Localization of Franchise Systems: Adapting Core Identities for the Global Marketplace

By Eric Johnson

I had just spent five hours in a plane crossing the continental United States, and another 13-plus hours crossing the Pacific Ocean to arrive in Auckland, N.Z., barely having enough time to change clothes before meeting with a local Maori tribal leader. I suddenly realized just how different the culture was that I was operating in as I stood in front of a very imposing gentleman waiting to exchange the standard pleasantries and handshake.

We shook hands and then the leader would not let go of my hand, almost pulling me closer and beginning to stare at me aggressively; I felt my personal space diminishing, wondering what I could have done so wrong, so quickly into this meeting, even under the haze of jet lag.

A Kiwi colleague was, thankfully, standing next to me and mentioned it is a customary greeting in Maori culture to touch the tips of noses and foreheads at the same time as you look deep into the eyes of the business associate you are just meeting. This is called a “hongi,” a sacred greeting among the Maori as they meet an outsider. It signifies the sharing of the breath of life. I had a very important meeting at stake, and did exactly as my colleague instructed and the mood immediately lightened. This tribal leader then considered me part of their community.

That day, I discovered how much I still needed to learn about New Zealand and Maori culture, which is very integral to the cultivation of land and sea to this tiny island nation. To operate in business you must become one of the people of the land through the hongi. Later that afternoon, sitting in a modern U.S.-looking Starbucks recently opened in Auckland’s central business district, I was feeling very comfortable because I knew just what I was going to order, until I was asked if I would like to “try a flat white.” Shocked, I asked what a flat white was. Soon the coffee was served in an actual porcelain coffee mug — a flat white is very similar to a cappuccino.

A level of finesse

There is no end to the cultural education one receives while travelling abroad, and that day I began to adapt to a new culture and approach. This is not unlike what franchise operators experience as they take successful franchise systems into different regions around the world. U.S. franchisors must also adapt as they explore global communities and cultures. Many brands are quickly reaching their saturation points in the domestic U.S. market, and foreign markets offer opportunities to introduce franchise systems and American culture, as well as brand quality and service to markets looking for a new approach. This takes a level of finesse that goes beyond export readiness.

In my role with the U.S. Commercial Service, I am constantly assessing the export readiness of companies as I work with them on potential expansions and selecting new international markets. I tell clients to conduct appropriate levels of market research to assist in the market selections and to navigate the best channels for a market.

My clients learn a great deal each time they visit a new international destination, meet possible partners, and immerse themselves in the local culture. It is only human nature to form opinions about our surroundings as we explore and get to learn a new locale, and we must look deeper in a commercial sense beyond personal opinions. Business partners in a foreign market are crucial to companies expanding internationally because they become the eyes and ears on the ground abroad, and this becomes particularly important when supported with consumer research and insights.

When franchisors meet potential master franchisees or area developers abroad, more is at stake than finding someone who has access to capital, real estate and even operational experience in the industry — albeit all of those things are almost a trifecta. Selected partners must work with the franchisor to modify the system to their local market. In many cases, products or services may need tweaks for the local markets, or localization.

The importance of adaptation

Having a well-known brand can be important toward international success, Even with iconic brands, adaptation or localization may be a critical step to taking a franchise system into a new market. Adapting the brand to a selected market or region may even be an absolute necessity for cultural reasons, religious reasons, taste profiles and price-to-quality ratios.

Adjustments should be made to a brand to facilitate market acceptance, and should be based on consumer insights, not individual opinion. Donnie Everts, vice president of international development for World of Beer Franchising Inc., feels many things can become the subject of localization to make a brand more successful in a market, “though someone will usually want to franchise a brand in a market because they see the need or demand for the business that may not be currently met in a region.”

Companies must always preserve brand identities and hallmark qualities such as providing the world’s best burgers; the world’s best quality pest control; or being the predominant leader in digital document storage. Every brand has a core of products or services that distinguishes it, and this core has contributed to the success of its systems.

What’s appropriate?

When looking at market adaptation, development teams must take all areas of a franchise system into consideration. Let’s start with a company’s brand identity. It would not be acceptable to take Church’s Chicken into the Middle East; instead the brand operates as Texas Chicken in this region of the world and others where Muslim culture and religion
are predominant.

Similarly, Carrabba’s Italian Grill operates under the name Abbraccio in Brazil due to a warm, familial connotation of Abbraccio. You must make certain a brand has an appropriate connotation in markets. In this vein, you cannot print the flag of Saudi Arabia on serveware as the flag is a sacred symbol and should not be thrown into the garbage. A Turkish flag similarly is forbidden by law to be printed on merchandise items.

Looking beyond printed items, there is also the need to remove pork and alcohol items in Muslim countries from menus and advertising, taking into account religious preferences. You would similarly not include beef on menus in India, as cows are sacred animals and vegetarianism prevails. Numerology only adds to the mix in China. It is important in making all of these considerations, to not lose the feel of the original brand, as that is one of the reasons why local people will choose to frequent a brand especially when it is well-known.

What’s on the menu?

