Introduction
With over 20 years of experience negotiating with franchisees worldwide, I’ve encountered numerous scenarios where two or more parties aim to operate the same brand within the same market. This fascinating yet complex dilemma presents itself when both parties possess proven expertise, financial muscle, and a well-structured back office, allowing them to operate with lower administrative and sales costs while maintaining efficiency.
Effective Solutions for Conflict Resolution
One of the most effective solutions I’ve witnessed to resolve such conflicts is adopting a Master Franchise national model with regional developers or ‘Area Developers.’ Under this scheme, the master retains national rights while delegating operational execution to different actors in specific cities or regions, thus avoiding direct competition among franchisees.
Another widely-used, simpler solution is selecting a single operator or developer to deploy the entire market. Although this option is straightforward and easy to implement, it faces limitations in large markets where rapid scaling is crucial.
The Challenge of Omnichannel Brands
This dilemma becomes more intense when parties with proven strengths in multiple sales channels vie for the same brand in the same country. These channels include physical stores (street, malls, or airports), traditional retail, digital retail (e-commerce), and institutional channels (hotels, restaurants, and cafeterias), also known as food service. Each channel requires distinct skills and operational structures.
Understanding Franchisee Overlap Risk
This situation led me to reflect on the academic phenomenon known as Franchisee Overlap Risk. This concept describes the risk of overlap between franquiciados: the possibility of conflict when two parties compete or aim to operate the same brand in the same market simultaneously. Although not always explicitly named, it’s recognized as part of channel conflicts or intra-franquicia competition.
Managing the Dilemma
When managed well, this dilemma can transform into an opportunity. I’ve seen cases where two operators coexist complementarily by clearly defining territories, formats, or sales channels. For example, one focusing on physical retail while the other targets convenience stores or airports. Or, one with a presence in major cities while another penetrates intermediate areas.
Strategic and Contractual Frameworks
Various routes are possible: geographic segmentation, format specialization, conditional exclusivity based on performance, coexistence clauses, or even shared joint ventures. The key is to design a contractual and strategic framework that prevents collision, ensures alignment, and prioritizes long-term brand value over short-term interests.
Leveraging Value through Clear Contracts
When managed with a robust legal framework and clear contracts regulating each operator’s conditions, these situations can become an extraordinary source of value. Transparency, maximized synergies, and a relationship structure generating value for all parties enable franchisees to share experiences and best practices systematically, creating a learning ecosystem that bolsters collective success.
Conclusion
Selecting the right partner isn’t merely a business decision; it’s a statement of future intentions. Designing structures balancing control and scalability, learning to coexist with operational diversity, and inspiring all actors to act under a unified brand vision are sophisticated challenges of expansion.
About the Author
Sebastián Mejía Salazar, an international business expansion specialist with over 20 years of experience leading global expansion processes. He is the General Manager for North America and International Vice President of Juan Valdez, where he has driven the brand’s presence into more than 25 countries.
