splash microfranchise proposal final

oakley1008 Hewlett-Packard

1/1/2010

Youth Microfranchise Initiative: Splash Microfranchise Proposal

This report analyses the mobile transaction market and industry and uses those analyses to propose microfranchise conversion plan to employ at least 1,000 youth in Sierra Leone. Prepared for : Prepared by:

2010

TABLE OF CONTENTS Executive Summary ....................................................................................................................................... 4

Business Analysis........................................................................................................................................... 6

Business Description ................................................................................................................................. 6

Product Offering ....................................................................................................................................... 7

management ............................................................................................................................................. 8

Market Analysis ............................................................................................................................................. 9

Target Customer Demographics ............................................................................................................... 9

Consumer Needs/Wants and Preferences ................................................................................................ 9

Market Size and Growth ......................................................................................................................... 10

Industry Analysis ......................................................................................................................................... 11

Economy Type and Description .............................................................................................................. 11

Competitive Landscape ........................................................................................................................... 11

Product Strategy Map ............................................................................................................................. 12

Market Players/Ecosystem ..................................................................................................................... 12

Microfranchise Plan .................................................................................................................................... 14

Introduction ............................................................................................................................................ 14

Evaluation of Microfranchising Potential............................................................................................ 14

Conclusion ........................................................................................................................................... 15

Microfranchisor Business ........................................................................................................................ 16

Business Description ........................................................................................................................... 16

Management/Monitoring System ...................................................................................................... 16

Marketing and Branding Strategy ....................................................................................................... 18

Training ............................................................................................................................................... 18

Expansion Plans ................................................................................................................................... 19

Microfranchisee Business ....................................................................................................................... 20

Business Package ................................................................................................................................ 20

Funding Considerations ...................................................................................................................... 20

Daily Operations .................................................................................................................................. 21

Marketing and Branding Strategy ....................................................................................................... 22

Supporting Systems ................................................................................................................................ 22

International Rescue Committee ........................................................................................................ 22

Fairbourne Consulting Group – Areas of Responsibility ..................................................................... 23

Timeline ............................................................................................................................................... 24

Financial Projections ................................................................................................................................... 25

Budget ..................................................................................................................................................... 25

Projected Returns to the Microfranchise Business Model ..................................................................... 26

Conclusion ................................................................................................................................................... 27

Appendix ..................................................................................................................................................... 28

EXECUTIVE SUMMARY Splash is new and innovative venture-backed company in Sierra Leone. The company offers customers

the ability to transfer cash through the current mobile phone network, allowing individuals in Sierra

Leone to benefit from the more efficient transaction services that credit card and debit card holders

have enjoyed for decades. The company is based on a partnership with four main groups. The software

comes from MoneyMagic on a licensing basis. GTBank provides the deposit accounts, acts as an “Agent

of last resort”, and maintains the actually money that backs the Splash Cash. Relationships with Zain,

Africell, and Comuim allow the company’s services to work across networks and their relationship with

Western Union allows for foreign remittances. The company is committed to building out a large

microfranchise network throughout the country and is willing to use IRC trained youth to fill those

Splash Agent positions, thus closely aligning their long term goals with the IRC’s for youth employment

in microfranchises.

Splash’s experienced management team and innovative technology positions Splash to be a strong

partner with the possibility for large scale job creation. Now that their product has been launched and

support frameworks have been established, the company is now focused on scaling their Splash Agent

network. In order for the service to work properly, there needs to be an Agent in every community so

that customers are able to quickly access and transfer their money. This is a tremendous undertaking as

it will require thousands of agents placed throughout the country. Splash’s other area of focus is

increasing the number of active users. To help achieve this goal, they have launched their Spartan

program wherein “Spartans” are employed on a commission basis to recruit and educate new users on

the benefits of using Splash.

M-PESA in Kenya has in recent years been a poster child for mobile payments and transfers and has seen

significant growth since launching in 2007. Today they have over 10,000 agents and service $200 million

in transactions per month. This is a strong indication of the potential of Splash in Sierra Leone. Using

mobile payment services introduces significant transaction efficiencies over simply using cash. It also

creates an easy way for individuals open a simple, non-interest paying pseudo savings account. It is

expected that as customers see the value of the service and trust the company that Splash will see

significant growth and user adoption as seen by other companies operating in similar environments.

A microfranchise business model is extremely well matched for Splash. The Splash Agent model makes

for a great microfranchise business. The Agent is an individual with a specialized, high value-add

product. They are reliant on good branding and are able to leverage marketing and business strategies

of the microfranchisor Splash. The product is relatively simple and easy to use and requires very low

startup costs. The need for Splash in Sierra Leone’s inefficient market, positions them to be a profitable

and sustainable business that is easily scalable to thousands of youth. In order to build out a

microfranchise business, the following three-phase process is recommended.

Phase 1 – BUILD OUT (7 months) – Design, build and launch the first wave of 500 microfranchisees in a

Live Market Test environment.

Phase 2 – SYSTEMATIZE (5 months) –The Fairbourne Consulting Group (FCG) conducts the Live Market

Test (LMT) to refine the microfranchise business model and achieve profitability at the microfranchisee

level.

