Franchising Compendium… The Thing That Kick Starts Everything

The thing that kick starts everything… Man… I’m getting cornier by the hour for sure… Anyway…

Since moving here (new domain) equals to Google putting me somewhere on the last pages of its search engine, I think most visitors here never seen what I wrote back in the early days. These articles are what made me decides to host my own blog so I can get much more control and personalization. Why? Because they are the most searched subject back when I was starting this blog at I meet new people (through the magic of internet), learn some more thing or two, and as such opened up my eyes to new horizons. These are not mere fruits of my knowledge and experience, these are what changed me.

Without further a due, here are my collection of franchising articles, its pros and cons and some examples along the way.

Franchise or not to Franchise… That is the question

Franchising: The Final Frontier – Part Uno

Franchising The Final Frontier: Part Dos! (Warning: Long Read)

Weekend Roulade: Franchising Fiasco

Enjoy the read, it’s about franchising, Krispy Kreme, J.Co, Es Teler 77, vodka drinking monkey and everything in between… Plus a bit of Honda.

Franchising The Final Frontier: Part Dos! (Warning: Long Read)

Now, let’s continue my entry about franchising. Be warned though, this is a long read… Get some chips and dips, because I believe this will be interesting.

The last time I blabber about franchising, I talk about problematic brands that tried to extend its wing but seemingly didn’t have the strength to flap it out. Es Teler 77 probably a small example from a good pool out there, but it is good enough to illustrate. Let’s take a recap, this is weekend anyway where I usually wrap things up in weekend roulade.

Es Teler 77 is what I call a geographic resource centric business, meaning that it can’t operate at 100% efficiency outside the boundaries or places that it needs its resource to operate. Es Teler 77 needs ripe-fresh-and ready tropical fruits that can only be found… D’oh, in tropical countries. Opening a branch or selling a franchise on non tropical countries means that it has to deal with the hassle of exporting and importing fresh produces which in itself is a hassle. Creating Es Teler 77 signature product is not quite the easiest thing in the world. It’s like making Sushi, you have to select the best ingredient out there, ingredients which are best taken directly and used immediately from mother earth.

There’s also the problem of habit of eating when introducing Es Teler 77 signature product outside tropical countries. It’s not a dessert, it’s heavier, it’s not condiment, it’s something more, so what is it? Well for sure on four seasoned countries it can only be eaten on summer or at least best to, so there goes 9 months of potential revenue. What about culture? Here in Indonesia people love impulse buying, especially snacks. Almost anywhere in Indonesia you can find small stalls which sells snacks from simple fried cassava/banana/tofu/chicken, to traditional snacks. Mind you that these are not light snacks but can be considered as light meal. Now what countries have that kind of eating habit? Not much eh?

Speaking of habit of eating, let’s continue on to our second example, Krispy Kreme…

Donut’s as we know is an American thing, coffee and donuts, just like the cops on those movies always took in the morning or when they are in break. For years donuts are considered as snacks in Indonesia, made not so popular by Dunkin Donuts, the first Indonesian franchised store which sells donuts. Then suddenly, two years ago, a locally owned donut retailers opened up its business and BOOM! Donuts are on its way to stardom baby! Donuts are now hip and a cool thing, far from so so image Dunkin Donuts has created for years. Indonesians love new things, they will always took that 1st chance to try anything new. In marketing term you can say that Indonesians are super early adopters. Sell anything that is new here and people will buy it, seriously! Nokia E90? We got it, there’s even engineering sample sold on a local mega store. Lexus? Seen it driven here and there, even though they are ridiculously overpriced (Lexus IS250 is more expensive than Mercedes E260, and Mercedes has better image and recognition here). Chinese cars? There’s few on the road, Chinese motorcycle, ditto.

Yes Indonesians are super early adopters, but they also put emphasize on satisfaction and expectation. When a product is bad, most often than not the product will be literally shunned by the community. After all we are talking about Easterners stereotype where word of mouth are more believable than advertising or promotion. Chinese motorcycle for example, about 4 years ago it’s super cheap and people (at first) flock on to it, anywhere it’s Chinese motorcycle for a while. However, just like flash flood, it’s over instantly (in this case less than half a year), as cheap also equals cheap quality and everywhere Chinese branded motorcycle dying on the roads, on the workshop, everywhere. 4 years later, only a handful of people bought Chinese branded motorcycle, and that even after extensive test driving and manually selecting the bike before purchasing.

