Kenya: Franchising Health Instead of French Fries

9 April 2008

Scott Hillstrom is founder, chairman and CEO of the HealthStore Foundation, based in Minneapolis, Minnesota, in the United States. The foundation aims to improve access to essential drugs, basic healthcare and prevention services to people in the developing world.  

The organization uses the franchise business model, having opened 65 outlets, known as CFWshops in Kenya, and is aiming to expand to Rwanda this year. The Kenyan shops are operated by the Sustainable Healthcare Foundation, an NGO set up by Hillstrom's group. Of the Kenyan outlets, 48 are medical clinics run by nurses and 17 are drug shops selling non-prescription medication and run by community health workers. Plans are underway to open an additional 30 CFWshops in Kenya this year.

How did this project come about?

It started when I learned that 25,000 children died each day because they did not have medicine that costs less than a cup of coffee. So I went to Africa to find out why and discovered that the average family can afford to pay for the medicine they need, usually to save their child's life, but the medicine they had access to would be very poor or counterfeit, or the services they would need to properly diagnose a disease were not available. In many cases there was no access at all to health care that was close enough to home for people to get to easily.

It occurred to me that maybe we could use the same franchise methods (as fast-food chain McDonald's)… in order to deliver health care in developing countries. So I went to a McDonald's franchisee that I knew and began to learn about how franchising works… Whatever you may think of McDonald's French fries, they are of an amazingly consistent standard – you can buy them anywhere and they are exactly the same as any other McDonald's French fries elsewhere in the world.

I [also] met some of the world's leaders in the global public health community at places like Oxford and the World Health Organization, and then I met with a number of franchise industry people to learn more about franchising. It was a very long, arduous process.

How many shops will you start with in Rwanda?

The model we're going to follow in Rwanda is an improvement over the model we have in Kenya… It's more streamlined, lower cost and it will scale faster.

For any large-scale health intervention to work there must be three things true of it. First, it must maintain business and clinical standards because what maintains business standards can be replicated, and if clinical standards aren't maintained then medicine doesn't work. The other two standards are that the business is scalable and can achieve economies of scale: scalable means there are many locations where patients can access drugs and services of consistent standard; economies of scale means that the cost per unit of service rendered decreases as the network grows.

It took Subway (sandwich shops in the United States) something like 10 years to get 70 outlets but in the following 30 years they grew to 27,000 outlets. In Rwanda, [first] one (HealthStore Foundation shop) is opening, then five and by the end of the year 15 or so. But the tenth year out we might have 300 outlets and might be able to open 100 in a single year.

If we're ever going to create large-scale access to health care for the poor and if it can only be done one outlet at a time it's only going to be done by franchising. If we had as many of these kinds of outlets going as Subway had sandwich shops we would reach about 150 million patients per year, we think, at a cost of less than one dollar per person.

In most developing countries there is very little standardization on the business side [of health care] and clinical standards are very low. So for example, one half of the drugs for sale in Kenya are counterfeit, so it is very important to ensure that all of the drugs that are sold are high quality drugs.

How do you screen medications to ensure they are of high quality?

You purchase the drugs from suppliers who test the drugs they sell. Then you maintain a secure supply chain out to the outlets.

How do you maintain that secure supply chain?

The drugs are delivered by our own field workers to the franchises and we have some standard drug-handling procedures at the shop level. We track inventories and we have a number of other ways to control that.

Do you partner with multinational companies?

We have a partnership with ExxonMobil where we have developed what I call the Exxon protocols for the detection, diagnosis and treatment of malaria, using the latest state-of-the-art malaria medicines.

We also have another partnership with Procter and Gamble where we do two things. First we distribute a product called PURE. It comes in a little sachet that you pour into a few liters of turbid, filthy water, stir it for awhile, filter the water and it's drinkable. It's a very cheap way to produce safe drinking water. They're also helping us develop better retail distribution models at the shop level.

Have you been looking at doing anything to help fight diseases such as meningitis?

The fact is that something like 70 percent of illness and death, particularly among children, is caused by a shortlist of four or five diseases. The common ones are malaria, respiratory infections and dysentery. Usually these can be treated with low-cost generic drugs. We concentrate on a shortlist so that we can be good at doing that. We don't try to be a comprehensive health care provider.

In order to have a replicable format it is essential that we can standardize everything that we do. It's not that hard to standardize the treatment of dysentery, malaria and respiratory infections. But it's very hard to standardize the diagnosis of meningitis. We are also very low-cost format so we don't have medical labs and testing equipment and so forth that would be necessary for testing diseases such as meningitis.

Also, health care facilities around the developing world are congested with children with these common diseases. One of our goals is to have very small low-cost outlets in villages where children live so they can be treated at that level for the majority of health problems. So the people who are not so easily treated as the children will have more access to higher level, more comprehensive health care.

Are you engaged in the fight against HIV/Aids?

We just received a grant from USAID where we will be treating opportunistic infections of HIV/Aids patients. We're not dispensing anti-retroviral drugs. We don't treat Aids, we treat patients with Aids. We think the franchise model is a possible solution to the last-mile problem in Aids treatment though. The huge challenge is to reach the rural patient, to maintain a secure supply chain, to make those drugs available every day of their   lives and to make sure they're used properly.

Who are the franchisees of the CFWshops in Kenya?

All of the medical clinics are owned and operated by nurse practitioners, regular nurses with a minimum of 10 years' experience. The drug shops are run by community health workers who have low-level medical training but they have most of the skills needed to do prevention and education activities and to distribute over-the-counter medication.

How do they purchase a franchise?

They need to raise a few hundred dollars of their own money, so they have an investment risk as all franchisees do. We provide the working capital they need beyond that to get their outlet open. We provide management and support services to each franchisee and we conduct compliance activities to make sure standards are maintained.

What I'm describing is what I would call "ideal." I don't want to lead you to believe we achieve the ideal, far from it. We have all kinds of problems, failings, weaknesses and difficulties. The bad news is that it's really hard to do this in Africa, especially when you don't have electricity, telephones … but the good news is most of the problems we experience are not unlike those experienced by early-stage franchise networks in the United States.

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