Phase 3 – REPLICATE (25 months) - LMT results in sustainable business model that can scale rapidly

across Sierra Leone in strategic locations. The microfranchisee network is built to 2000 youth.

In order to implement this approach FCG will create the Manager of Franchising position housed at

Splash to oversee the Field Managers and other in-country staff. The franchisor/franchisee relationship

is critical and it is the responsibility of this new position to ensure franchisees are effectively trained and

integrated into the business system. The IRC will oversee the identifying and business training of the

youth. However Splash and more specifically the Manager of Franchising will train the youth in the

specific Splash Agent microfranchising system. The FCG will work with Splash to design and create the

Splash Agent microfranchisee business package, which will provide the necessary support and

equipment for franchisees to be integrated into the business model. Funding for that business package

will come initially as grant funding from IRC and Splash. Eventually it is recommended that funding

support is provided through a microcredit model in order to achieve long term sustainability.

Developing a microfranchise model with Splash is an enormous opportunity for both the youth

microfranchisees and the company. Both stand to gain in developing a deep transaction network and

giving youth business opportunities in a high growth, innovative new market.

BUSINESS ANALYSIS

BUSINESS DESCRIPTION

Splash was launched in 2007 by Sheka Forna and Ben

Farren as a way to improve transactions in the cash based

economy of Sierra Leone and take advantage of the

favorable environment for launching a mobile phone

transaction business. The Company is venture capital

backed with $2 million in start-up capital from ManoCap, a

Sierra Leone based firm. Since the product launched in

October of 2009, Splash has successfully signed up over

45,000 customers doing over $3,000 per month in

transactions.

Splash is built on a number of strategic partnerships. Each is a key component to the company’s

operations as indicated in the chart below:

PRODUCT

The basic service is simply money transfer through the use of Splash Cash; the way this operates is that

the customer buys Splash Cash from a Splash Agent and gets cashed out by a Splash Agent. No fee is

charged for this transaction, but the Splash Agent is paid a commission, thus Agents educate and

encourage customers to turn their cash into Splash Cash. Fees are paid once Splash Cash is actually

transferred from one customer account to another. When the receiving customer needs access to their

money, they can change Splash Cash into cash through a Splash Agent. Here again, the Agent receives a

commission, encouraging them to be available for transactions. A breakdown of fees charged to

customers can be found in the Appendix. Splash Agent will also be able to sell air time units as a

supplement to their income.

Customer Deposits

Money with Agent

Mobile Agent Transfers Credit

to Customer’s

Phone

Customer Receives

Electronic Credit

Pays Bills

Transfers Money

Pays for Minutes

MANAGEMENT

Sheka Forna – Founder & Chairman

20 years experience as a marketing executive in West Africa and the UK

Outstanding local network, including many family ties

Michael Foley – Managing Director

15 years experience as a Telco executive, including 6 years in senior leadership roles in African

markets

MD Celtel / Zain, Tanzania

Commercial Director, Celtel Nigeria

Sade Akinlade – Commercial Director

15 years as a Sales & Marketing executive in W.Africa inc. 10 years at Zain in Nigeria:

Group Manager, Global Accounts

Head of Customer Care

Ben Farren – Founder & Director

6 years as a strategy consultant with Marakon Associates in London, Singapore & New York –

focus on retail financial services

Nick Hughes – Advisory Board Chairman

Partner, Signal Point

Former Head of Mobile Payment Solutions, Vodaphone (responsible for founding and launching

M-Pesa)

MARKET ANALYSIS Mobile banking is currently one of the hottest economic growth and development opportunities in

emerging markets. With the recent success of M-PESA in Kenya, more organizations, governments and

companies are looking at the potential of mobile banking. This is a big opportunity in Africa as over 40%

of Africans own at least one cell phone. M-PESA, a mobile banking solution provided by Safricom in

Kenya, is currently the largest player in Africa with over 8 million active customers, representing an

18.4% country penetration rate, and a 38.3% penetration rate

of total cell Kenyan cell phone users (The Economist,

September 2009). One recent study by Olga Morawczynski,

an ethnographer at the University of Edinburgh who has

studied M-PESA in detail, found that mobile banking has

saved E-PESA users enough in time, travel, and fees so as to

increase their incomes by 5-30%.

The basic mobile banking services simply allow people to transfer funds via

their cell phones. Applications may include but are not limited to remittance

transfer, payroll, shopping, non-interest paying saving accounts, utility and

school fee payments, etc. In part, mobile phones act like debit cards. The

service reduces the need to carry cash, which can be unsafe and

cumbersome. This is important for countries like Sierra Leone where

inflation has led to paper currency with little value, resulting in the need to

carry large quantities of cash.

TARGET CUSTOMER DEMOGRAPHICS

Currently, users include mostly more educated and technology savvy

consumers and businesses. Customers will need to make enough money to

own a cell phone and to justify the transfer fees. Most users are urban based,

though as the services rolls out, it is expected that usage among rural users

will grow significantly.

