drugs and supplies, furnishings and equipment. Once open, each franchise outlets buys the drugs from SHEF, which ensures they are safe and affordable.

Over time, SHEF is expected to cover all operating costs through the revenue it earns from franchisees. The goals is to have the network be self-sustaining-and of course to open more shops and increase the service areas throughout Africa. He projects about 500 shops will open by 2007, which is the break-even point for the organization.

"These people have no business skills; no concept of how to build a business," said Hillstrom. SHEF teaches the CFWshop owners these skills.

Franchise attorney Tom MacIntosh of Mackall, Crounse & Moore in Minneapolis met Hillstrom at his Minneapolis Rotary Club meeting a couple of years ago. It's a strange twist of fate that someone looking to get into franchising would sit down next to MacIntosh, who is now a member of the SHEF franchise advisory board.

"I think what fascinates me most is that here's an entrepreneurial concept he's taken to a third-world country that you and I think of as economically depressed," said MacIntosh, "and (the people in Kenya) have embraced this opportunity. They've embraced this opportunity to make their own business."

"It's going back to really helping people," said Brad Fishman, president of franchise public relations firm Fishman PR, who has also joined the advisory board. "They are teaching entrepreneurship, but they are helping the villages, as well."

Fishman joined the board because he wanted to give something back, and he believes in Hillstrom.

"I think he's got credibility, and that's half the battle," he said.

Enough credibility that the World Bank has asked SHEF to assemble a franchise advisory group to address social franchising.

"They want to learn more about franchising," said Hillstrom. It's his intention that once the World Bank's policy makers understand the impact franchising can make on the world's poor, they'll make more money available. For years, he says, the World Bank has invested in the world's poor through micro loans.

Other major organizations are noting SHEF's success: World Vision, a global humanitarian organization, is working on a partnership with SHEF to bring CFWshops to other parts of the world, and SHEF has a strategic allegiance with Management Sciences for Health, an organization that receives funding from the Bill & Melinda Gates Foundation.

But when Franchise Times talked to Hillstrom, his goal was to get the word out to franchisors.

"The knowledge and skills (franchisors) posses can help the developing world," he said. "What they know holds more promise for the poor than any government, foundation or program."

Copyright ©2004 Franchise Times Corporation

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