Justin Willingham & Monica Fonseca: An International Perspective on Franchising

“Let’s not be copycats. Create a new demand for new products. Don’t be afraid. Go for it. And if you fail, just get up and do it again.”

Our most in-depth look at international franchising yet! Based in Honduras, Justin and Monica have made their mark not only by importing multiple North American and European franchise brands to Central America, but also by expanding their footprints to Eastern Europe and North Africa. Most recently, Gong cha Bubble Tea awarded them the master franchise rights for Central America – they plan to open 50 stores across Honduras, Guatemala, Costa Rica, and El Salvador over the next 10 years.

Justin and Monica joined Ab and Vini to pass along their decades of wisdom gained from both successes and failures. Learn about the special (and numerous) challenges of introducing a franchise brand to a market where it’s not well known. Why open communication with other ‘zees “on the ground” in your market may matter more than open communication with your ‘zor. The power of patience. The universal need to hire values-aligned people. And why they lose sleep over supply chain.

Transcript

 Hi everyone, welcome and thanks for joining us for Stars of Franchising. Get ready for a roller coaster ride through the world of franchising as we bring you the best stories of inspiration and entrepreneurial grit and turning dreams into franchise realities. That's right Vinnie. From emerging to global brands, we'll chat with the genius minds behind the magic. All brought to you by the Tariq Farid Franchise Institute at Babson College. I'm Ab. And I'm Vinnie. Now buckle up for some serious inspiration.



 Welcome to our guest today. Dylian from Honduras, Justin Willingham and Monica Fonseca. Thank you both for being here on our podcast and sharing some insights.



 Well, thank you guys. It's our pleasure to be here. We were glad to have met during your visit to Babson and really appreciate this opportunity. We start our podcast discussions for our audience to really get an understanding of what your why is and what calls you both to do what you do. So can you give your audience a little background on that and even how it got you into franchising your why?



 I think it goes back a little bit to generational maybe the interest of franchising. Having attended Babson myself, there was a lot of spirit of entrepreneurs even business and trying to bring cool things to the region where we grew up in, which has been Honduras and Central America. So the franchising part of our business goes back one generation. I think that our parents were involved in something related to some earlier franchises back in the 80s and 90s and early 90s. So there's been a little bit of blood and a little bit of energy and desire to be entrepreneurial and do that all while from home here in Central America. Great.



 Yeah. So actually in the 80s, Justin's parents brought one of the European fashion brands to Tebucilalpa. They were like one of the first franchises in the market. And then, well, eventually we got married and I had to help out with the family business and then we just developed a passion for it and here we are. That was the Benetton franchise that was popular back in the 80s. Yeah, right. I thought so. And that's a great story and great history and it leads me to something we hear and see and we try to dispel myths around it here. When we talk about franchising and giving you studied entrepreneurship in your foray, what are some myths or misconceptions about franchising you think that people may have that either you learned early on or you still experience today?



 I would say we're still experiencing today.



 Most people misunderstand and think that a franchise is like a guarantee of success. Okay. Because somebody else, you know, developed the business model, gives you a set of instructions and you think, oh my gosh, I just do what they do and I'm going to be successful. But then you develop it in a different market, especially us, for in Central America, completely different from the US, Europe. And so you have to tailor it to your market. I mean, just because they know it in the US or in Europe doesn't mean they know it in Central America. And so it's a whole bunch of challenges trying to market the brand, brand recognition. So I would say that's the biggest misunderstanding.



 It's a great case to start off with a franchise, but it takes a lot of artwork, dedication,



 commitment, I mean, for both parties. Yeah. Great.



 Justin, about you?



 Yeah, I think that's about the same. I think that what one believes that somehow you read up on a franchise ban, you read up on something that's there and you figure that this has all been planned out and the most difficult thing is actually just getting the franchise and going and getting it set up in your market. And many times you're not ready for all the challenges that it entails. And I think I love that phrase, overnight success takes 15 years.