Today there are only 200,000 bank accounts among Sierra Leone’s 6.3

million, compared with the 1.5 million mobile phone users. Akin to other

countries in Africa, mobile telecommunications are leapfrogging archaic

technologies; youth as well as adults use cell phones. Although youth are more technologically savvy

and likely to adopt new mobile phone applications quickly, adults who account for the majority of small

business and farm owners could stand to profit the most from mobile banking solutions.

CONSUMER NEEDS/WANTS AND PREFERENCES

Awareness is one of the largest problems facing mobile banking in Sierra Leone. People are unfamiliar

with banking in general given the low banking penetration in the country and they typically lack the

education to understand how the system operates. Although many people in Freetown had heard of

Splash and Zap, the two solutions provided, few know where or how to use the service.

People do not trust or like banks in Sierra Leone. Countless individuals store money under their beds

and in other unsecure areas rather than depositing it in the bank. This bleeds over into the mobile

banking sector as people get comfortable with the system and trust that it will operate correctly –

ensuring that they always have access to their money.

Currently, there is limited benefit to the customer due to the few other registered customers. As more

and more people use mobile banking solutions, it is expected that there will fast growth due to network

effects and ease of use. However, the service must be available to thousands of customers with

hundreds of physical access point before it reaches exponential usage growth rates.

MARKET SIZE AND GROWTH

The market size is small, with very few users. Splash currently has 25,000 users and the competing

offering Zap by Zain is also now just raising awareness of its product. Using M-PESA as a guide, number

of mobile banking users in Sierra Leone could reach 600,000 (40% of 1.5 million cell phone users). This

estimate might even be low, given that M-PESA is tied into Safaricom and only works on that network.

M-PESA transfers around $200 million every month with an average transaction size of $18 in Kenya

among its 8 million users.

Using similar statistics to M-PESA would result in a potential $5.4

million market size per year in the next year or two, assuming 3%

transaction fees on $15 million in transfers per month. If Sierra Leone

mobile phone penetration hit the same 40% as the rest of Africa (2.52

million Sierra Leoneans), that alone would grow the market to $22.7

million per year. Although this may seem like a much lower market size,

this does not account for other additional services, nor is it expected

that more than 2-3 players will operate in this market. In addition, there is still significant growth in this

market given that M-PESA is currently signing up 10,000 new users per day.

INDUSTRY ANALYSIS

ECONOMY TYPE AND DESCRIPTION

Mobile banking sits within the finance industry; however, it decentralizes traditional banking into the

informal markets and is considered one type of “banking for the unbanked.” While many poor have

access to mobile phones, there are still many without bank accounts or education regarding how to save

money. Hence, mobile banking has the potential to change the financial industry as it becomes more

prevalent and possibly redefine the demand for banking services in the emerging markets.

COMPETITIVE LANDSCAPE

Being a new but growing industry, Splash has had to deal with little competition. Currently in Sierra Leone, only two mobile banking services are available, Zap and Splash. Zap is a mobile payments service that only operates on the Zain network with a few large businesses, like one of the local gas stations. Zain operates in a similar fashion to Splash as customers pay cash to agents in order to maintain an electronic balance of liquid credit on their mobile phones. However, as a major advantage to Zap, Splash works with the three main telecommunications companies in Sierra Leone: Africell, and Comium, and Zain. In addition, Splash is solely dedicated to mobile banking

solutions, while Zap is a smaller part of Zain’s services.

Splash has high potential for growth as mobile banking grows in Sierra Leone and the rapid increase of mobile phone ownership. But, also may face some barriers. Besides Zap as a competitor, some customers have expressed they could use units or airtime as cash to transfer to each other. Although it appears from talking to people that this is uncommon, we did interview some individuals that transferred money to the provinces in this manner.

Perhaps the greater possible threats come from outside of the country. M-PESA, a mobile banking company in Kenya, is currently working with a number of banks to expand its presence in other African countries (Safaricom.com). As was mentioned, M-PESA transfers around $200 million every month for 8 million users, and they are growing. Although they have already reached Uganda heading West, M-PESA has had some challenges with fraud and will probably not attempt to enter Sierra Leone anytime soon, thus giving Splash a great opportunity to dominate the market.

MTN also recently launched a mobile payments service in Uganda with Stanbic Bank. So far the trial has been successful and resulted in expansion to Ghana with 20 other countries on the expansion list (“Beyond Voice”, The Economist, 2009). As at 30 September 2009, MTN recorded 108,4 million subscribers. Though MTN is a strong player in Africa, Splash already has a beginning hold on the market in Sierra Leone, having partnered with all major telecommunication companies. Rolling out this microfranchise model and building out a distribution model soon, Splash will have first entry advantage in keeping market share.

Other potential entrants include Gcash and Smart Money in the Philippines, Wizzit in South Africa, Celpay, and Mobile Transactions Zambia Limited in Zambia. These are all operating in emerging markets and could serve as potential competition, accept none are currently expressing interest in Sierra Leone.

