Oxygen Infrastructure Franchise Model
Even before COVID, there has been a tremendous shortage of medical oxygen in Sub-Saharan Africa (SSA). The current annual supply is about 4 million cubic meters, compared to the COVID needs of potentially 50+ million cu m per year through the likely duration of the pandemic.
The supply of medical oxygen in much of SSA is dominated by a small number of colonial-era multinational companies which have historically had 90+% of market share. In recent years, a small number of entrepreneurs have emerged as alternatives to the large incumbents. However, these entrepreneurs are sub-scale and are struggling to be financially sustainable without ongoing philanthropic support. Specific challenges include: (i) high CapEx, (ii) limited bargaining power with suppliers and large customers alike, (iii) limited access to capital, (iv) inefficient operations for maintenance and distribution, (v) limited data-driven sales and customer management, and (vi) the lack of standard operating procedures.
ITT has established a multi-country franchised business, The Oxygen Hub, in SSA to increase medical oxygen supply to underserved peri-urban areas and small/mid-sized towns. The franchisor supports entrepreneurs with financing, equipment leasing and management support. As the entrepreneurs demonstrate consistent success, they will take over ownership of the assets. With initial focus on underserved peri-urban areas and small/mid-sized towns, distribution will gradually expand into rural areas via a hub-and-spoke model.
The Franchisor offers:
- Aggregated procurement to improve bargaining power
- Standardized data-driven processes to create world-class management systems
- Blended financing to unlock additional investments
- Improved customer management processes including training
The franchisees are existing or high-potential new oxygen entrepreneurs who will:
- Lead setup of medium-size PSA oxygen production facilities
- Launch and manage full franchisee business operations
- Implement and comply with SOPs and reporting / governance requirements
- Take full ownership of business after meeting performance and growth metrics
This effort will tackle short-term COVID demand while also building a resilient, locally-owned-and-managed infrastructure of business to address ongoing medical needs. Over a 3-year period, our business model will drive a 3-5x increase in the oxygen supply in 4-5 of the largest countries in SSA and lay the foundation for future growth in smaller countries and increasingly rural areas throughout the region.
Learn more here.