Franchising: The Final Frontier – Part Uno

As I have noted previously on my Franchise or Not To Franchise post, one must take careful consideration to take a franchise. There are lots of considerations to make before taking a decision, decisions such as:

• Availability of suppliers
• Location desirability
• Brand image
• Product desirability amongst the would be consumer

Those I mentioned above seem like a very simple process that anybody with limited knowledge might know. However, you might want to take a look at these next examples how a franchise is not done the right way following the criteria I described above.

For this entry I will take two examples that spans the globe, the internationally renowned Krispy Kreme and the not so known Es Teler 77. Both are a distinctively different company although both has similarities in term of the business they are into, the food business. I don’t have to describe in detail about Krispy Kreme, it is after all already spawn across the globe, however I do have to detail it out about Es Teler 77. Es Teler 77 is a chain store business mainly selling unique Indonesian dessert of a mixed fruits with syrup and crushed ice. The name of this dessert is the brand name of the store itself, es teler, or drunken ice in English… The name doesn’t do justice for the product though as the dessert has no intoxicating property whatsoever, it is just crushed ice mixed with mixed syrup (this is the not so secret ingredient) and mixed exotic tropical fruits. Speaking of ingredients, I personally like the star product of Es Teler 77, the sweet taste of the syrup (too sweet for my taste though, I occasionally ask for more ice or for less syrup) combined with jackfruit, coconut meat, and avocado combined in a way that it creates a complete combination of taste. None of the specific ingredient has its distinct taste dominate each other.

Es Teler 77 claim itself as the first Indonesian franchisable business available, although I assume they are just one of the pioneers, not the very very first. As a franchisee, one could find Es Teler 77 chain store strewn about in Indonesia most known shopping malls or districts. With the perfect combination of availability and affordable price, Es Teler 77 took Indonesia by storm (or tropical tempest).

Now with the introduction settled, let’s talk about how each actually fails in some aspect of its business life and why we have to take a lot into consideration of franchising even though how well known the brand is. This entry will be a companion entry to the original Franchise or Not To Franchise I did back when I first started this blog. With such a wide spectrum franchising covers, expect to see more of it down the line.

Now let’s talk about Es Teler 77 first shall we? As a franchise company, Es Teler 77 spreaded out throughout Indonesia with vigor, from the far east of Indonesia to the absolute west of it. The nature of the star product or the accompanying products which are cheap and can be considered into side dishes/dessert makes it as impulse goods. In that they are bought without a lot of considerations. On my last trip to Australia many years ago, I saw Es Teler 77 stall opened near… Well I forgot, you guys can check it out around Sydney. This come as a surprise for me because entry barriers for this kind of shop is quite high, considering the exotic goods it uses as the main ingredient.

Through curiosity, I came up to the store and ordered the es teler. As I predicted, the taste was chaotic at best, the jackfruit tasted bitter and occasionally tasteless, a trait commonly associated to unripe jackfruit or packed (not fresh). The syrup tasted too sweet, and basically it taste doesn’t do justice to the original recipe we have back home. When I took a look around, most who ate there are Indonesian’s student.

Now what is the problem with Es Teler 77 in Australia? As I have mentioned above, the problem lies in the availability of suppliers of exotic tropical fruits there. Indonesia as a tropical country is the perfect breeding ground for tropical fruits. Availability of coconuts, jackfruit and avocado are year long, or at least it is abundant enough that the ingredients can be kept with ease even if it’s out of season. Australia with its pseudo reversed tropical season (winter when it is summer around Asia and vice versa) prohibits the specific genus growth of tropical fruits used in Es Teler 77 ingredients.

I can imagine the horror of managing fruit distribution if it has to be imported from Indonesia… Brr… It gives me the chill already. First of all, they need to find grocer who are willing to pack and ship the goods to Australia, mind you though, selecting groceries to send abroad needs skill. You can’t just select random vegetables or fruits, you need to select manually those who are just ripe that it still retain its consistency (fruits gets softer as it ripens) so it can survive the journey. This alone already took quite a lot of resources/money, there’s also more resources involved on keeping the unripe fruits to be used by the store. Distribution actually is no problem if you have resources to spare actually… But the most important thing here is that fruits that ripen on tree tastes different if it’s ripen off the tree.

Now what do we basically knows about franchising in general? Franchising brings about the unique taste of the franchisers to the franchisee, or just basically bringing the unique taste of the trademark throughout the places it opens its business. If Es Teler 77 Australia has a different taste than Es Teler 77 Indonesia where its main HQ are, what is the point of opening up business abroad? I suspect that Es Teler 77 Australia is not a franchisee, but rather a branch therefore the owner is just a district manager acting solely on HQ command.

Es Teler 77 problem lies in the availability of suppliers in the region it opens up is business. Also the problem of Es Teler 77 lies in its product type, it is not a universally consumed goods like an ice cream. Can you imagine ordering up ice cream in Antarctica? Eating ice cream in the coldest place of the world seems like a good idea. The same goes to Es Teler 77, it’s star product basically a cold food, outside of the tropical regions do you think it will manage to be sold well? It’s about habit of eating that is becoming the ultimate barrier to entry for food products, especially if it’s going to be sold internationally.

Do remember, when you took a franchise, always ask where are you going to get the special ingredients of the product if there’s any.

Now what is this habit of eating we are talking about? And where’s that Krispy Kreme entry? Where did Superman go? Does the chicken came before the egg? Will lost goes on and on and on and on and on and on and on? Well, find it out on part dos of this entry, to be concluded later tonight.

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