Sending remittances back to Sierra Leone is another method for transferring money that could affect Splash with its mobile banking platform. Currently, there is Western Union and the UK Department for International Development has sponsored

www.sendmoneyhome.org that compares options for sending remittances. This website is very helpful as it suggests banks, methods of payment delivery, and assesses cost for the user per method. It also reports that as much as $57 million is sent to Sierra Leone from the UK each year. In the short-term this does not highly affect Splash because remittances come from abroad into Sierra Leone; however, in the long-run as more and more people have access to online payment methods like some do with remittances, Splash would have to simple adapt its model and consider offering similar services.

Other Citations

http://www.sendmoneyhome.org/communities/sendmoney-sierraleone.php

http://telecomafrica.blogspot.com/search/label/Mobile%20Banking

http://technology.cgap.org/2008/11/25/mobile-banking-in-the-philippines-interview-with-

globe-telecom%E2%80%99s-rizza-maniego-eala/

PRODUCT STRATEGY MAP

MARKET PLAYERS/ECOSYSTEM

Splash has 5 main market players that define its business ecosystem. Banks, Super Agents, Agents

(microfranchisees), Customers, and Telecommunication Companies interact together to sustain it.

Banks and Telecommunications Companies operate independently, while Splash manages its select

Ease of Use

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http://www.sendmoneyhome.org/

http://www.sendmoneyhome.org/communities/sendmoney-sierraleone.php

http://telecomafrica.blogspot.com/search/label/Mobile%20Banking

Super Agents, and wide-spread Agents. Each layer of the network, from the Agents to the Super Agents,

to the Banks operate as decentralized tellers.

The bank’s main role is to service Super Agents and house the volume of Splash funds. Although Banks

are highly inaccessible to many Agents and are often the “Agents of last resort,” they provide key

benefits and services to the Super Agents. Such as, access to reserves, guaranteed funds, and the best

interest for deposits.

Super Agents act as intermediaries between the Banks and the Agents providing better cash liquidity,

capital access, and management support. From the Banks down to the individual Agents, the amount of

cash decreases and is disseminated for down-line distribution. Super Agents serve as mobile banks in

key hub areas, and they provide the Agents access to their higher volumes of cash on hand. If Agents

run out of cash to handle transactions, they can always resort back to the Super Agent or Bank for timely

cash access. Super Agents will also provide vital management support to Agents as they deal with

marketing their services, managing their business, and dealing with customers.

Agents main role are to serve as transaction points for Splash’s customers. Different than Super Agents

from a branding perspective, Agents serve the most important role because they are the main face of

Splash to the customer. Agents are closest to the people in various areas whether near the largest cities

or remote areas. Agents provide faster and more convenient banking services to both the traditionally

“banked” and “unbanked” customers. As the volume of Agents and service distribution channels

expand, Splash will need to continually ensure the Agents maintain Splash’s brand to the customers.

The main Telecommunication Companies, Africell, Comium, and Zain play another key roles as they have

opened up their user networks to Splash’s services. Since Splash can be used across all of their networks

and by any customer, Agents and Super Agents have a major market advantage over Banks. Rather than

having access to a single Banks’ customers; Splash Super Agents and Agents can service all Banks’

customers. This gives Splash a highly competitive edge against other similar services, such as Zap which

is an exclusive service for Zain users.

While the cost for Splash Agents to offer mobile banking services may be fairly low, we expect each youth Agent to have a high earning potential, with a percentage of transactions being paid as a commission. According to Splash, Agents should make L 20,000 (~$5) per day if they service at least 7 transactions. In addition, microfranchisees will be able to sell mobile phone air time at a much better rate through Splash then they could get from airtime wholesalers, thus increasing their earnings.

Mobile banking agents provide a very simple service to their customers. First, customers deposit money

with a mobile phone agent. The mobile phone agent then transfers the amount minus a small fee to the

customer’s mobile phone and both will receive an electronic SMS as a receipt of the transaction. From

there, the customer uses their electronic credit by dialing certain numbers and using their security id or

password. They can pay bills that are set up with the service, transfer money to family or friends, or pay

for additional phone minutes out of their mobile phone’s balance.

Mobile banking systems are simply a software and mobile texting platform that sits on top of the

transaction network. The networks are designed to keep the virtual cash as liquid as possible for the

customer, this being the key to generating revenue for the mobile banking unit as it derives its incomes

from fees.

MICROFRANCHISE PLAN

INTRODUCTION

This section outlines the microfranchising aspects of this paper. It begins with an evaluation of the

potential of creating a microfranchise business model through a partnership with Splash. It then

proposes how the microfranchise model should be structured and operated from both the

microfranchisor and microfranchisee perspective. Once the structure has been outlined, the supporting

structures required to create the business model are identified and described. The section concludes

with a timeline for the project’s completion and a review of the business financials.

EVALUATION OF MICROFRANCHISING POTENTIAL

PARTNERSHIP

We have strong partnership opportunities with Splash. They have an

experienced management team that is capable of managing a large

scale business. In addition, they have access to capital from a venture

capital fund, ManoCap, which has invested USD $2 million to date, while

currently raising another $1 million for a third round of funding

projected to close at the end of this year. Splash’s management also

sees the value of designing a microfranchise model to scale their

services; thus, strengthening the commitment to see the IRC youth

succeed.

