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.

My Personal Preview (rant) of 2008 Honda Accord (Asian Version)

So it is official, Honda has launched Accord in Thailand as of last week. So why do I keep mum for all of these time? The self proclaimed rabid Honda fan boy? Well… It’s because I didn’t like it. To speak without restrain, Honda has done stupid things in the past, but with the launch of Accord in Thailand, they have done the most stupid thing in history as far as I know. When Takeo Fukui made his speech at Tokyo Motor Show, he said specifically that Accord will be a global model, meaning that around the world there will only be one Accord. Is this a good thing? Well, read on…

America Honda Motor a couple months ago has released Accord in the states with mixed comments from the industry. The V6 coupe has garnered many many fans while the sedan received a welcome pat on the back. It is Honda Accord after all, winner of Car and Driver magazine family sedan of the year ever since 1985, so no surprise there. But when I look at it… Damn, the car looked too bland, too “safe”, and too vanilla-ey. I guess Honda wants to play safe and gives the north American Accord the mild styling, they’ve done so in the past with the north American Civic.

The reception for this “safe” design approach was accepted by the Americans, well, their stereotype does involve simplicity over style. The Civic with the simple head light line and Honda City 2nd generation simple rear lights was a hit. Compared to the Asian/rest of the world Civic (sans Civic Euro), the north American Civic is very bland. The Asian Civic even got integrated into the Canada Acura product line as the CSX, just for styling alone.

Now here’s what I have for the global model announcement. By being a global model, a Honda car will basically have the same look anywhere it is sold in this world although there is the possibility of a minor cosmetic change. The Fit for example, it’s a global model, and from Europe to Asia to America and beyond, the Fit shape will be similar no matter what. So what does this bode for the Accord as it’s becoming a global model… One thing for sure, the shape of American Accord will be the same around the world

When the announcement was available, I immediately voiced my concerned on many internet message boards, one being Temple Of VTEC. I specifically criticize the bland styling of American Accord that will be globalizes. The world is not America (even though American government wants it that way), therefore what being sold / attractive there doesn’t necessarily means it will be the same anywhere else. Sure Accord is America Honda Motor bread and butter product, but will it be successful outside of America with the same styling?

Toyota had done their homework very well, creating a higher scale (cosmetically) Camry outside of America. Compared to Asian Camry, the American Camry looks bland, just what the Americans like. The Asian Camry however looks down right expensive and upscale. 7th generation Accord one up last generation Camry by having a full chrome around the side windows (the last gen Asian Camry has only chrome on the bottom side of the side windows. Now, Camry one up 8th generation Accord by having full chrome around the side windows and chrome lining around the fog lamps and more aggressive looking bumper… How about Asian Accord? Well, it is the same with American Accord, bland.

The rear American Accord was like a huge void of sheet metal with a big fat H logo on the center of the trunk. Thankfully, the Asian Accord received an ornamental thin red stripe extended from the rear lamps towards the center of the trunk, just like current generation Honda Odyssey.

The interior is also a shameful excuse for a Honda badge… It’s basically the 7th generation Accord interior with small changes… What the hell… I know the saying if it ain’t broke don’t fix it, but come on, it looks almost the same with the last generation if I don’t look hard enough.

Thankfully, my father is taking CEO position in his office and doesn’t align himself directly with Honda anymore. If he does still work with Honda, he has to buy the new Accord.

Why does a rabid self proclaimed Honda fan boy said all of this things? Because I want Honda to step up and show some balls. Because Accord is the most popular car in the states doesn’t mean it will sell everywhere else around the world.

However, the engine of the new Asian Accord is quite good though. 180ps, the most powerful 2.4L engine in its class, I think the Camry has a 160-166ps 2.4L engine. A fast ugly expensive sedan will still be faster than a slow upscale pretty expensive sedan.

Here’s some links to Asian and American Honda resources.

Honda Accord Thailand website

American Honda Accord full overview

Oh, almost forgot to add, the Thailand Accord will be the base for Asian Accord including Australia. Although many applaud its driving dynamics, the drivetrain, the improved interior space, the everything… It is just ugly, bar none. Oh well, I can already imagine what they are going to do with the mid life cycle upgrades, but why won’t they do it in the first place?