 I mean, I think it has in any other business. It takes at least three or four years to probably get a franchising off the ground really and getting things going. So it's very rewarding to see that those initial opening a franchise basis and getting to step one. But I think everybody has to realize that's only the beginning. Yeah. Well, this is great. Now, Justin and Monica, which I have a question, Justin, Justin, you studied at Barbzine, correct?



 Yes. Okay. And last time you knew economics.



 Okay.



 Now, you see, at Barbzine, we breathe entrepreneurship of all kinds.



 And then having someone who came to Barbzine and then left and go into franchising. Some people believe that there's no entrepreneurship in franchising, as Monica was saying. You have instructions. You have guardrails. Everything is there. You've got everything. So you're not going to even think. It will just, you just success, right? You just have the success. What would you say to that, that entrepreneurship and franchising cannot go together? So I've been involved in different areas of our business, and not all of it is necessarily in franchising. But I don't think you could demand the need for entrepreneurship when getting into franchising. I think even though there is a clear formula, you don't have to conceptualize the business from scratch. I think like in any other business, entrepreneurship DNA and the spirit of entrepreneurship is for sure needed because it's that perseverance. It's that trying to struggle with a business, trying to get it to another level.



 It's very similar to other areas. Maybe you're not creating the original model. Maybe you're not creating that great product or formula or service.



 But it's certainly, I think the entrepreneurship is again, set two through 99.



 Set number one, you'll get a piece of paper that I don't think that gets you that far, especially when you're talking about adapting, in our case, something that you're bringing from other areas of the world into a completely new market where I think the market is completely different, the purchasing power is completely different. So you're really adapting and taking that entrepreneurial spirit and adapting a concept that works somewhere else and therefore, really trying to analyze it and see how it could work for you. Great. Monica, you want to add to that? Yeah, I would like to add that, let's not forget that behind every great franchisor, there's a great entrepreneur.



 Somebody had to come up with a concept and scale it and everything. So I think they're closely related. Good. Thank you. Well, on that concept of great franchisees behind every franchisor, can you talk a little bit from your perspective as franchisees and dealing with multiple franchisors?



 Let's start first with what makes a great franchisee in your mind and then we'll flip the coin to what makes a great franchisor.



 Okay, so a great franchisee. I think you have to start out with a clear business plan, what you want, when you get your goals aligned, you know, short term, long term, and you've got to work the business, ask for help to the franchisee. I mean, they know best. Okay. They're friends, it's their idea, so they know best. And you know, try to tropicalize a little to your market and work as a team with them. I mean, they want the best for their business. So I would say work together and see what's best for each market and develop each market differently. Yeah, great advice.



 And go ahead, Justin. Yes, so now flipping it, as you told, as a franchisor, I think you have to be ready as a franchisor to know that franchisees, like, I think we know best. Okay. So even though it's their business and their model, somehow we think we've already figured it out and found ways for that model to be more successful in our territory. And again, we looked at a good franchisor to having a strong backbone and down to having a clear DNA model, which we can follow. So even though we want to try to modify it, to edit it to our markets, I think you want a strong franchisor who's very clear as to what are the basic unalterable areas of the business model that they believe and they have learned through experience in different markets are needed and are unnegotiable. Okay. Now, Monica and Justin, you have been very quite successful in bringing global brands there into Latin America, okay, Central America to be specific.



 Now could you share with us, our audience, what are the biggest challenges that entrepreneurs like yourself who live outside the United States, in this case in Latin America, Central America, to be precise, what are the biggest challenges when it comes to becoming franchisees for brands from North America or from Europe?