SCALABILITY

There is a lot of potential for mobile banking to be successful in Sierra Leone. Building out the strong

transaction network outlined in the Supply Chain section will be crucial to achieving that success. This

network of Agents will require that at least thousand people are ready throughout the country to

provide liquidity for customers. Splash recognizes this and is focused on building and supporting this

network. This provides a real opportunity to employ hundreds, if not thousands of youth through a

microfranchise model. In many aspects, this business should scale to a similarly to the mobile air time

reseller market, such that a Splash agent can be found within a certain distance from any customer.

Splash is also exploring a number of other verticals such as payroll services and becoming Sharia

compliant, which would give them better access to the large Muslim population that accounts for 60%

of Sierra Leone.

SUSTAINABILITY/PROFITABILITY

We found that Splash has the potential to be profitable to both the microfranchisees and the

microfranchisor. We see good potential for IRC microfranchisees to get involved in an emerging industry

and build a large clientele before the industry explodes and the market is saturated with youth mobile

banking agents. While the cost for Splash agents to offer mobile banking services may be fairly low, we

expect each youth agent to have a high earning potential, with a percentage of transactions being paid

as a commission. According to Splash, Agents should make L 20,000 (~$5) per day if they service at least

7 transactions. In addition, microfranchisees will be able to sell mobile phone air time at a much better

rate through Splash then they could get from airtime wholesalers, thus increasing their earnings.

CONCLUSION Due to the mobile banking industry’s current management team, scalability, and profit earning

potential, we recommend using mobile banking as one of the project’s sectors. In particular, we

recommend IRC partner with Splash as the best microfranchising partner. Since Splash envisions

developing a deep distribution system with mobile banking and its services, it will make a great partner.

This service distribution network represents an enormous opportunity for youth microfranchisees to

become mobile banking agents throughout Sierra Leone.

In addition, Splash has already expressed interest to work with IRC and Fairbourne Consulting Group to

develop the microfranchising system. Manocap, the local venture capital firm funding Splash has also

offered its backing and support. This is an enormous opportunity that will benefit both the youth

microfranchisees and Splash.

COMPARISON TO OTHER MICROFRANCHISES

The FCG has worked with or studied nearly every microfranchise model in operation. Through this

journey we have catalogued a list of best practices of what makes a microfranchise successful. We have

also worked through worst practices of what doesn’t work. When selecting potential partners we

considered all that we have learned and built the best practices into the two models. We used filters to

sift out the weaker models and redesign business models be stronger. We identified similarities and

differences with many successful microfranchises.

Splash has many strengths similar to M-PESA, the most successful mobile banking operator in West Africa. M-PESA currently has over 10,000 transaction agents and employs many microfranchising practices throughout its operations. Agents operate as franchised businesses and are given significant training, branding, and advertising support. Some strengths that Splash has over M-PESA is that we have incorporated transaction network characteristics from M-PESA without having to go through the trial and error phases. We are also able to build in key lessons learned from other microfranchises. However, M-PESA has been in operation for a number of years already and has achieved market dominance in Kenya, giving strong brand appeal. This increases the success rate for new microfranchises. Splash does have a strong brand, but not as strong as M-PESA. Splash has potential to have a similar brand presence as M-PESA over time as they build and scale their business.

Some of the common mistakes that would-be microfranchisors make are the same mistakes that many new businesspeople make. First, they do not spend enough time on proper business development. A microfranchise is like any other business: It must identify and address market failures. Microfranchisors must likewise perform exhaustive market analyses to test their theories about what products low-income consumers want. IIB is willing to put in the time to build out a proper model that works. In all, after putting Splash through the rigors of our business filters and added key design modules to make Splash a strong microfranchise candidate. Splash’s high barrier to entry for competing services is a strong feature. This coupled with low start-up costs, easy training, strong potential market demand, recognized brand, focus on youth, strong management team, and capital to expand make Splash well suited to become a successful microfranchise business. The biggest risk for working with Splash is that this new business is a start-up and there is always a chance for failure with start-ups, even with an innovative and exciting product.

MICROFRANCHISOR BUSINESS

BUSINESS DESCRIPTION The microfranchise is primarily a transaction network of virtualized bank tellers. These bank tellers are

the Splash Agents and provide liquidity of Splash Cash to customers. The backend of the Agents’

business is the software system and is supported by the bank, super agent, and other support services

offered through the Splash Company.

MANAGEMENT/MONITORING SYSTEM The diagram below shows how the business will be structured. All operators in the business will report

to the management team of Splash as well as its board. Although middle management positions of CYPD

Officer and Agent Program Manager will be IRC and FGC posts respectively, all relevant positions will

eventually be transitioned into Splash paid and controlled positions.

Large Bank “Agent of

Last Resort” w/reserves

Customer Agent Transaction

Point for Customers

Super Agent Capital and

Management Support

Splash Provides banking system, training, certification

During the life of the project, the Agent Program Manager, an FGC consultant, will be responsible for

setting up the systems and monitoring them for refinement purposes. They will be supported by Field

Agents that will work directly with the youth microfranchisees. Each Field Agent will cover up to 100

microfranchisees, separated into geographically close groups of 10. Of these 10, one will be selected as

the Lead Agent and will be responsible to help lead the group.

