#107 The End of a Monarchy: Burger King in Germany
Although Burger King has had its fair share of failures in international markets, things haven’t been going all that bad for the fast food giant over the last decade. Last month, however, the King was (partially) deposed in Germany. After repeated reports of poor hygiene and sub-standard working conditions, Burger King has terminated the contract with its largest franchisee in Germany. Over night, franchisee Yi-Ko Holding was ordered to close 89 stores or more than 10 % of all Burger King stores in Germany. Approximately 3,000 employees all over Germany were let go. What had gone wrong? In bare bone terms, investigative reporters had reported on severe breeches of the franchise agreement. The franchisee allegedly had ordered employees to alter the expiration dates on food products. Also, according to the reports, some of the restaurants didn’t even have the most basic restaurant equipment like dishwashers or garbage disposals. So much for the facts. But what has happened behind the scenes? If a franchisee of a global brand is in severe breech of the most basic stipulations of a franchise agreement, then the blame is often shared – particularly when it takes investigative journalism to uncover such a massive failure. It is hard to tell at this point, but in general it is the franchisor who sets the stage for success or failure. Successful global franchising starts by setting clear performance expectations and unambiguous language about contract enforcement. Another critical issue is the selection of the right franchisee who understands the culture of the global brand and has the capacity to implement the franchise system. If the franchisee acquires a master-franchise, then contractual arrangements, ability, and trust become even more important as the master-franchisee has the right to appoint sub-franchisees, leaving the brand owner even more removed from the market. And then there are training, permanent quality control and enforcement. In the recent case in Germany, it is almost certain that Burger King headquarters must have failed in some aspect. Once again, it has suffered from a disease that many global brands suffer from, a certain inability to transfer competitive advantage coming from a global brand and a well-oiled defined business model. So in some way, the King was not deposed in Germany. He has abdicated.
December 6, 2014 @ 10:44 am
Burger King, an american fast food chain, seems to get a big problem in the german market. According to the article above the franchise company gets confronted with hygienic and working condition Problems. In my opinion, because of the fact that burger king is a franchise, there should be certain fixed conditions which support each burger king store to avoid such problems. In order to this point it has to be considered that nearly each country has different laws and different circumstances which have to be thought before defining certain regulations. Moreover such different circumstances have to be considered in many ways not only in relation to the law. In this case I would like to draw the attention to the marketing aspect. The fact is that Burger King is borne in the USA and pursues a clear image. Here the question is if the marketing strategy, which is used in the US, also works in the german market. Therefore it has to be bear in mind a few dimensions of Hofstede (masculinity, individualism, uncertainty avoidance, power distance). Based on these dimensions it has to be decided if the marketing stragey has to be adaptoped or can be used standardized in the german market.
December 7, 2014 @ 10:33 pm
I agree with Mr Janisch’s proposal that Burger King should also consider the dimensions of Hofstede when entering a new market.
For instance, the dimension of Uncertainty Avoidance is quite high in Germany (65). This results in a high importance of guidelines and instructions that, as a result, are essential in the German franchise industry. Consequently, Burger King should have carried out a comprehensive market research before entering the German market.
In general, the German put a lot of weight on hygiene in restaurants and the compliance with the foodstuffs legislation. As a result, if there are negative headlines of the media, it will not be easily forgotten. This effect also applies to giants as Burger King.
Burger King currently faces the challenge of regaining the trust of its German clients. To overcome this challenge, the fast-food chain should carry out a market research considering also the dimensions of Hofstede and rework its existing guidelines and instructions for franchisees. Furthermore, it would be important to communicate such improvements to customers.
A strategy that is not only adapted but also totally tailor-made to the German market would be necessary. For instance, a strategy where customers are able to watch the cooks during the work could be beneficial under these circumstances.
December 8, 2014 @ 11:48 am
Burger King is an american company. In this case the nationality of german franchise holder Yi-Ko was not mentioned. His background and ways of working can be very different compared to german style of working. Implementing a global business model and strategy within different countries can cause problems -and that is what happened in this case. I think when taking a job of a franchisee holder of a well-known huge company, many things are not considered enough. People just want to create the same image of a big company -in this case Burger King- while at the same time forgetting that ways of working and working conditions must be adapted to a culture of a foreign country. Rules and laws of a foreign country must be obeyed. Delivering an image of a great american company to local people is one of the things when building a franschise chain. There are still many things left to consider.
