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Posted on Jan 01, 2011

The Co-branding Franchise Trend

Borrowed from the brand management term “Co-branding”, this technique has been used for numerous brands to complement each other. The relevance to this term in franchising occurs in the manner that this involves two, three or more brands in the same geographical location that complement each other in a manner that each can benefit from the existence of the other.

Co-branding is most commonly found in the fast food and restaurant business as these types of businesses often face problems operating in certain times or seasons hence they need the assistance of other services to make their operating costs relevant. For example, a frozen yogurt franchise may face problems making significant sales during the winter season while their expenses remain the same the year round. However, by siding with a franchise such as a gas station, the franchise finds that it may have certain impulse buying customers even during the winter season.

Similarly, some restaurant/fast food franchisors have partnered with other food brands to improve their channels or simply to attract the same customers to a variety of options. There could be a number of reasons why co-branding could be selected. A few of those reasons could be:

a) The products complement each other:
The opening of an ice-cream and frozen yogurt stall would complement a deli or sandwich shoppe. Similarly a tailor shop would be viable around a wedding planning office.

b) Costs can be shared:
If their is free space available at a store, it can be used by some other product offering company and can be used as a sample room. Normally in large malls and superstores, companies provide their products for display under their own brand name and this way they are saved the expense of creating their own stores, while the superstores have new varieties available for display.

This strategy can be applied to any number of combinations and depends on the creativity and realization of the market needs. Nowadays we experience co-branding in most places, as we have delis present with gas stations, ice cream being offered at fast food outlets, car washes working alongside gas changing stations and countless other permutations and combinations. The major factor being that there should be relevance between the two types of businesses otherwise if they are totally unrelated the co-branding strategy would not yield positive results.

Example

Allied Domeq Retailing USA, a large franchising company, has recently adopted a three-brand opportunity which would best illustrate the example of co-branding strategy. They have Dunkin Donuts as their first franchise brand, which attracts the breakfast crowd and some late-night eaters who are attracted by the donuts, bagels and coffee offered. They have a second brand, Baskin-Robbins, which has a wide variety of ice-cream and yogurt flavors and other cold desserts which cater to the needs of the lunch hour until closing time for the outlet. The third brand, Togo’s eatery, a sandwich and salad concept attracts heavy business during lunch hours and to a lesser degree at dinnertime.  Combining these three concepts, Allied Domeq Retailing created maximum satisfaction for the customers of the outlet by offering meals and items for all working hours to their customers. The franchisee thus has the benefit of opening his outlet throughout the day and still gets business no matter what time it is.

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