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.
What is Co-branding?
This term has relevance to franchising when it involves two, three or more brands in the same geographical location that complement one other in a manner that gives each greater revenues, greater operational efficiency, or greater profitability by working together.
Co-branding is most commonly found in the fast food and restaurant businesses, as these types of businesses often face problems operating in certain times or seasons and could benefit from the assistance of other services to justify their overhead or operating costs.
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.
Ultimately, there could be a number of reasons why co-branding is pursued. A few of those reasons include:
a) The products complement each other: An ice-cream and frozen yogurt stall would complement a deli or sandwich shop. Similarly, a tailor would complement a department store.
b) Costs can be shared: If there 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 all the time, 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 here is that there should be relevance between the two types of businesses; if they're totally unrelated in product or customer base the co-branding strategy would be unlikely to yield positive results.
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 Sandwiches, a sandwich and salad concept, attracts heavy business during lunch hours and to a lesser degree at dinnertime.
By combining these three concepts, Allied Domeq Retailing has created an offering that can satisfy customers from morning to night, meaning the franchisee has the ability spread his or her rent / real estate overhead out across a larger base of sales rather than a narrow window of morning, midday or evening.
Debunking Franchise Myths
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How Much Do You Have to Spend?
Whether you’re purchasing a whopper from Burger King or joining the Burger King franchise system, the old mantra holds true: there’s no such thing as a free lunch. When you first get started running a franchise you need to pay a fee to allow you to enter into that franchise. These fees are the largest fees that you will normally pay a franchisor and typically range between $5,000 and $1,000,000 depending on the franchise. The franchisor charges this fee as a way to recoup the costs of expanding the franchise and to continue to grow. From a franchisee perspective, this is a major outlay and can take a long time to make back, but is a necessary step. Aspiring business owners must understand how much capital is available to them so they can ascertain how much they can afford. The cash you have at your disposal is known as liquidity, and there are numerous ways to increase your liquidity above the balance in your bank account. As a result, many people don’t realize how much capital they actually can use for investments, like launching a franchise branch. We’ll run through some of those methods below.
The Franchisee & Franchisor’s Point of View
Many of the characteristics of the perfect franchisee are shared by both a franchisee and a franchisor, but there are also some slight differences. A franchisor is more concerned with how an individual franchisee will fit into their business as a whole, and not necessarily how the single franchise will operate on a day to day basis (although that’s still important to them). Meanwhile the franchisee cares almost exclusively about the success of that individual.