“We really leveraged our franchisees in Beijing who are connected with grocery store, restaurant, and other industry suppliers,” Champagne says. “Drink and sundae cups, spoons, napkins, and toppings are made in Thailand, and we distribute those products all over Asia from there.”
Asked if company officials are concerned over the quality of raw materials and other products in the supply chain in the wake of media reports of tainted food products and shoddy manufacturing from China, Champagne replies with an emphatic, “No.”
“There is a lot of BS out there about crappy vendors in China, but if you take the time to build relationships, you won’t have problems there,” he adds.
Over time, Dairy Queen officials have been able to take over a great deal of the supply chain in China so that franchisees can focus primarily on their respective quick-serves. “It doesn’t go over well in any country you are in to just say you want to take over the supply chain,” Champagne says. “In China, we had to convince them they would get more economic value with us handling the purchasing.”
Understanding cultural differences is equally important when it comes time to build the menu and open for business. Champagne illustrates the dichotomy between Asian and Western cultures by using Dairy Queen’s Blizzard as an example.
The No. 1 Blizzard in North America is made with Oreo cookies. That same Blizzard is a distant second in China, where the top seller is made with green tea and red beans.
“North Americans would not eat that,” Champagne says. “In North American, people break apart our waffle bowls and eat them, but before they knew they could, the Chinese would not eat with their hands, so they would just leave the bowl.”
Focus groups conducted by Dairy Queen ferret out preferences and tastes, he explains. Neither brand arrogance nor the “Super Size” mentality will work in China. “They will not purchase a portion size they cannot finish,” Champagne says. “We didn’t adjust portion size at first. Now most purchases are between eight and 12 ounces.”
Culture also reverberates through the supply chain when it comes to chocolate. While chocolate flavor might be satisfying to Americans, it might not agree with Asian palates. Minimizing products to core items, Champagne says, and gradually rolling out tertiary menu items is a cost-effective way to ramp up the business without taxing the supply chain.
Au Bon Philosophy
Going global can be glorious, but setting the stage and maintaining a presence is a laborious, ongoing commitment.
“It’s actually quite a process,” says Bernard Platt, senior vice president of franchising at Au Bon Pain.
Internationally, Au Bon Pain is primarily focusing on new developments in Asia and the Middle East. It currently operates 36 cafes in Thailand, four in Taiwan, and six in Seoul Korea, with other facilities opening in Japan and the Middle East this year.
Au Bon Pain, Platt says, works directly with international franchisees to define the menu program and determine how deep it will go. Once a detailed list of raw materials for that menu is devised, franchisees begin working with teams that deal with food and beverage procurement, purchasing, logistics, and distribution.
“We work with the franchisee to set up all of those components in their country,” Platt says. “Our philosophy is to have an in-country model. We’re not working to export to another country. We work to procure raw materials and ingredients from the country where we are going to franchise. The reason we do that is because of the economics. A lot of countries are emerging markets; they can’t afford it and it is not feasible to import from the U.S. because of the cost of the logistics.”
The biggest hurdles are the raw materials, Platt explains. In Japan, for example, sourcing spices such as cinnamon can be difficult, which can delay putting cinnamon scones on the menu.
“Cinnamon applications are not available in Japan, so we have to look at alternatives,” Platt says. “We are still working that out right now. There is always an alternative, and then you customize it.”