Entry updated here…

Do You Want To Start Your Own Business? Read On…

Starting their own business is a dream for almost every person in this world. You work for yourself, you don’t have the nagging boss behind you, you set your own goal, and if you strike it good, you will get lots of money. Speaking of money, my father and I had a little conversation about setting up a business. We talk about how my friend wants to open up an upscale escort/transportation business with little start up capital.

Now here are some problems we encountered during the conversation. With a small start up capital, does the bulk of the resource goes to the core of the business? And if it isn’t does the core of the business is allowed to expand later in the stages of its life cycle?

Now we know about product life cycle, where a product is devised, introduced, then it matured and then it finally falters. With a small start up capital, will the product/service being introduced has its core business 100% developed? To put it simply, my friend’s idea about starting up the escort/transportation business requires a hefty sum of money. However, because he didn’t have enough start up capital (he does actually, but he didn’t want to put all his eggs in one basket) he wants to introduce the business concept incrementally. Personally I thought that this is a bad idea… And why is that?

Here is the thing, my family ran our own business, and what we learn through the years is that customers only remembers us for the smallest mistake or the slightest lack of feature from our product/service. Here in my country, we have a saying that goes like this (loosely translated to English): a drop of coffee on a glass of milk and you throw away the milk jug. It means that people will judge us for the smallest mistake we made, not how many good deed we had done.

Back to the business part, what that old saying means is that we have to establish the core of the business 100% instead of introducing an incremental increase for a period of time. My friend’s business proposal for example, the escort/transport will first use cheap vehicles that contains only the essence of the true core business, then down the line he will introduce the more expensive vehicle. Now the example seems a bit convoluted, let’s talk about automotive service workshop.

Inside a workshop, we usually finds oil changing service, tire changing/balancing/spooring, engine maintenance, engine repairing, and the likes. How about if we open up an automotive service workshop providing only engine maintenance and engine repairing, but we put up general service workshop sign in front of the shop. People off course will be upset because your core business which is general repair is not fulfilled. If you has only limited start up capital, do make sure that your core business is intact, up and running. Use less man power, provides no-frill waiting room, whatever you do, don’t do the other way around. The waiting room on a service workshop acts as a support for the core business, and that should be the least thought out aspect of opening up a business.

Now people sometimes confuse what is the core business and what is the supporting factor. This is actually basic marketing once again, one of the 4 Ps, product. According to value based, a product must have functionality, quality, appearance, packaging, brand, service, support, and warranty. When I helped a lecturer wrote a book for his professorship he divides product into three separate category, the core, the secondary and tertiary. The core is what defines the product itself, its function. The secondary defines the name, the specific category it places and the tertiary defines the supporting factor of the product such as warranty, after sales service and the likes.

Well, enough for the product description, I will write a separate article for that one. Back on topic, if you open up a business, you need to make sure that the core business is intact and fully running. Do not sell a broom without the whisk that’s for sure, and thus when you open up your business, always starts with your core business intact from introduction phase up to maturity in its life cycle.

Counter Marketing and The Shit That Follows

Okay, I promised back then that I would dig deeper about how two big Indonesian GSM providers are duking out medieval style by throwing stones at each other directly. However, due to my lack of social life, and my lack of interest about local scenes I couldn’t find out more about the advertisements. However, I can give out some examples about counter marketing using the most renowned brand in the world… Coca Cola and Pepsi Co.

In the land of uncle Sam, everything is legal, even making a mockery out of your competitor. The most oblivious of this example is the ongoing battle of Coca Cola and Pepsi Co advertisement where they literally disgrace their competitors product to a high degree. I remember about reading an advertising book where there’s a picture of a kid using Coca Cola cans as a stepping tool to reach and buy a Pepsi from a vending machine… Boy, that was classic! But you know Coca Cola going to retribute right? Well of course they did. How about Pepsi Co, did they just be quiet about it? Of course not! They retaliate again.