In my culinary explorations and conceptualization of recipe ideas through New Zealand, I found it most intriguing to work on menu ideation. When taking a QSR or fast casual concept abroad, it almost becomes a necessity. Hair Parra, vice president of international development for Wing Zone, feels it can be “an important step to add a local dish or some local touch without losing your image or brand.” Mark Whittle, senior vice president of development of Hooters of America, LLC mentions the company “allow between 10 percent and 20 percent of our menu to be local items, however, we keep these menu items on a “Local Favorites” insert.

Overall, portion size, meat substitutions, spices and seasoning, and service style for the menu all play integral roles to determining what is core to brand identity, and adjusting to a local market to gain acceptance by the consumer. When locals frequent a franchise in their region or neighborhood they want to see something local to their culture such as McDonald’s offering the McTurco burger in Turkey, the McKebab in Israel, or in serving of rice across all service segments in the Philippines.

It is interesting to note vegetarianism in India. Subway has debuted an all vegetarian restaurant in India for the Jain religion, and KFC has debuted vegetarian menu items as well as experimenting with the delivery of hot food through the system of Dabbawallas in Mumbai. Dabbawallas deliver hot lunches to office workers on bicycles and railway lines sometimes taking great risk to deliver their packages on time.

What’s in a name?

Imagine some of the requests that are made as companies work from initial investments and agreements to operational aspects of franchise systems. These requests sometimes make their way into acceptance of franchise systems, first by making their way as limited-time offers and then becoming core either to a region or system wide. A change in service style may even be required as Donnie Everts encountered when at Outback Steakhouse. The brand had to change the name of the person at the front door greeting guests and showing them to their tables. “This role is a “Hostess” in the U.S. but this was changed in South Korea to “Greetress” as “Hostess” refers to being a prostitute in South Korea.”

Similarly, Outback Steakhouse changed the name of one of its ice cream desserts called the “Spotted Dog” as dog meat is still consumed in some parts of South Korea, and this name did not accurately translate to the desert offering. A request can also be a simple change, as Hair Parra found in Russia when Wing Zone needed to offer silverware for consumers to eat the franchise’s sauced wings at the table.

Sometimes a change request may go against core, and you must know when to stay central to your brand identity. Mark Whittle discovered this when a Saudi Arabian Sheik sent the Hooters team renderings of what the Hooters girl uniform would need to be. This was a deal, “Needless to say,” the Hooters team passed on at that time.

The logo stays

Most franchisors are willing and dedicated to altering aspects of their brand and systems if it means they will have improved chances of international success. Growth in international markets requires flexibility. Most brands will never change their trademarks, logos, or a unique identifier unless it is an absolute necessity.

Aflac Inc. found this to be the case in the 2000’s with their iconic duck. The existing duck was too aggressive for the Japanese market and a tamer version needed to be created for the more tranquil Japanese market. It does come back to the logo for most brands, as this is how brand recognition is established.

Tom Luczynski, group vice president of Orkin International Development & Franchising, is very proud of the service standards and quality the company’s Red Diamond logo signifies. “This is our logo and all of our franchisees around the world must comply with our logo graphics.” The logo is consistent in all markets, and while Orkin service vehicles may vary, the Red Diamond logo is prominently displayed on
the motorcycle.

Franchisees seek brands to fill a commercial need in their markets, and there are some minor adaptations required in most markets, but franchisees also know that the branding of a concept along with proprietary items or systems are what is on offer from the franchisor. Maintenance and care of the spirit of the brand is important.

A balancing act

Having a sophisticated franchisee as a market partner helps to strike a balance between the franchise system and local market needs. Chris Rich, president of Rich Response International, said “you need a sophisticated partner who understands the market and target consumer. Both quantitative and qualitative research conducted by the franchisee needs to include focus groups and taste panels to “dial-in” the taste profile, portion size, price to value proposition, concept look and feel, and consumer relevance access as far a spectrum on target consumers as possible.”

Taking a new franchise system into a market is an exciting opportunity and franchisors and the local operator need to make certain they have taken average checkout tickets into consideration as you may raise prices in time, keeping you from pricing yourself out of markets at introduction.

This is very true for the Indian markets where average check out prices can be low, and brands offer slightly different product and sizes to operate in this very competitive region. Pricing isn’t related only to core menu or service offerings, it makes an impact on selection of a location and the design package for the units. In many Asian nations where real estate costs are at a premium, brands operate with a smaller footprint reducing the build-out investment.

Franchising is a relationship business and franchisors and franchisees must be in constant communication to determine a balance that will promote and protect consistency of a brand, and also maximizes the franchisees’ interests and success factors. Balance is a crucial element of franchise success around the globe.

Localization = Success

As we introduce markets to our iconic brands and services, we must keep sight of how our franchise systems can be adapted in global markets. Localization is tantamount to success. As I continue to work with franchisors in identifying possible partners and conduct research, I am reminded of New Zealand business trips to work with Maori food and beverage manufacturers to position premium products in restaurant chain operations and distribution, and the hurdles with New Zealand and U.S. corporate chefs to design menu items for replication and resonance with U.S. consumers.

It is not easy or without complications, but with research, diligence, creativity, and flexibility, it is possible to bring consistency and core identifies to varied markets such as Turkey, South Korea, India and Brazil. We know that “Location, Location, Location” is crucial. To grow internationally, we should focus on, “Localization, Localization, Localization.”

Eric Johnson is senior international trade specialist for the U.S. Department of Commerce’s U.S. Export Assistance Center in Atlanta.