Splash Management Team

Project Lead

Agent Program Manager

ManoCap & Board of Directors

CYPD Program Officer

Training Staff

M&E Staff

Staff

Field Manager

Lead Agent

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Staff Staff

Microfranchisee FCG Splash IRC

VALUE CHAIN

MARKETING AND BRANDING STRATEGY A core part of a successful microfranchise system is the ability to leverage nationwide marketing

campaigns to build local brand recognition and trust. Developing effective marketing strategies will be

key to the success of both the microfranchisee and microfranchisor.

The marketing and branding strategy of the microfranchisor should have two goals: increase brand

awareness and increase user trust in the system. Activities within this marketing strategy can be divided

into two types: mass media and microfranchisee support.

Mass media uses print, radio, TV and sponsorships in order to raise awareness of the brand and what

the company does. It also increases trust in the brand and the company as people see it everywhere and

tend to believe that only a strong company has sufficient capital to maintain a strong brand presence.

Mass media techniques also keep the company and its services top of mind, which will be important in

the early stages of this sector’s life cycle in Sierra Leone. Given its cost effectiveness, we recommend the

use of radio to reach mass audiences for very little in terms of ad spend.

Microfranchisee support refers to helping the microfranchisee build out his client network more at the

local level. We recommend putting on campaigns wherein Splash provides music and prizes and helps

facilitate “drawings” for free Splash Cash so that new potential customers can see in real life how the

system works and that it can be trusted. The “drawing” may occur such that all those that register that

day enter to win L 100,000 in Splash Cash. Those that win are announced and can exchange their Splash

Cash for real money from a local Splash Agent in front of everyone else. This enables lots of people to

see how the system works, that it can be trusted, and who the closest Splash Agents are.

Finally, microfranchisees benefit from leveraging the branding and design capabilities of the

microfranchisor. The microfranchisor should have multiple marketing options available for the

microfranchisee to use to promote Splash in his or her area. These materials should include posters,

bumper stickers, bracelets, booths, signs, paint and logos for houses and buildings, t-shirts, etc. These

types of marketing materials increases brand awareness as well as helping customers find their local

Splash Agent.

TRAINING Training is another key component to microfranchising success. We recommend that Splash use the

following training areas.

Basic Business Training – Due to the war and poverty, many youth lack basic education. Helping them

understand the basics of how a business is run and expanded will be an important aspect to their

success, regardless of the business. Areas of training here include how to keep track of expenditures and

profits, how microcredit works, how microfranchises work, how to scale a business, and how to manage

employees, just to name a few.

Product Training – All microfranchisees need to understand how the system works inside and out such

that they can operate their businesses and help confused customers learn how the system works as

well. This training should cover how the transactions works, the organizational support structures, and

how to operate their business on a day to day basis.

Marketing Training – In order to be successful, microfranchisees need to learn how to best market and

sell their services. This will require specialized training specific to the Splash business. Microfranchisees

will need to learn how to develop strong relationships with customers so that they gain their trust and

business. They need to learn the best techniques for finding new customers, keep existing ones activate,

and up sell current customers. We recommend that part of this training cover how to launch and

manage mini campaigns in their area, how to train and manage others as employees of their business,

and how to build trust with those in their area.

EXPANSION PLANS Splash currently has a plan to expand into a number of different services and product offerings. With

regard to microfranchising, we recommend that Splash focus on their first set of microfranchisees in

order to identify what systems and training procedures work and which don’t so that that model can be

tweaked and improved. Once the model is running smoothly, Splash will be able to successfully replicate

that model and expand their transaction network by bringing on hundred of new microfranchisees and

plugging them into their systems and processes. This system can eventually be implemented in other

West African countries such as Gambia and Liberia.

In addition to Agent expansion, Splash also plans on adding the following services, some of which will

increase Splash Agents’ income.

MICROFRANCHISEE BUSINESS

BUSINESS PACKAGE Each microfranchisee will be provided a basic business package in addition to their training to help them

start and operate their business. This package will include the following provided by Splash and IRC.

Package Item Splash Support IRC Support

L 300,000 in operating capital L 100,000 L 200,000 as a grant/loan

Branded Kiosk Funding via grant/loan

3 Mobile Phones & SIM cards 3 Phones and SIMs

Marketing Materials Tee-shirts, posters, bumper stickers, etc.

General sales and marketing training

FUNDING CONSIDERATIONS Due to the emphasis on constructing a viable test for impact evaluation, the first several waves of

microfranchisees will be provided with a grant to cover their microfranchise fees and business package

costs. This grant will be provided by the IRC and will be in conjunction with the support offered by

Splash as noted in the Business Package section.

Eventually, microcredit loans will be introduced in the last wave of the three year project. This will allow

the project to prepare for long term sustainability by providing a means whereby youth can finance the

start-up costs of the business. Because this is not expected to occur until the near end of the project,

microcredit loans are not taken into consideration for the rest of the roll out strategy.

DAILY OPERATIONS On a day to day basis, Splash Agents will be responsible for three areas: Marketing, Recruiting and

Transaction Services.