Now let’s back to Krispy Kreme stuff. 1 year after opens up its business, it seems that everything is fine and dandy, people still queue long lines to purchase even half a dozen of donuts. Now does this means’s donuts are a success, you bet it is. However, hot on the tail of is PT. Mitra Adi Perkasa, Indonesian Krispy Kreme franchiser who wants a piece of the donut so to speak (pardon the pun). There are rumors that is using Krispy Kreme recipe therefore it is expected that with brand name and originality claim, it is expected that Krispy Kreme will do better than

However, this is my critics lie upon Mitra Adi Perkasa, do they actually did a research about the eating habit of Indonesians rather than just following in’s successful steps? Do they did a research that Indonesians like to eat donuts? This actually a classic condition where one fails to oversee the immediate surrounding or the market condition. Ya Kun Kaya, a Singaporean owned breakfast stall was a hit in Singapore even until today. When you visit Singapore, be sure to eat breakfast at one, the combination of milked tea and kaya sandwich are top notch. However here in Indonesia Ya Kun Kaya is positioned as a lavish upscale snack place in shopping complexes which opens at noon… WTF?? For years I saw mostly empty chairs and I’m just sad how a wonderful product was put out of its intended place. This is because Indonesians didn’t eat breakfast outside of their house, it’s just habit, custom, culture or whatever you might called it. Indonesians are communal individuals, they eat breakfast with the family in the morning, and if possible eat dinner together with the family. How about the singles? Well, they eat alone, but still at the comfort of home. Indonesia’s capital is not the friendliest place to travel you know, with traffic jams 24/7, there is not enough time to go anywhere to eat.

Does Mitra Adi Perkasa knows about donuts are not indigenous to the locals? I don’t know. Now let’s continue to the horror story that haunted Indonesia’s Krispy Kreme franchiser until today.

If you wanted to know how Krispy Kreme fair, please check my previous post about Krispy Kreme. I suspect that Mitra Adi Perkasa relies solely on’s success and that Krispy Kreme is an international brand that they expect the franchise will be successful. However that’s just wrong. In my days of observing Krispy Kreme is that they are successful enough in the first months, queue line as long as’s but it only lasts for a brief time. Now Krispy Kreme is like Dunkin Donuts, barren, devoid of customers except for the occasional people lured by the buy a dozen get two dozen more promo. So how can survived but Krispy Kreme couldn’t? The answer is deceptively, and eerily simple.

While Mitra Adi Perkasa seemingly rely on promotion and Krispy Kreme brand, actively pursue recognition in the form of pure marketing campaign. I’ve talked about habit of eating, where as donuts are not staple food or even snacks for Indonesians, so what does did? They did a roadshow, taking donuts and coffee to universities and literally educate students to integrate donuts and coffee into their life. Now who wouldn’t target young aspiring future users these days? This conforms to Adam Morgan’s book, Eating The Big Fish (1999). He wrote about how second liner brands could outperform the number one brand. In this case, used the classic approach of education, educating how to properly eat donuts and the likes. Who knows that glazed donuts are overly sweet because it is meant to be dipped into the hot coffee to soften the sweetness thus making the coffee sweeter along the way… I do, but most Indonesian’s don’t.

For and Krispy Kreme, everything is already written in stone, as aggressive marketing strategy seemingly defeat Krispy Kreme costly promotion. The defeat of Krispy Kreme lies not on its unattractive promotion, it is attractive indeed, you get triple for the amount you paid, but for what? Those who got “touched” by will surely know how to eat and when to eat it properly. But those who eat Krispy Kreme just ate it because they bought it. Now it’s not just about Krispy Kreme lack of creative marketing effort, but also on its lack of improvement of the product they sell.

I’ve also noted on the last post about how Krispy Kreme franchise characteristic is its own down fall against creative competitors. It cannot changed its recipe because it’s a franchise company. Robert M. Grant wrote on his book (Contemporary Strategy Analysis, 2006) about evolutionary theory and organizational change. He mentions about organizational willingness to change and adapt to their surroundings if they see it fit. The lack of creativity out of Krispy Kreme might not be the fault of their franchisers, but attributed also to Krispy Kreme headquarter to not let local franchisers to introduce new products in its lineup.

I see Krispy Kreme Indonesia is dying, unless Mitra Adi Perkasa could introduce the same marketing concept as, they might succeed, but for this time being, I’ll be watching from a distance, the slow death of Krispy Kreme Indonesia.

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.

Weekend Roulade: Franchising Fiasco

So I’ve start a topic about franchising using Krispy Kreme as its example. Well, in Indonesia currently Krispy Kreme is facing a tough challenge in the form of a local branded donuts chain store, akin to KK. As a franchise, KK chain stores must sell products that is defined by the main headquarter somewhere in America. However, this strong point of franchising becomes KK main disadvantage in Indonesia.

KK looses to J.Co (the local branded donuts chain store) simply because J.Co modifies the recipe which at first tasted similar to KK donuts. J.Co listens to the customers complains about how its donuts are too sweet and changed the recipe to become less sweet… And what do you know, it works. Now KK chain stores in Indonesia couldn’t follow suit isn’t it? How’s that for franchising becoming the easy money people would hope?