 I think that's the two biggest thing when you're operating in markets like ours, Central America, Northern Africa, some areas of Eastern Europe. I think that the similarities are that we look for these great brands that are being successful in the US and Europe and many times the purchasing power of our markets, they don't position the same way. And that is an incredible challenge when you come to our markets is how does that product that is maybe popular to everybody and more accessible to everybody in the developed markets is not necessarily as accessible to our markets like it is there. I think you have to really be clear that the positioning in our markets could be different to the positioning in the market that you're bringing it from. And I think another large challenge of that is supply chain. I think at the many times the issues related to you're bringing maybe some product that's seasonal or a fashion brand that again is seasonal and you're trying to introduce a lot of these things at the same time. We're trying to respect the seasons that these other countries have when you have difficult logistics, extreme supply chain issues, long distances. So and you now have a customer looking on social media and expecting the same things in their local markets if they're seeing overseas and you have all these additional layers of challenge that are not common to where the franchise or has been operating in. Well before I pass on again to Ab, I was going to follow up by asking you, the two of you, in your experience bringing global franchise brands into Central America, what has been your biggest failure and what did you learn from it?



 Oh, just once.



 But I'll start. So maybe I think one of our biggest failures has been that you get too excited. You open up one store and then you think you get, oh my gosh, I can multiply this by 10 and make 10 times the money and you don't manage your cash flow well. You try to expand way before you're ready, before you operate your store really well and you think of expansion. So I would say we try to expand too fast. Okay? And I mean all other night stores weren't as successful as the first store. So I would just take your time, slow down, operate your business well and then make sure you have enough cash flow, cash to expand. So that would be my experience. I think it goes along the same here. You're getting excited and you're losing your entrepreneurial model by going back to the initial conversation and you're looking at that business plan and you're putting all that on paper and it looks really cool and certainly everything is kind of figured out all right before you even get out off the ground. And something as you get into it, your financial plan does not work out as expected. Your road is significantly longer than you certainly predict it there. And you really have to be resilient and perseverance to be able to modify failure that you will for sure have the first three years of operating that business. So it's exciting when you finally check through all the boxes and what they told you you would do when you open the franchise. It's there and operating and cool but those first three, four years is really something where we have failed in the past with different franchises and not because of those failures I think we have learned to plan that the first checkpoint is actually five years after day one. It's not March or month two.



 A little more patience.



 Exactly.



 And expectations. Well one of the things we like to talk about and love your perspective since you've built multiple brands and worked with several partners and built a team there, can you talk a little bit about culture and leadership and what that means to you and your companies and employees and how you put things in place to develop a culture that supports the vision of the both of you?



 Yeah, I think that's always a challenge. I think it goes to identifying great people that have that same passion for the business and have someone of that entrepreneurial spirit to join you and be a part of those initial struggles. I think many times in getting a franchise off the ground if your team is used to larger corporate environments, many times you're now ready to be flexible on their feet and be able to follow the start-up of a new franchise. No matter how popular it has been somewhere else. So I think finding alignment between the personalities of a lot of these people obviously have prepared this and everything along those organizations. But I think those challenges are pretty much the same worldwide in finding people that share the same value and the same perseverance needed to go over the daily hurdles and getting this to the next step. Yeah, I work with the operational people in my day-to-day. So I really like, or I believe, that we should create a culture of respect, fairness, belonging. We like our people to feel part of the business.



 They're not employees.



 They have a little ownership of their business and a company culture where it's not a business. They're not slaves. I mean, it's not nine to five. They can come in, come out, and just very open. But you learn that with experience.



 In the beginning, everything is just a number and how much you're making and this is a noun. We've learned and the pandemic changed everything. It's like people can work from home and they work more.



 I think also we have different teams of people focused in different areas depending on their preparedness and past experience and what they've done. So I think we try to let every person lead in their particular area and be good at what they do, maybe financing, maybe the logistics, supply chain, marketing, whatever that is, and respecting everybody's leadership roles and the places that they're at. Because for sure, I'm great at earlier stage of the business and people come to me to look at all that. But once the business is operating, I'm not very valuable around the office anymore. So I think at that point, they really go to Mornington or they go to somebody else to look for that leadership. And I think we all are good at different stages or focus on different stages of the business. And I think we can pretend to all be good in all the areas we work at. Well, such great advice when building a team and growing. And I'd love to hear for our audience if you could talk a little bit about the brands you've experienced and you're working with and maybe how multiple brands or opportunities have created pathways for those team members and how you were able to scale based on what you started with. That's a really big part of what we're talking about here, which is scaling. And I just love that you've been able to scale multiple brands as you've grown your business. So I'm going to have to go back a little bit to the failures. And I think that's also a very important part of where we are today. And I think as I was mentioning a generation back and as I was mentioning maybe in some franchises that we were operating in fashion like a Benetton, how those shoes that we were doing and stuff so many years back. I think when the brand that you're working, the price point is not as broad as you would like. And your economies of scale are very limited to the market you can target. So as we were describing the purchasing power, I think the scalability of the brand.