MARKETING

Raising awareness and building trust in the communities among potential and current users will be a

primary role for the Splash Agent, particularly in the beginning as they work to develop their own

customer base. Although activities may vary over time as different practices are identifies and refined, it

is expected that Splash Agents will run local campaigns and manage “Splashers” as part of their

marketing responsibilities. Campaigns will be semi-large events in the local communities wherein Splash

agents bring people together to tell them about Splash and its benefits and participate in activities that

encourage customer usage of the service. “Splasher” will be groups of younger kids that will travel

around and encourage usage of the service through education and announcements. This will be based

off of the Wizz Kid program operated by Wizzit in South Africa.

RECRUITING

Recruiting clients will be an important aspect to helping the Splash Agent develop a customer base in

their geographic region. Splash Agents receive L 2,000 for every new account they register and this will

enable them to earn money in the short run before people have enough incentives to make transactions

on a frequent basis. New accounts can be divided into individual users that will pay and transfer money

via Splash Cash and small stores that will accept Splash Cash as payment for goods.

TRANSACTIONS

Transaction Services can be divided into Splash Cash transactions and air time sales. Splash Cash

transactions require that the Agent become an individual bank teller. Customers will be able to covert

cash into Splash Cash, transfer Splash Cash to other Splash users, and turn Splash Cash into cash through

the Agent. This is why the Agent will need L 300,000 to start the business is available operating capital.

Air time unit sales will also be available to help supplement the Agent’s income. Splash has been able to

negotiate wholesaler status with the three major telecommunication providers in Sierra Leone and will

pass the 7% margin they receive onto the Splash Agents. This is a significant increase over the 3% most

air time unit sellers make.

MARKETING AND BRANDING STRATEGY The general branding and marketing strategy for the microfranchisees consists of building a good

reputation in their community and helping build the Splash brand broadly. Establishing a reputation

within the local community will require that they work to know their potential customers by educating

them, spending time with them and using reputation and trust building exercises. Broader brand

building would include wearing the t-shirt and maintaining a clean and operational kiosk to transact

Splash Cash.

SUPPORTING SYSTEMS

INTERNATIONAL RESCUE COMMITTEE The International Rescue Committee (IRC) will play a key role in supporting the microfranchisee and

microfranchisor by providing recruiting and training services. The IRC will also need to monitor the

microfranchisor Splash to ensure that the MOU is properly followed so that the project goals are

accomplished.

RECRUITING

The IRC will be responsible for recruiting and screen out Splash Agents for its part of Splash’s expansion

plans. This will be done by IRC staff in conjunction with local youth groups. Participating youth will need

to show a certain level of numeracy and literacy in order to be select for the project. Over the life of the

project, it is expected that IRC will be responsible for recruiting 3,500 youth to participate in the

microfranchise opportunity (2,000) and to be part of the two control groups (1,500).

TRAINING

Training is an important requirement for a successful microfranchise operation. Basic business schools

are also crucial for youth to go beyond their simply microfranchise to develop life skills related to

operating and starting a business.

MICROFRANCHISEE – BUSINESS SKILLS

The IRC has developed training program on the basics of running a business and managing personal

finances. We recommend that they continue this training, while identifying the most important and

impactful areas to focus on. Also, IRC will need to develop systems to deal with training large numbers

of youth as the project comes closer to an end is prepared to be transferred over to Splash.

MICROFRANCHISOR – MICROFRANCHISING SKILLS

We also recommend that the IRC realize the need to continually support Splash by offering ongoing

microfranchisor training to its staff and management. This can be done through Fairbourne consulting,

and is important so as to keep Splash inline and involved in the project. These trainings can cover many

of the basics of microfranchising and should be assistance to Splash as they develop new business and

marketing strategies for the company.

MICROFRANCHISOR OVERSIGHT

Closely related to microfranchisor training, we recommend that IRC put into place certain oversight

provisions into the MOU in order to ensure that Splash complies with the provisions needed to achieve

the project’s objectives. This would include areas such as restricting the hiring of control group youth to

preserve the integrity of the evaluation and could be accomplished through checks of their new hires on

a predetermined schedule.

FAIRBOURNE CONSULTING GROUP – AREAS OF RESPONSIBILITY Fairbourne Consulting Group (FCG) will be responsible for all aspects of the microfranchise model

design, implementation and refinement. To cover these responsibilities, FCG will have one consultant in

country managing the day to day operations over the life of the project under direction of Jason

Fairbourne. Generally, FCG will be responsible for the following:

Monitor Agents

Build & Improve Systems

Assist w/Marketing

o “Splasher” Training

o Campaign Training

TIMELINE

Splash

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

IRC Staff Recruiting

Refine Business Training (IRC)

Design System/Business

Recruit & Train 150 Youth (Freetown)

Recruit & Train 125 Youth (Bo)

Recruit & Train 125 Youth (Kenema)

Recruit & Train 100 Youth (Kono)

Launch LMT w/Small Group

Monitor Best Pratices

Refine the model

Train others on Best Practices

Launch 150 Youth Splash Agents (Freetown)

Launch 125 Youth Splash Agents (Bo)

