The Franchise Model That Didn't Work: Lessons from Entering New Markets

When entering a new international market with limited resources, partnering with a local operator through franchising seems like a smart move. You reduce risk, leverage local knowledge, and avoid the complexity of managing operations remotely. But for marketplace businesses that need rapid iteration and centralized optimization, franchising creates more problems than it solves.

On the Levels Podcast, Guillermo Martinez, COO and co-founder of Buen Provecho, explained why their franchise approach to Colombia failed—and why they'll never use that model again for marketplace expansion.

Why Franchising Seemed Like the Answer

When Buen Provecho was ready to expand beyond Uruguay in 2023, they faced significant constraints. They were still a small team, resources were limited, and they had no experience operating in foreign markets.

Colombia looked like the right opportunity. It was Spanish-speaking, had no dominant food waste competitor, and represented a large market. But they couldn't just pack up and move there.

"Obviously at that time we were a lot more nascent as a company. smaller, we didn't have that much resources, so we said, okay, let's go for a local partner."

The franchise model addressed several concerns simultaneously. The franchisee would fund local operations rather than Buen Provecho bearing all costs, reducing the capital requirements dramatically. A Colombian partner would understand cultural nuances, business practices, and local networks in ways the Uruguayan team couldn't. The partner would handle day-to-day operations while Buen Provecho provided technology and brand, lowering the operational burden. And if the market didn't work out, they hadn't invested heavily in infrastructure and team, mitigating the risk.

On paper, it made perfect sense. Franchise models work successfully for many types of businesses—restaurants, retail stores, service businesses with proven playbooks. Why not a marketplace?

The Fundamental Mismatch

The problem emerged quickly: what franchising provides conflicts with what marketplaces need to succeed.

"And yeah, we basically had our first roadblock, because we sort of just going there directly, or just having a huge stakes or a lot of skill in the game, we went for a franchising model. Obviously with a lot of caveats to a lot of growth, not just compromising future growth or current success, you could say. But yeah, we basically didn't get the right partner. That wasn't the right model for our kind of business."

Franchising works when you have a repeatable formula that can be executed locally with minimal corporate intervention. A restaurant franchise succeeds because the menu, operations manual, and service model are fully documented. The franchisee follows the playbook and succeeds.

Marketplaces are different. They require constant iteration, testing messaging, pricing, features, and supplier acquisition tactics based on market feedback. They need centralized optimization, using data across the entire platform to improve conversion, retention, and unit economics. Unified technology means rapid product updates that roll out simultaneously across all markets. Cultural adaptation happens alongside this, adjusting positioning and communication for local markets while maintaining brand coherence. All of this demands tight feedback loops and quick decisions based on what's working or not working.

Franchisees want autonomy. They've invested capital and expect control over their local operations. They don't want head office constantly changing things, testing new approaches, or mandating how they communicate with customers.

This fundamental tension—franchisee autonomy vs. marketplace need for centralized control—created friction at every turn.

The Partner Problem

Beyond the structural issues with franchising, Buen Provecho also struggled to find the right partner.

"We basically didn't get the right partner."

What makes someone the "right" partner for a marketplace franchise? They need to understand marketplace dynamics like the supply/demand balance, network effects, and why both sides matter equally. They have to be comfortable with ambiguity since early-stage markets require experimentation, not just execution of a proven playbook. They need to think like an operator rather than an investor, working in the business daily rather than just providing capital and oversight. For a mission-driven brand like Buen Provecho, the partner needs to genuinely care about waste reduction, not just see it as marketing spin. And perhaps most difficult of all, they need to balance local and corporate culture, functioning effectively within both Colombian business norms and Buen Provecho's startup culture.

That's a narrow needle to thread. The ideal candidate is rare, and Buen Provecho learned this the hard way.

The Communication Breakdown

Cultural differences compounded the franchise model's structural problems. As discussed in their Colombia expansion post, communication styles between Uruguayans and Colombians differ significantly.

"For example, there's something that is quite impressive to me, even Telefor all this time. They are really not direct. They're really indirect on how they speak."