Now this is what counter marketing is all about. Usually, to save face, a competitor who’s being targeted as the victim will retaliate, and the evil cycle continues. In the case of Coca Cola Vs Pepsi, they can manage to duke it out for so long because they have the resource for it. One word of advice, don’t get involved in a counter marketing, because the person/group/company/principle who have the most resource will win at the end. So be very careful about derogating your competitor, because once you get stuck inside a counter marketing situation, usually it will involve a lot of money…

Money you say? Yes, money. When you derogating a competitor, it means that you deliberately dragging down its image. Now how do you increase image standing again… Well, you can’t, at least in a short period of time. But what you can do is to counter it, and make the people sees that the person who derogating you is the one who doesn’t have the credibility.

Suzuki Indonesia… A Not So Champion Of Rational Thinkers

Okay, so I wrote back then about how Suzuki is the champion of rational thinkers. Now people might expect that I’m changing my mind about the matter because I don’t… However, I have this irk to settle about Suzuki Indonesia and why they kill a perfect little car called the Swift.

Suzuki products are widely known for its class leading equipments. For example here in Indonesia, the Swift WAS a product of choice for cars under US$16K with airbag+ABS+EBD+onboard computer+audio controller on steering wheel. Other cars barely reach Suzuki Swift’s equipments even as an option. The trend continues with SX-4 here in Indonesia, at just roughly US$17K, you get all of the above but with a bigger chassis and everything. But recently, Suzuki chopped off the options on Swift to the bare minimum. The car now has nothing but priced at mind boggling US$14K, down around US$3K with the negation of the options.

Now it is understandable to make the Swift as bare as it is to reduce price. But Suzuki Indonesia does not offer Swift with the extra options anymore, just the bare minimum… Now what the hell with that? From what I heard and read at many automotive forums and mailing list, Suzuki does this to push sales because the car is not selling well compared to Honda Jazz and Toyota Yaris. D’oh! Off course it is, Swift is a small car compared to those two. It is not a family car per se, it is more of a coupe with extra doors at the back. Rather than just pushing for bigger sales, Suzuki can use the Swift as a stepping stones for people who wants to buy bigger Suzuki cars in the future. After all, what sellers wants from their customer is their retainership and loyalty.

Instead, Suzuki Indonesia degrade the class of Swift into that of a cheap entry level car and those who wants to buy the full optioned Suzuki cars must buy Grand Vitara or SX-4. Now where’s the logic on that? The exclusion of models with full factory options are caused by Suzuki decision to localized the production of Swift, because before the Swift was exclusively imported from Japan. Now with the localization of the Swift, Suzuki deletes the option altogether. Suzuki can still import Swift with full options, even for just a handfull because there will always be a market for high end products. Is Suzuki worried that Swift will overlap SX-4 sales? I don’t think so, because the SX-4 is already a bigger car, even though it is derived from Swift chassis.

One thing I can notice about Suzuki Indonesia decision is just because they want to save as much money as possible. By making all Swift as one standard model, they can achieve economy of scale far easier and they don’t have to incur inventory cost by keeping a separate line of cars. The thing is importing a car are full of hassle, first there’s the administration fiasco between Suzuki Indonesia and Suzuki Japan, that’s for sure. Then there’s the hazard of importing a car from far away land physically (well, you won’t know what happened to the car on its way here), not to mention the time and cost it took to ship cars from overseas.

I wholeheartedly understand why Suzuki want to “degrade” the caste of Swift. After all by doing this Suzuki now has a complete line of products ranging from the affordable entry level Karimun Estillo, to the not so expensive neutered Swift, to the rightly priced all terrain SX-4, the coming soon SX-4 sedan, and to the top of the line Grand Vitara. All products ranging from US$10K to US$25K.

Now my decision of buying a Swift has been decimated to the lot… I do feel sad because the car was the best choice for a full optioned car under the price of US$15K. It seems the curse of Honda rears its head again, probably I will buy the all new Honda Fit/Jazz, a not so bad model. I wanted to buy SX-4 though but kind of afraid Suzuki Indonesia is going to pull the same trick with neutering the SX-4 as it did with the Swift. If I bought the fully optioned Swift back then, probably I will feel alienated by Suzuki Indonesia decision to neuter all existing Swift. Because after all, how can I brag and persuade people to use the Swift if the existing Swift is not exactly the same product I used? Don’t start about the exclusion of Airbag and ABS doesn’t bring about different driving experience, it does, wait until you gotten into a situation when those things safe your life… I had.