Launch 125 Youth Splash Agents (Kenema)

Launch 100 Youth Splash Agents (Kono)

Build out processes

Implement best practices

Systematize franchisor operations

Systematize franchise operations

Hire and train in-country staff

Recruit 300 & Train 225 Youth (Freetown)

Recruit 250 & Train 200 Youth (Bo)

Recruit 250 & Train 200 Youth (Kenema)

Recruit 200 & Train 175 Youth (Kono)


Launch 75 Youth Grantee (Freetown)


Launch 75 Youth Grantee (Bo)


Launch 75 Youth Grantee (Kenema)


Launch 75 Youth Grantee (Kono)

First Wave Baseline Study

First Wave Midline Study

First Wave Endline Study

Idenditfy Geographic Locations

Constant refinement of model

Labor Market & Savings Survey













Second Wave Baseline Study

Second Wave Midline Study

Second Wave Endline Study

Select and Support Loans (Bo & Kenema)













Third Wave Baseline Study

Third Wave Midline Study

Transition Training Program over to Splash

Ph

ase

3

Syst

emat

ize

Year 1 Year 2 Year 3

Ph

ase

1

Des

ign

Ph

ase

2

Test

Ph

ase

4

Rep

licat

e

FINANCIAL PROJECTIONS

BUDGET

Expenses IRC Splash

Staff $150,000.00 $150,000.00

Training site rental

Food during trainings

Training materials

Total $150,000.00 $150,000.00

Equipment IRC Splash

Total $0.00 $0.00

Microfranchisee IRC Splash

Cash/Credit $100,000.00 $100,000.00

Kiosk $150,000.00

Phone/Sim $70,000.00

Uniforms $100,000.00

Total $250,000.00 $270,000.00

Miscellaneous IRC Splash

Maintenance

Transportation $200,000.00

Travel Staff $60,000.00

Total $260,000.00 $0.00

Total Expenses IRC Splash

460,000 288,000

PROJECTED RETURNS TO THE MICROFRANCHISE BUSINESS MODEL

By implementing a microfranchise business model, Splash has the opportunity to achieve significant

returns on investment, increasing the likelihood that they will continue using the model even after the

IRC has finished its portion of the project. This is important as it will ensure that the employment

opportunities provided are a sustainable improvement that can be scaled to provide thousands more

youth the opportunity to start and grow their own Splash microfranchise.

Splash Microfranchise Projection Model

(All units in US Dollas)

Year 1 Year 2 Year 3 Unit Assumptions

Revenues - 945,750$ 3,315,000$ 13,513,500$ Transactions

Average Transaction Size 15.00

Commisions 27,000 518,500 1,703,125 6,939,250 Transaction Commision % 0.5%

Transaction Revenue % 1.0%

Expenses Recruiting Commision 0.50

Business Package 65,000 - 195,000 -

Staff 36,000 36,000 90,000 90,000 Business Package

Training 7,500 - 22,500 - Operating Cash 25.00

Uniform 15.00

Contribution Margin (135,500) 391,250 1,304,375 6,484,250 Marketing Materials 15.00

Cellphones & SIMs 75.00

ROI 6037% Total 130.00

Yearly Assumptions Staff

Microfranchisees 500 500 2,000 2,000 Salary per Staff 3,600.00

Total Users 30,000 121,250 212,500 577,500

New Users 91,250 91,250 365,000 Training

Transactions/User/Yr 12 52 104 156 Cost per Microfranchisee 15.00

Staff 10 10 25 25

CONCLUSION We recommend that IRC pursue a relationship to work with Splash as its primary partner for youth

microfranchisee employment.

Splash represents a unique opportunity to leverage a new growing trend in mobile and financial services

in developing countries to potentially employ thousands of youth in Sierra Leone. The Splash

management team has significant experience in the telecommunication and mobile transactions space

and is one of the most capable teams we encountered in any business in Sierra Leone. Splash’s

relationships with telecommunication companies that allow its service to work across networks give the

Company strong competitive advantages over competing services and substitutes. The Company is also

well funded with $2 million in startup capital backing and an expect $3 million additional investment to

come in 2011. Currently, the main backer is ManoCap, a Sierra Leone based venture capital firm that

gives the company assistance through management and network connections. There is strong evidence

that mobile banking can be successful if properly implemented and Splash benefits from operating is a

new market with only one other direct competitor.

Splash is committed to being a good partner in the youth microfranchise program and has shown this

commitment through partial funding of the Splash Agent’s business package. The business model is well

structured to fully leverage a microfranchise model due to the need to have thousands of “bank teller”

like Agents placed throughout the country in order to offer the required liquidity to the customers.

Splash therefore sees this project as the best method to achieve this goal as IRC is also seeking to

employ thousands of youth and can provide the necessary selection and preliminary training processes.

Lastly, Splash has worked with us to develop a business to meets the minimum microfranchisee profit

requirements, including offering the ability for Agents to sell air time units to help supplement their

income in the short run when customer transactions are still very low.

APPENDIX

POPULATION DENSITY MAP OF SIERRA LEONE

SPLASH TARIFF SCHEDULE

splash microfranchise proposal final

Documents