Loading case study...

Back to Case Studies

Implementation of Franchise University

Implementation of Franchise University

Situation

In 1997, after a significant worldwide correction to the Pepsi Cola business, Mr. Gonzalez was invited from Spain to join the Corporate HQ in Purchase, NY. The international business had finally defined a path forward to grow the franchise business, and Mr. Gonzalez was meant to execute the plan globally. HQ had two senior executives developing a solution built around worldwide concentrate price increases — a proposal set to go to the CEO of PepsiCo just two days after being shared with Mr. Gonzalez.


Actors

  1. The two executives who developed the solution
  2. The CEO and President of Pepsi Cola International
  3. The Head of Human Resources of Pepsi Cola International
  4. The Executive Vice President of Operations of Pepsi Cola International
  5. A consultant from Accenture, brought in to help conceptualize the rollout
  6. The 100 Franchise Managers around the world who would need to implement the change
  7. The Bottlers around the world

Solution

Mr. Gonzalez, an internationalist who had by then lived and worked on four continents, had confronted labor law in multiple countries and worked closely with legal teams around the world. He immediately recognized that HQ's proposed concentrate price increase could not be executed without significant legal battles in every country — a huge distraction and cost to the Company. Based on his experience in the franchise and bottling businesses, he knew that upsetting the Bottlers would produce the opposite of what the CEO and President of Pepsi Cola International wanted.


He went into a "fox hole" with the Accenture consultant and prepared a discussion document to present to the CEO that same afternoon, briefing his boss on why the HQ plan couldn't work. His boss didn't like hearing it, but understood the logic. At the meeting, Mr. Gonzalez laid out every actor's interests and explained, without emotion, why the proposal would fail — stressing that the real priority was improving Bottler profitability, not just the franchise company's. Using the same model the two executives had built, he showed that the profit pool was skewed 80/20 toward the franchise house versus the Bottler, and recommended a model where Bottlers could grow their own profitability through smarter marketing spend: more volume, more profit for everyone.


The CEO of Pepsi Cola International agreed not to bring HQ's proposal to the CEO of PepsiCo, and gave Mr. Gonzalez two days to develop an alternative to present to the 10 Business Unit General Managers four weeks later. He worked 48 hours straight to build the foundation of what became Franchise University — a program that had been flatly rejected a year earlier by Pepsi Cola International's senior leadership.


Mr. Gonzalez set criteria for success: a sponsor from among the 10 Business Unit General Managers; the best field leaders made available to develop curriculum and training materials; Company funding without pushback, given the timeline; and a pilot program in Barcelona within four weeks. For the first time in 100 years of PepsiCo, eight weeks after that New York meeting, the 100 Franchise Managers from around the world convened in London for the first session of Franchise University.


That year, business plans for every market were completed by November 30 instead of the following May — a six-month acceleration that let markets compete effectively against Coca-Cola through the full year. The Company gained one point of share worldwide and continued gaining share for eight consecutive years.


Once again, Mr. Gonzalez used every actor's agenda to reach a better outcome for everyone involved. The two executives who'd developed the original proposal went on to great careers — one became CFO of the Winter Olympics in Utah, the other stayed at PepsiCo for years working alongside Mr. Gonzalez before founding his own company. Game theory principles, it turns out, are just as valid for recovering a failed project as for launching a new one — and actors not directly involved in developing a solution will still push it forward if they stand to benefit.