When you need rapid iteration and quick decisions, indirect communication creates delays and misunderstandings. The franchise partner might say things are "going fine" when they mean "we're having significant challenges." They might agree to try a new approach when they actually have serious reservations.

With direct operations, you can push through these cultural differences through daily interaction and relationship building. With franchising, where the relationship is more arms-length and formal, cultural communication gaps become major obstacles.

What They Should Have Done

Looking back, Guillermo recognizes they should have either waited or committed fully to direct operations.

"Because we sort of just going there directly, or just having a huge stakes or a lot of skill in the game, we went for a franchising model."

They could have waited for better timing—they eventually expanded to Argentina successfully once they had more resources and experience, suggesting patience might have been better than forcing Colombia with the wrong model. Going direct from day one would have meant finding a country manager, renting a small office, committing to being there regularly, and running operations directly even if more expensive. They could have raised capital specifically for expansion instead of bootstrapping international growth, fundraising with the explicit goal of properly resourced market entry. Or they might have pursued a strategic partnership without franchising, working with a local partner who has stores and distribution while maintaining operational control rather than franchising the entire model.

The common thread: don't compromise on operational control just to reduce costs. For marketplaces, control is everything.

The Argentina Success Story

When Buen Provecho entered Argentina in mid-2024, they applied these lessons.

"And we shifted to Argentina, obviously using the learnings taken from Colombia in 2024, middle of 2024. And now we see we're in Argentina, it's going quite well."

The approach was completely different. Buen Provecho runs Argentina directly rather than through a franchise partner. They found a country manager who understands both cultures and can bridge them effectively. They waited until they had the proper resources and team bandwidth to do it right. And Argentina's cultural proximity to Uruguay reduced communication friction significantly.

The results speak for themselves. Argentina now represents 25% of their store base with 15% month-over-month growth. More importantly, they maintain brand consistency and can iterate quickly based on what they learn.

Lessons for Marketplace Expansion

Buen Provecho's franchise failure offers clear lessons for other marketplace businesses considering international expansion. Franchising doesn't work for marketplaces because the operational flexibility marketplaces require conflicts with the autonomy franchisees expect—choose direct operations or don't expand yet. Finding the right partner is harder than it looks since the ideal marketplace partner needs a unique combination of skills, mindset, and cultural fit that's extremely rare. Cultural differences compound with distance, and when you can't be there daily to work through communication challenges, small cultural gaps become major obstacles. Cost reduction isn't worth control loss since saving money on expansion costs doesn't matter if the model fails because you couldn't iterate and adapt quickly. And patience can be strategic, where waiting until you have proper resources and experience might delay expansion but increases success probability dramatically.

For founders building marketplace businesses, this is especially important. The supply and demand balancing, the network effects, the unit economics optimization—these all require centralized control and rapid iteration. Franchising gives up the control you need most.

The Colombia Return

Despite the failure, Buen Provecho hasn't given up on Colombia. They're planning to return—this time with direct operations and the lessons learned.

"And now that we are lot stronger, we want to double down and go back to Colombia."

They know the market is attractive. Colombian food production is even less efficient than Uruguay's or Argentina's, meaning bigger waste problems and more value to capture. The opportunity hasn't changed.

What's changed is their approach. This time they'll enter with direct operational control, proper resources and team, realistic expectations about cultural adaptation, and experience from Argentina to guide execution. The first attempt taught them what not to do. The second attempt will benefit from those expensive lessons.

Key Takeaways

• Franchising conflicts with marketplace needs as the autonomy franchisees want clashes with the control marketplaces require
• The right partner is extremely rare requiring a unique combination of marketplace understanding, operational excellence, and cultural fit
• Cost reduction isn't worth control loss especially for businesses that need rapid iteration and centralized optimization
• Cultural communication gaps compound when you can't build relationships through daily in-person interaction
• Failed market entries are expensive lessons that only create value if you learn from them and apply those lessons to future attempts

Listen to the full conversation with Guillermo Martinez on the Levels Podcast to hear more about international expansion mistakes and how to approach new markets successfully.