I’ve mentioned also about the difficulties of setting up a franchise, especially about location. I ate at Burger King this afternoon, and really wonders about why oh why Burger King closed down so many years ago… Apparently there are lots of people eating there, and I don’t see a reason why they left, considering this must be a franchise, thus taste will not differ that drastically in just a short time. So this short minded brain of mine started to theorize a bit.

Burger King chain stores in Jakarta are available in the best, most glamour shopping place around, the Senayan City and Grand Indonesia. How about back then? Well, back then Burger King was available at Kelapa Gading Mall… Not the most glamorous place then or even now as a matter of fact. So does desirability location affect Burger King so bad it just went out so many years ago? Perhaps, but I need to delve in further with the many resource I have.

Oh about marketers go to hell thing… I really mean it.

Next week! Super Salesman, is there such a thing? Actually it has to do with my recent visit to a Suzuki dealership. With such a keen intention writing about how good Suzuki products nowadays, I was really surprised when I visited one of its dealership… Well, you can guess I’m going to rant.

Franchise or not to Franchise… That is the question

Franchising, do you really need it? It’s a tale as old as time, as taking franchise promises the easiness of plunging straight into the hard boiled business world with little preparation. To open up a franchise, you only need a big start up capital and the rest will fall in order because buying a franchise means you buy everything from the know how (the recipe if it’s a restaurant), and the how to (the management process), is it not? Well, that’s just wrong.

Opening up a franchise involves a lot more work than people might expect. First of all, there is the human resource aspect that is not made available by the franchiser; we have to search for the employee to work for us by ourselves. Remember, weak under performing employee will never get you nowhere even if you buy the best franchise around. Then there is the geography problem, a place where you want to open up the business. We have to think about the ease of access, the surrounding locale, and the desirability of the location. Lastly there is the problem of who is in charge of it all? Certainly we need to know at least what is the nature of the business if we did not want to be bamboozled by the operating manager because our lack of knowledge operating the business.

You guys can look up for the pros and cons of franchising on the net. But I want to press about the cons of franchising using a unique example of franchising in Indonesia.

Krispy Kreme, and McDonald are two of the biggest franchise name in the world. However only one of those franchiser that thrives in Indonesia, and it is not Krispy Kreme. McDonald has the first mover advantage, being the first burger joints available anywhere in Indonesia, since late 1980s… Or something (forgot). However, Krispy Kreme is not so bad after all, being the third donuts chain store in Indonesia after Dunkin Donuts and Indonesia’s very own J.Co, even though KK came on a very late time (just two years ago).

When J.Co was introduced around three-four years ago, it became an instant hit overnight as people flock and queue long lines to buy just half a dozen of donuts. Hot on the tails of J.Co success is America’s leading donuts chain store, KK. Please pardon my lack of knowledge about who owns KK in Indonesia, but suffice to say it is still a franchised chain store therefore franchise traits are still applicable. So today marks the two years J.Co and KK has waged war to garner donuts lover into their shop, and wanna bet who wins? Well, it’s J.Co, the new startup Indonesian company.

The unique advantage of franchising sometimes is also its downfall in the case of KK in Indonesia. J.Co was rumored to use KK recipe to make its donuts before KK open up its store in Indonesia. However, once KK arrived, shortly after J.Co came up with a new recipe that is less sweet than the “competing brand”, and we know who that is. As a franchise company, KK cannot change its recipe, because that was franchising is all about, bringing the unique taste of the franchiser to anywhere in the world. This limited creativity is noted as one of the cons of franchising[1].

My family and friends love the less sweet taste of J.Co compared to KK, and the effects are as clear as a sunshiny day. KK customers dwindles, and in places where there are both KK and J.Co, like in Senayan City, you can see the void of visitors on KK but the same cannot be said to J.Co. KK even go as far as buying one dozen of donuts, you will get two dozens more… That is downright crazy. Well, you can say it is a promotional event, but I think it has going on for more than half a year.

So franchising in the case of J.Co and KK is not really a good thing isn’t it? Well, I am impartial in this issue, but if I have to take side, I’m going to say that franchising is not an option in the case of J.Co Vs KK. J.Co without the ties of franchise has the unlimited creativity to cater with the constant change of market demand. So why McDonald thrives? It is after all a franchise company too… Yes, it is a franchise company, but the franchiser (McDonald of America) has policies to let the franchisee expand its product portfolio. That is why McDonald has/had “local specialties” such as pork burger in Thailand, and Rendang beef burger in Indonesia.

As such, franchising is a prospect that needs to be taken carefully. One must weigh the pros and cons carefully and most important thing is the franchiser’s willingness to adapt to future situation. If you adapt (like McDonald), you will survive, if you just stick to your brand identity… Well, people don’t eat intangible things.