 We actually participated. I was very involved with the Cratum Barrel coming to Central America back in 2016.



 We opened the first door in 2016, a brand that we did in partnership with a financial group in the region. And we thought we could actually scale Cratum Barrel through a bunch of different countries. And we realized that a lot of what was behind that brand, which we loved and we thought it was an incredible brand in the US. But it maybe wasn't as scalable in some of these markets and stuff that we were working on because of the logistic and price points and everything that was related. Recently, I became enamored with this brand called Miniso out of Asia that we started back in 2018, roughly with them, our first chats. And some of these newer brands that we've been working on is because they resonate to a larger percent of the population. We're able to get just scalability. We're able to get to our markets are small. So we're operating in Honduras. We're all being installed and over-operating in Nicaragua and other countries in the population of each of these countries, maybe 10 million, eight million, six million. But they're not very big markets. So you really have to have brands like Miniso that we were very excited to get in and it's just a big deal. And we're able to get to a sustainable business model that allows us scalability. I think we made that mistake with other brands that were incredible brands in their markets



 or in more developed countries. And not that America, a lot of these great brands, that maybe didn't translate as well to the markets that we were targeting. In that case, Justin, you are in the vantage position to speak to this. You and Monica, because you've dealt with Americans. You've done businesses with Americans, with Canadians maybe, with Europeans, I would guess, right? And then with Asians. OK? So you've danced with different cultures. And within this book, the scope of the space of franchising, what was the greatest learning knowledge you've sort of gotten as a result of dancing with different cultures when it comes to franchising?



 Yeah, I think it's been great that we've had all these different experiences. We started off with Europeans, I've had some US brands at the beginning. And now we have more relationships with Asian brands. And I think that that has been eye-opening as for sure it is completely different to anything we have done in the past. I think-- and we like this segment, whereas the European and the US, even though they think the market is similar, the DNA of how they protect their own franchise or their own companies versus the general intention of seeing the franchisee become successful are very different between Europe and the US. I think-- I could say that normally US companies are genuinely more concerned about the franchisee success.



 Interesting. I think that European are as well. We can't say that they are not. But I think that they're protecting their model maybe a little more than the success of the franchisee. And I think that maybe you have to understand that maybe European companies aren't as open or as many times as supportive on some of that. It could be an overgeneralization. That's just our experience up to now. But I think since we started having more relationship with Asian brands in the-- since 20, 80 years, it's really been eye-opening. That is a completely different mindset than anything we've done in the past. Obviously, the brands that we've worked with in the past manufacture a lot of nature. But we did not have to regulate the relationship with Asian companies like we do now. And I think that the way they view growing the business and growing the franchisee and actually conquering the world is something that I think us Americans all throughout the continent, Europeans, are not as eager to do anymore. And I think we've been incredibly surprised at that drive that we see in some of these newer companies in Asia that we haven't seen in quite some time in these more familiar parts of the world. Justin, can you speak maybe a bit more specific? What are the eye-opening?



 So can you talk about maybe two or three specific things that would say, "Ooh la la, wow, what is this?"