As mentioned in the blog post, there are many links in the chain when it comes to a franchisee business. Starting from the US and moving until the german end of how things are done is a long road. How to know if all people within that chain understand the differences between these two cultures? These people are the representatives of the brand owner. It is a great challenge to communicate all those important things when implementing a global business model to foreign countries.
December 9, 2014 @ 2:25 pm
First of all I have to say that Burger King’s example clearly states that intercultural aspects become more and more crucial in our times and that even the best global brands can fail if they don’t take them into consideration or leave it all to a regional franchisee without adapting global strategies to specific cultural needs.
Apart from Hofstede’s framework, I think Germany’s culture as a whole should be considered as a pitfall in this particular case of Burger King. Germany is known for its high health and safety standards and regulations as well as for their liability to cleanliness, hygiene and order. Moreover Germany is considered as a country with fair working conditions and a well-developed marketplace. This could be a severe indicator why failures regarding the equipment, hygiene conditions or product expiration dates preponderated and had even higher consequences than they might have had in other markets.
I totally agree that it is difficult to blame the one or the other party involved – on the one hand a global franchisor should not only set goals but also support the regional franchisee at least in terms of cultural research and adapt certain stipulations to the countries’ conditions and requirements. On the other hand the franchisee miserably failed to identify the German markets’ characteristics and particularities and seemed to ignore cultural values all along the line.
As far as Hofstede’s dimensions are concerned, the most important one in this case (from my point of view) is Individualism. Germany has a high score (67) at this point which indicates a high sense of duty and responsibility as well as direct and honest communication as a cultural value. Such dishonest communication represented another big problem in the King‘s case – the fact that expiration dates and hygiene standards were sidestepped secretly and lastly revealed by the press itself, was perceived as dramatic offence on the part of Burger King by public.
Another important influential factor is the rather high masculinity (66) in the German culture. People in such cultures are driven by competition, success and always orientate themselves by the best in field. Customer loyalty suffers therefore from customers who just always choose the better option as soon as their “usual brand” makes a mistake. Therefore it can be assumed that German customers immediately went for the “stronger” competitor (in this case most likely Mc Donald’s) when Burger King couldn’t meet their needs. In other, more feminine cultures the effects might not have been so drastically.
All in all Burger King would be well-advised to probably adapt their franchising agreements according to specific cultural circumstances – at least up to a certain extent.
December 9, 2014 @ 5:48 pm
First of all, I totally agree with Mr. Janischs opinion, that the american fast food chain Burger King is in big trouble because of the serious deficiencies with regard to hygiene and miserable working conditions. This failure damages the reputation of the Burger King brand and also endanger the other franchisee and many workplaces.
To refer to the Hofstede five dimensions the most important one is in this case the dimension of Uncertainty Avoidance. The Uncertainty Avoidance has in Germany a score of 65, which is quite high. countries with a high score of this dimension try to avoid ambiguous or unknown situations. A high uncertainty avoidance defines reather deductive approaches like thinking, presenting or planning. details are essential to create certainty. And the combination with their low Power Distance (35) shows that Germans prefer to compensate their higher uncertainty by strongly relying on expertise.
In my opinion, companies should be really careful in countries with an higher Uncertainty Avoidance score and should adapt their working conditions. In May they already checked the hygiene standards and the working conditions. After this bad result they checked it again in November with the same result. It is really imprudent of Yi-Ko Holding not to follow the regulations of Burger King and the expectations of the citizen.
Burger King takes decisive action against these serious failings of the franchisee Yi-Ko Holding. The licenses of 89 stores were withdrawn. From my point of view it was the right decision to reduce the risk and to avoid more uncertainty of the citizen.
To sum up, as before mentioned the appropriate strategy is necessary to be sucessful. When you enter to a new market you have to adapt everything, not only the product, the working conditions or the hygiene standards. I am sure that there are many other factors which have to be considered and the next years it will be very hard for Burger King to gain trust again.
December 13, 2014 @ 3:43 pm
In this case USA meets Germany. Two different cultures. And it seems that it has failed, because of basic things, like hygiene. In my opinion this is one of the worst things which can happen to a (fast-food) restaurant in Germany. From my point of view hygiene is one of the most important things for the German population. When the trust of the Germans has broken once it is very hard to recreate it once again.
