I. Synopsis of the Situation:

During the 1980s and 1990s, PepsiCo’s business strategy was to increase its presence in the casual dining segment of the restaurant industry, initiated through the purchase of Carts of Colorado and California Pizza Kitchen. While on paper the acquisition plan stood to be lucrative and position PepsiCo as a major competitor in the restaurant industry, relationships between corporate and franchisee became strained. The source of the fracture in PepsiCo’s business strategy was decentralization led by the CEO’s of the company. For example, David M. Kendall set a tone for a competitive and ambitious business acquisition strategy. The strategy endorsed an aggressive stance for purchasing and with regard to employees’ culture, one employee in the following statement noted his aggressive tone, “The controlling management style brought in by Kendall in 1963 had completely changed the cultural emphasis at PepsiCo from passivity to aggressivity” (p. 24, Magnani). The business strategy appeared beneficial and able to generate large profits, yet relationships with the franchisee component suffered due to decentralized communication. In short, the lack of synergy and competition between franchisee and corporate, resulted in divisive franchisee culture and major communication errors from the top down.

II. Define the Problem:

The core issue is the decentralized business model, which spawned a corporate culture characterized by miscommunication and competitive turf wars rather than cooperative relationships between franchisees. While the model encouraged autonomy, there was not enough to permit franchises to feel less micro managed and have their daily business operations uninterrupted by corporate. It was seen that franchisees were shielded from working harmoniously with their fellow franchisees, “Synergy is a dirty word here. It’s a