 Yeah, I think as-- so maybe in the past, we have worked with mature franchisee stores that had-- that went to other larger countries before they came to Central America. They already kind of had a formula. They had failed in other territories in the past. And they felt, "Well, we better keep these guys down the safe path because we know this works, this doesn't work. It's not a big territory." When you talk to the Asians, they don't really care. They just want to conquer the world and really become relevant in every corner of every area. And I think that drive and that passion when you are in a conference room and somewhere in the US and you're listening to the franchisor, talking about how they're going to do it, you're in a franchisor's room in southern China, the vibes of the room are very different somehow. And I think that-- I'm not sure that we're addressing maybe specifically, but it's just the sense of the business and the way that they really are driven to do whatever it needs on their end and they expect you to do whatever it needs on your end to be successful is something what I'd never encountered or been a while since I've been a counter in the past. Yeah, I think the Asians are creating the whole thing, different products that can be mass marketed. And so, I mean, they're really excited about going out and adding a product for everyone. So we get to these conferences in Asia. It's like, "Oh, so you're going to go from one store to 30 in a year while Americans or Europeans were more conservative." But it's been great working with all of them. I mean, it's been an alerting experience and it's just all the better for us to have all these insights. That's great.



 Well, I guess given all you've done with different franchise brands and all over the world and as franchisees, I have to ask the question because some of the best franchisors we've spoken to are former franchisees or vice versa. Have you contemplated or had any experience with launching your own brands or helping franchise brands scale, given what you know, whether that's creating something that resonates in your market or taking something to another country?



 For sure. I think that's something that's always in the back of your mind. I worked as a franchisee for quite some time. I think you realize that you are working somebody else's brand and master franchise agreements have a certain lifespan, whether you like it or not, whether you like the renewal clauses and whatever's there. At times, you believe you have enough expertise to go on it and do it on your own and create a brand that may make works from this region of the world and goes into more developed areas of the world as well. I think it's for sure it's it's definitely entrepreneurial spirit. It takes in a little more on we do operate or participate in other areas of businesses, plus a scale with it may be called that allow that opportunity. But if you do learn a lot of franchisee, it is a school. You're looking at somebody else's model. You're constantly you're looking at other franchisees. We're sharing their stories. So it is like going to be the perfect university. You're learning from all these peers and the master franchise and for sure you're better prepared to try that model and be ready to jump on it when that opportunity rises.



 And I made real quick, Monica, from your perspective, can you talk a little bit about the innovation and as Justin referred to the network, the power that franchising can give if you rely on other franchisees or master franchisees so that our audience can best learn how to navigate that? Because it sounds like a lot of innovation in the franchise model can be shared pretty quickly versus non-franchise model. What have you seen?



 Let's see. So I think it's really important to have an open line of communication with your franchise for us, obviously, but I found that I need to be a little better if you have an open communication with other franchisees. Okay. Yeah. So we operate in like the miniso stores. We operate in Central America. And sometimes I think when I need help or I have struggles and challenges, I find it much easier to call somebody in Latin America and say, so what are you guys doing? I mean, it's just happening to you because, you know, Asia being so far away, they have a different perspective on the market. So I just think communication with everyone is like really, really important to share best practices, get you ideas, innovate and see what you can adapt to your market. Great.



 Well, yeah, Monica and Justin, if you have like an auditorium filled with Central Americans, Latin Americans, many of them interested in like becoming franchisees. And they would like to hear your advice that what should they take care of before getting into the battle ring?



 I think it goes back to again, studying the franchise, studying the real relatability of the franchise to the market that they're trying to do. And just because it's been successful somewhere else is by no means going to be a guarantee of success in your market. So so so translating that model is at least in your vision or in your thoughts.



 To where that position to your local market scene, if that translation is real, okay, if that's going to work. And then, of course, it's coming up with a good plan that allows for all these unforeseen obstacles that will just jump your way like in any other business.



 I think getting there and being prepared for the long, longer significantly than anticipated. So I think that that translate ability. I think it's a seeing the competition and maybe the players that brand is not competing with somebody else in the market or does not. But maybe locally, there are other players that are answering for that need in the market. And I think it's it's a lot of kind of slow searching on the brand and thinking about how that brand really will do against all the other existing players in the market today. Normally, our markets are highly underserved. And there are huge opportunities more than there is on the US. So so it's not as difficult as negative. Normally, I would say most of the franchise, the franchise is the franchise or have a higher degree of success in our markets than in highly saturated markets in other areas of the world.