As mentioned in the report there are some points to be considered when doing successful global franchising. One is to set clear performance expectations. In the case Burger King this might have not been communicated at all or maybe they have been communicated in a way the franchisee hasn’t understand them in the right way. As another critical issue the selection of the right franchisee has been mentioned. Burger King may not had a close look on their largest franchisee Yi-Ko Holding, since the owner of this company apparently had another understanding of leading Burger King restaurants. At this point a few questions arise- why the Burger King headquarters never had a closer look on the restaurants in Germany? Why they haven’t realized that there is a need of training and why they haven’t realized that Burger King in Germany is going to abdicate? In my opinion they might be more alert if Hofstede’s cultural dimensions would have been considered and as a further consequence a better understanding of the German culture would have been available.
December 15, 2014 @ 11:51 pm
I couldn’t agree more with the above mentioned points regarding Germany’s high standards of hygiene, health and cleanliness especially concerning gastronomy and the food industry in general. Lately there have been many scandals revolving around foul meat, filthy kitchens or lax health standards. Thus the public already has learned to be attentive when going out to grab food. There is a lot of mistrust and scepticism, so it is understandable that burger king as a franchisor to take appropriate action and split from the franchisee immediatly in order to avoid any further harm. The franchisee simply cannot afford errors like these because mistrust concerning hygiene and freshness of food is not to be corrected easily, if even possible to gain customer’s trust ever again.
Of course, Burger King could be blamed because of (obvious) lack of qualitiy control. But still, such a huge international company with that many restaurants all around the globe has to somewhat trust their franchisees because thorough quality control is not possible every single day. If it was, there would be no need for franchising but Burger King could run the restaurants with their own staff. So, when choosing a franchisee there should be a contract that settles all crucial points. And if one of these crucial points is broken in that extent, then there should be severe consequences that somehow save the franchisor from any further damage.
Considering the hofstede dimensions, a lot has been mentioned and illustrated before. UA is rather high Germany, that is right. But I still think, that things like using fresh groceries and cleaning the kitchen regularly should be classed among minimum requirements and should be stuck by all over the world. I do not think that any restaurant could survive negative press concerning cleanliness and health standards like Burger King did. In that respect I consider the franchisor’s behaviour right and understandable. What else should they do? Other than hope that not many people read the paper.
December 16, 2014 @ 9:00 am
As mentioned before a franchisee must be aware that he (or she) can cause a huge loss of image to a company- especially if this concerns such a well-known and huge group. Straight hygiene standards have become particularly important in recent years, so it is not surprising that this was a great scandal for this fast food chain. In reality, the problem goes much deeper and often has its roots in price pressure within the fast food industry. The possibilities of price savings are very low-. Therefore often the quality of products is affected by the savings. In the fast food industry the appearance of products is often more important than the quality.
I think it was in spring this year, when a German television station uncovered the scandal. They found, among other meat that has been kept warm for longer than permitted. But why did the restaurant chain draw consequences only after half a year? This might be because there is a strong bureaucracy in Europe that takes a long time to implement consequences.
But in general the scandal is just a slideshow because the concept of standardized food, limited choice and many calories does not work as well as it used to in Europe. The image disaster could have also had consequences beyond the individual case. Negative reports always affect the entire industry.
According to food and gastronomy experts, fast food restaurants have lost its market power in the German market in the past years. The industry has now changed from the growth in the stagnation mode- even the market leader weakens. Customers crave more and more for fine food. A lot of new fast food restaurants offer slightly different fast food- beef tacos and sushi made from high quality ingredients – just to mention a few specific examples. There is also a counter-movement to fast food called “slow food”.
The hurried customer who quickly wants to fill up his (or her) stomach is rare. The classic fast-food client gets lost more and more. Organic food is becoming more popular; people are increasingly interested in ingredients and pay a lot of attention to health.
Therefore large food chains have to rethink and better adapt to these conditions.
October 18, 2015 @ 5:28 pm
First of all, I have to agree with all the mentioned statements above.
Before entering a new market it is of high importance to illuminate the market, especially if it is a difficult market as Germany. Big companies like Walmart also failed in the attempt to enter this European country although they are successfully placed all around the world.
