Theme 9: Product Standardization and Adaptation

The signing of franchising agreement with the foreign partners requires Firm A to assist the outlets operation in the foreign markets. Firm A has always exerted tight control over the quality of the product and standardized the taste of fried chicken everywhere.

In the interview, the General Manager describe in detail on the standardization of its menu:

We standardize fried chicken to protect our core competency. We only export the very important ingredients such as pepper and herbs, and our branding flour. The mixture of herbs is done in Malaysia. We also mix our branding flour for battered chicken. The sauces have also been standardized according to the procedure that we‟ve set. This is to ensure the standard of taste in order to maintain our quality and the secrecy of recipe will be well protected. Our secret recipe is kept by the trusted person to ensure that the menu and product can‟t be easily duplicated like our marinated gravy and the combination of herbs used. When we export, it takes up to 3 months through shipment to certain country. In Tanzania for example, it takes 45 days to reach. We must have proper chilled storage for this long journey. We can export frozen nuggets and fish fillets if the franchisees aren‟t able to source in their country.

The standardization strategy required Firm A to manufacture its core product in Malaysia before exporting to the host countries. In this case, the taste of fried chicken could be standardized using Malaysian made marinated ingredients and sauces (Franchiseek Malaysia, 2004, July). Therefore, Firm A had to manufacture the batter and herbs and spices in Malaysia to be used for marinating the chicken and fish as well as making sauce in Southeast Asia, China, India, Middle East, and Tanzania. Clearly, the exportation of batter and herbs and spices was not only to maintain its taste but also to control and protect its secret recipes while at the same time, standardize the products throughout the world.

In order to standardize its products, Firm A had to source in its home country. However, if other ingredients such as frozen nuggets and fish fillets were not available in the host

countries, it had to export. In fact, the export strategy can ensure the standardization of its recipe throughout the world.

On the other hand, Firm A is quite flexible when it comes to introducing other menu items popular with the locals of the respective countries. The General Manager described how the adaptation of product was done in the host countries:

I think 30% of the products are adapted to foreign markets because we alter food portion, taste, and presentation. We empower the master franchisee to adapt to local taste. We loosen the control over customized menu to better target foreign consumers. In fact, franchisees have full control over menu in their country except for standardized menu. They just need to inform what new items they want to offer, we‟ll assist them in terms of QA (Quality Assurance) and R&D (Research and Development). We‟re mutual learning to adapt to other countries. This can improve our experience curve.

Many foodservice players are offering products in the host countries which are tailored according to local taste and preference. Firm A needed to be also more adaptive in offering food by tailoring to local palate (Franchiseek Malaysia, 2004, July). This strategy seemed to be effective in gaining more market share from its competitors in the foreign countries as it showed concern to the host country‟s customers. Firm A had also learnt about the differences in various countries‟ food culture with its R&D. The local food had to undergo stringent quality control before offering to its customers.

Therefore, the outlets located in Middle East may have different offerings than one in China. He further explained the products that were adapted to foreign markets:

Except for fried chicken, burger, fish and chips, fries, nugget, [and] bread, we adapt all products to foreign markets. In India for example, roti prata (fried flour-based pancake) is offered in our outlets. In Middle East outlets, we offer chicken kebab (pieces of meat roasted on a skew). In fact, chicken satay (Malaysian marinates, skewered, and grilled meat) is popular in UAE because it looks like kebab. We also serve loose rice in Arab countries rather than Malaysian sticky rice. In China, we offer noodles. In Southeast Asian region, we offer nasi lemak (coconut-cream rice).

In fact, we‟ve our own strong identity of food. Even our nasi lemak (coconut-cream rice) is popular in Tanzania and Dubai.

Firm A always thinks global but act local. The product in host country can be similar to home country if both countries possess similar characteristics. However, there will be certain adjustment in terms of the product characteristics to suit to local taste. In this case, Firm A has adapted local food such as roti prata in India, satay in Middle East, nasi lemak in Southeast Asia, Tanzania, and Dubai; while noodle in China.

Firm A also allowed the raw ingredients to be sourced locally in the host countries as elaborated by its General Manager:

We locally source certain raw product in the host countries such as chickens, fishes, potatoes, vegetables, breads, rice, and other products like chili and tomato sauce.

Mostly are the perishable products. This is to save cost in logistic and to ensure the efficiency of the supply. However, the franchisees have to bear the cost of inventory and food sourced locally. We outsource almost everything. That‟s why we don‟t have to wait until we‟re perfect to venture overseas. KFC and Pizza Hut may have their chicken slaughtering center and chili farms in Malaysia, but we don‟t need this. We‟ve worked closely with our trusted suppliers. Even the countries that we venture, we found many Malaysian firms are there [to be our suppliers].

Firm A was very comfortable with local sourced raw product in order to localize its menu items. It was also very dependent on its reliable suppliers in order to be more cost effective in running the operation overseas. Therefore, Firm A needed not to own supply chain in the host countries. Furthermore, there were many other Malaysian firms available to be part of its supply chain.

In this interview, it also shows that Firm A is proactive franchisor, instead of waiting for the brand first to be popular in the domestic market, it quickly expand its business internationally to take advantage of image creation through its franchise system.

By the combination of standardization and adaptation of the product, the General Manager agreed that Firm A had offered better quality to its customers everywhere:

Yes, standardizing can maintain the quality of the product in all of our international outlets. Localizing the product will let the franchisees to be more competitive in offering the product as they‟ve to compete with their local competitors.

To certain extent, he disagreed with the over control exerted by his firm to the franchisees.

Too much control over foreign franchisees could give wrong signal to them. In this case, they may be over reliant on headquarters and may not be learning and have the mindset that franchisor would always help them in operation.

In the interview with the General Manager, he admitted that Firm A had encountered many challenges because of their third world mindset among the host countries.

Since we invested in third world countries, we‟ve to change their third world mindset which has various working attitudes. In India, there are unproductive. Many staff are doing the same work at the same time. In Middle East, many of them are unknowledgeable. Fast food is something new for them. We need to expose them with fast food environment. In Tanzania, we found they‟re conservative. They don‟t like to makeup and wear uniform. We‟ve to provide more training for them.

However, they‟re very appreciative and perceive their job as very valuable. We provide training in English. We base the three-month on-the-job training in Genting (Malaysia) where our largest outlet is located. We also provide formal [off-the job]

training at our headquarters, Johor Bahru (Malaysia). These centralized training venues are set up to better control quality worldwide. [However,] In China, the training is conducted in Mandarin language.

Since majority of the subsidiaries were located in the developing countries, Firm A had to provide more training for its franchisees to improve their capability to run its outlets.

All the franchising trainings were conducted in Malaysia except in China where it had its own training center.