 But you have to really throw that idea in your mind a lot before you take step two with a franchise or.



 Yeah, so I would say, you know, think about what you want to do, observe what's around you. And let's not be copycats. Okay, just because somebody's doing great with a coffee shop or a dough in a place or a clothing store. Come on, let's not open another going because you're just going to be taking sharing of market demand. I mean, you're just going to be sharing. Let's try to get stuff that's new, create your new demand for a new product, something innovative. I mean, and you know, just don't be afraid. Go for it. I mean, if you fail, just get up and do it again.



 Well, love it. That entrepreneurial speed, spirit and leadership that we talk a lot here at the absent. I'll end with the following question. And given that you're involved in some new concepts, new parts of the world, what trends are you seeing, Justin and Monica, whether on the consumer side technology regulatory that are affecting not only your bands, but maybe franchising in general from now going forward. I think I hate to say the word globalization because I think it was that was important. I was in that. Yeah, but I do think the commonest of the market and how maybe the gaps between the underdeveloped countries like ours and some of these countries in the franchise coming from our closing. So I've said quite the contrary, but I do believe the trends are very important.



 I mean, in terms of regulatory, a lot of the things are being inspired from other markets that are already have done that significantly better than smaller markets like ours have done on regulatory. So we're just just inspiring a lot of those issues out of the more developed markets.



 You're seeing a lot of more similarities between the markets and whatnot. I think social media has also played an incredibly large role in people being able to detect trends that are going on in different places and not being very patient about waiting for those trends to come to their markets. So I think that that connection between people that social media has brought about as close these concepts and don't give me a brand that is not exactly what I want. What is popular today or don't try to give me a version of the brand when I can perfectly on social. You see what the brand or the franchise or whatever it is is supposed to look like. So I think it's up to the level of execution of anybody who wants to get in the franchise world. The market knows much more about your brand than you think they do. And I think that that closeness of communication throughout the world is for sure something that you need to keep an eye on. Yeah, I think our customers are becoming more demanding each day with all the digital technology and all I mean all these social media where you're watching a tick tocker and she's selling a product that you can push a button. And it's not only buying a tick tock, we want instant gratification. We want that product now. Before it was three days, seven days delivery for now the customer wants their shirt now, wants their lipstick now, wants their coffee now. And so they're becoming very, very demanding with the brand. So we got to keep up with them and find new ways to innovate and serve them better.



 Wow. Great stuff. This is awesome. This is awesome. You don't mind what keeps you awake at night with regards to franchising?



 Oh, supply chain. It's December right now. Right now it's like, you know, if we don't turn black this month, then we're never turning black.



 No, we're never.



 So just basically just thinking, you know, getting having the stores full, getting the right product to the customers and just hoping they want to spend their money on our products. I think getting up at night is a very entrepreneurial thing or worrying about just different things or not being able to get those opportunities out of your head. So I think a little bit of everything related to daily issues. How can I jump into tomorrow? What what opportunities are we missing? Just turning those around your head.



 That commitment and passion for anything you do, I think, will make sure you have those things. Love it. Love it. I wanted to thank you, Justin and Monica so much for your time and and congratulate you. And, you know, Babson alums and entrepreneurs build great teams. You guys clearly have a great team together. One and two also pursue new opportunities. So thanks for sharing how great entrepreneurial leadership can make an impact across the world and especially through franchising. So we're at the Tariq Fried Franchise Institute and Babson are grateful for you and hope we can return the favor and help you guys in any ways as you scale your various businesses.



 Thank you very much. Yeah. Thank you, Nav. I think it's been great meeting you guys back and then participating with you guys today. It's equally exciting for us to be able to reconnect with Babson and to you and to know you and the dialogue has been incredible.



 Thank you so much. Thanks for joining us on this episode of Stars of Franchising.



 Stars of Franchising was produced at Babson College, engineered by Travis Gray. Karen Sowell is our guest coordinator and music by Ralph Taylor. If you like Stars of Franchising, be sure to review us wherever you get your podcasts and swear the word and share these stories any way you can.