Germany is a country where the laws determine the coexistence in society. They are all characterized by respect for authority, bureaucratic precision, and centralized decision-making methods. Therefore, a market research or the consideration of Hofstede´s framework would have been the best chance for Burger King to enter the German market.
To describe the image of Burger King in Germany, it is worth to mention that it never was as popular as e.g. Mc Donald´s because of the communicated CI/ CD and the un-uniqueness of the company. When entering the German market Burger King should have come up with new ideas which its strongest competitor did not have.
But the point mentioned above that the hygienic standards were that bad do not fit with my expectations of the German law. As there is a regulation that all appliances for a hygienic working area have to be given before opening a restaurant-so why was it possible to open a fast-food-company without a dishwasher and garbage disposal at all?
March 28, 2016 @ 7:39 pm
I think we have to consider the fact that Burger King is not the first global player that fails to participate on the German market. But in my humble opinion this case is not comparable e.g. to the case of Walmart´s Germany failure. Burger King as a brand got accepted on the German markets – there are over 800 restaurants – only around 89 are suffering from the bankruptcy.
Further investigation on the certain franchisee, Yi-Ko, showed that a TV report leaked serious hygiene problems in the restaurants and that they had massive troubles with labor law, based on poor working conditions. This was enough for Burger King to cut the contracts with Yi-Ko and they stopped delivering goods to them. During the negotiation phase no arrangement could be found so as a result of this, Yi-Ko had to close all of their 89 restaurants. But Burger King was interested to keep the restaurants open, only with a new franchisee. Finally, the bankruptcy was taken back, Yi-Ko renamed to KRG Foodservice and is willing to invest 15 million € in the 89 temporary closed restaurants.
I think Burger King in this case had to fight publicly with their biggest franchise in Germany because there was the danger of a bad reputation and loosing even more customers. For an international company like Burger King it is no problem to keep 89 restaurants closed for a certain time – in the end just the hygienic conditions and the right way of treating their employees counts. The case was fought publicly, so it should reach a lot of people that the conditions have been improving and Burger king in Germany stands now for high quality fast food.
July 9, 2017 @ 12:34 pm
In my opinion this leck of hygiene is quite a big scandal in Germany. As many visitors of restaurants do look very closely regarding the conditions of the building and also do talk about certain mistakes. Therefore Burger King is going to have to deal with a lot of negative word-of-mouth and there are for sure going to be inspections on a regular basis. For their biggest competitor McDonalds this is a huge competitive advantage and Burger King might loose clients, market share as well as profits. I would suggest to implement a social media campaign where the franchisee is talking about the issue and is also explaining what is going to happen to sort this problem.
July 1, 2021 @ 10:20 am
It is not a surprise to me that Burger King has practically failed to be successful in the German market. The problems that have been brought up in this blog post, like hygienical issues, poor working conditions and minimal effort for working equipment, are topics that can not be ignored or excused in a high-standard country like Germany. And to some extent customers must have experienced the consequences of those conditions when visiting the fast food restaurants. As an Austrian, I honestly have to say that I believe it will only be a question of time that Burger King will also vanish from the Austrian market. There are not enough adaptions made to each local market and therefore the concept does not appeal to potential customers as much. Take a look at McDonalds in Austria for example. In my opinion this is an excellent example for adaption to a market, because McDonalds advertises that they are using local produce (which is VERY important to Austrians since we question pretty much everything that goes into food) and they offer seasonal menus to keep customers excited. This is how you should approach local customers. Maybe if Burger King took some time to analyse the needs of a specific market, they would be able to identify small changes that could be made in order to succeed.
January 8, 2022 @ 3:07 am
Many American fast food restaurants are struggling to get into the German market. With this situation in violating regulations like changing expiration dates or not even having the proper equipment to run a healthy business. By not following these basic guideline, the consequences were more than what they probably imagined, but at at the same time, it is not a complete surprise. It is interesting that they would follow through with these orders because even in America, this is completely unacceptable. When looking at both countries as a whole, it involved two completely different cultures. As they have not found ways to adapt to their culture and consumer habits, there would be a point they would not be successful in that community. Having an understanding of the market around you and even comparing your business beyond that one country, is super important because the same techniques could be reused to capture the attention of those consumers.