Think Local When Franchising Abroad
All politics, it’s said, are local. The same often holds true for franchising, despite its reputation as a cookie-cutter, by-the-book way of doing business.
Being able to adapt to local customs, laws and tastes is particularly crucial when a franchise goes abroad.
Take Domino’s Pizza Inc., presumably about as standardized an operation as there is. Put a fresh-tossed pie in an oven, bake for 5½ minutes, box and deliver. But when the Ann Arbor, Mich., company took that concept abroad, it experienced an array of situations that ran counter to its operations manual.
In Japan, Domino’s had to modify its delivery procedures because addresses there often aren’t sequential but instead are determined by a building’s age. On Aruba, it soon found that using motorcycles to deliver pizzas was too dangerous because of the island’s strong winds. (Small trucks solved the problem.) In the Philippines, locations of stores at times were chosen using feng shui, a Chinese art that positions buildings according to spiritual flows. And because many Icelanders stay up all hours, Domino’s stores there must be open much longer than elsewhere.
‘Too American’
Occasionally, local barriers proved insurmountable. When the company went into Italy, many Italians found its pizza “too American — the sauce being too bold, the toppings too heavy,” a company spokesman recalls. Eventually the world’s largest pizza-delivery company packed up and pulled out of that country.
As veteran globe-trotters can attest, having a savvy guide can make all the difference when going abroad. For franchisers that means finding the right business partner, someone familiar with the terrain, who can navigate through bureaucratic brambles if necessary, and who knows what will sell and what won’t. The franchiser also must have confidence in the distant partner’s judgment — be it in selecting franchisees, negotiating with suppliers or making on-the-spot decisions for the welfare of their venture.
“From a business perspective, the most important consideration is finding a partner who understands the culture, the customs and the consumer,” says Matthew Shay, president of the International Franchise Association, the industry’s Washington-based trade group.
But sometimes even sophisticated companies stumble in that selection process. Seattle-based Starbucks Corp. encountered difficulties with international partners twice. The first time was in Israel in 2003 when, citing “some disagreements in philosophy” with its partner there, according to a company spokesman, Starbucks abandoned the Israeli market. A year later the specialty coffee retailing giant bought back its shops in Germany from department-store operator KarstadtQuelle AG after the venture missed financial targets.
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