Case Study VII | 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 way to go forward to grow the franchise business. The idea was for Mr. Gonzalez to execute this plan around the world. The HQ had two senior executives developing a solution that called for Concentrate price increases worldwide. This solution was to be taken to the CEO of PepsiCo two days after it was presented to 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 that was to aid Mr. Gonzalez on conceptualizing how to roll out the solution

  6. The 100 Franchise Managers around the world who needed to implement the change

  7. The Bottlers around the world

Solution:

Mr. Gonzalez is an Internationalist whom at this moment had lived and worked in four continents. He had confronted Labor Laws in multiple countries and worked closely with the Legal department in multiple countries around the world. Therefore, he immediately knew that the HQ’s proposed price increase of concentrate could not be executed without significant legal battles on every country around the world. This will be a huge distraction and a great cost to the Company. Based on his experience in the franchise and bottling businesses of the Company, Mr. Gonzalez knew that upsetting the Bottlers would produce the opposite results than those 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 afternoon. He briefed his boss and told him what he thought about the impossibility to roll out the HQ’s plan. He did not like it but he understood what Mr. Gonzalez was saying. At the meeting with the CEO, Mr. Gonzalez put on the table the interests of all the Actors. And then he explained without passion why the proposal would not work. In addition he stress this was a time that we needed to improve the Bottlers’ profitability instead of just the Franchise Company’s. He used the model the two executives had developed where it was clear that the profit pool was skewed towards the franchise house 80/20 vs. the Bottler. He recommended a model where the Bottlers could increase their profitability thru better management of the Marketing spending. More Volume more profits for all.

The CEO of Pepsi Cola International agreed not to present the HQ’s proposal to the CEO of PepsiCo and gave Mr. Gonzalez two days for him to develop a new proposal to present to the 10 Business Unit Managers 4 weeks from that point. Mr. Gonzalez worked for 48 hours non-stop to develop the underpinning of Franchise University, a program that had been violently rejected a year earlier by the senior leaders of Pepsi Cola International.  

Mr. Gonzalez established criterion for success:

  1. There was to be a sponsor from the 10 Business Unit Managers

  2. The best leaders in the field would be made available to him to develop the curriculum and thetraining material

  3. The Company will pay up the cost without challenges as there was no time to argue

  4. There would be a pilot of the Program in four week in Barcelona Spain

  5. For the first time in 100 years of PepsiCo, 8 weeks after Mr. Gonzalez visited New York, we brought together the 100 Franchise Managers from around the world in London for the first session of Franchise University

That year the Business Plans for every market were all completed by November 30, as opposed to May of the following year, a saving of six months that allowed the market to compete effectively with Coca Cola through the full year. The Company won 1 Point of share worldwide and continued to make share gains for 8 years in a row.

Once again, Mr. Gonzalez used the agendas of every Actor to achieve a better outcome that benefited everyone involved. The two executives went on to have great careers, one went to be the CFO of the winter Olympics in Utah and the other stayed in PepsiCo for years working with Mr. Gonzalez on many projects and today owns his own Company. The other senior executives went on to have great careers in PepsiCo. The use of Game Theory principles are also valid to recover a failed project to produce great outcomes. Even when there are Actors not directly involved on developing the Solution but if they benefit from it they will push the action forward.