Image by RACINGMIX via Flickr
I’ve always been very interested in co-branding. It seems to just make sense to combine operations and leverage resources. An early co-branding franchisee of KFC and A&W speaks about his co-branding experience.
“I think the real lesson is, you’ve got to spend the money and do it first class,” he says. “If you try to go in and nickel and dime it, not buy all the equipment, not buy all the seating, not buy all the signage, not train all your people, not have a great manager—it’s just all the same things that we know will work in any restaurant. If we want to be successful, we’ve got to do it right.”
White’s results are exactly the same as what Tricon franchisees discovered when co-branding KFCs and Taco Bells. “When we started introducing Taco Bells into KFC in the multi-brand program,” says Gary Masterson, senior director of franchise development for KFC, “we referred to the early program as ‘lick and stick,’ where we just took a KFC and put a Taco Bell sign over the drive thru, changed the pylons from KFC to Taco Bell, and maybe a couple of minor changes to the decor elements, but nothing major. It was just an investment of maybe less than $50,000.
“The impact on sales was nowhere near as great as the current program,” says Masterson. “Today, if you want to build a Taco Bell in a KFC, you have to reskin it. You have to tear off the outside of the building and introduce the Series 6000 multibrand look, which is an equal mixture of Taco Bell and KFC. Those restaurants are performing at much higher levels of sales performance than the early ones.”
It would be nice if the story could end here, but co-branding isn’t just about real estate. There’s also the human angle. Combining two brands under one roof is more than simply putting up some appealing signage and attracting a lot more customers to your restaurant. Once those customers arrive, the folks behind the counter have to be able to service the increased demand.
The article then goes on to discuss the labor issues.
For both Tricon and Yorkshire, operational simplification will not only make a difference from a management perspective, but also at the bottom line. “Intuitively, you would think that if your sales go up 50 percent, your labor percentage ought to really drop dramatically,” says Feltenstein. “But it doesn’t. That is a challenge for us and many others with whom I’ve spoken, to get the labor percentage to drop so you can flow through even more. The fact is you’re flowing through a lot of incremental profits because the sales are so much higher—but it could be even better if we find more efficient ways to manage it so as to take more labor dollars out of the store.”
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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-715-8115.
The Pundit writes:
I’ve always been very interested in co-branding. It seems to just make sense to combine operations and leverage resources.
My reply:
In a couple of large cities I have seen office buildings convert to include a food court that uses a centralized common kitchen, which makes a great deal of sense to me. As far as co-branding goes it is interesting. I have seen some horrible combinations and some good ones. The ones that make the most sense to me are the add-ons, for instance adding a known Smoothie concept to your fast food offering, adding premium coffee to your donut shop etc. Personally I find some of the multi brand look a bit tacky, sort of like a green car with one white fender and one yellow one, it just looks slipshod to schizophrenic.
For an example look at the bizarre, schizophrenic appearance of the Brown’s Chicken co-branded mess. What the heck is it suppose to be? Brown’s Chicken and Pasta, Choo Choo’s Ice Cream, Tai Wanna’s Mexican food, and Chicago Sandwiches – gee I’ll take a spicy chicken breast, pasta Alfredo, a bean burrito, a banana split, an Italian Beef, a HotDog and a diet coke – Sheesh! Seriously, have you seen this mess? There are better looking ghettos in Puerto Rico. I cracked up laughing when I saw the signage outside advertising Cold Beer and Ice Cream right next to one another. Maybe they should sell rolling papers too! If Ryan will post the pictures I would be happy to get pictures of this tragedy as it is hilarious.
As I mentioned in other posts, things need be taken in context of business value vs. costs. Co-branding makes marvelous sense if you get the kitchen designed correctly and the preparation and production line consists of a set of homogonous skills that do not drive up your waste factor. However as in the above you can end up with a strange hodge-podge of foods, now of which are well prepared and the employees not even aware of a large portion of the menu.
In many ways I think McDonald’s has this right, with their drop in seasonal items like the McRib or Culver’s with their Lenten Walleye, both obviously drive revenue and creates excitement for their customers (I still can’t figure out why McDonald’s dumped the Cheddar Melt).
So would I co-brand – sure. I would even be excited to, but it would have to be offerings that are correct ergonomically, that can be prepared with a homogonous skills set, that drive additional revenue rather than cannibalize existing sales, and the resulting menu does not lead to customer disorientation.
Does anyone ave any studies of merit that indicate increased sales for co-branded concepts? Specifically I want to see if it drives additional sales or merely cannibalize existing sales.
FuwaFuwaUsagi
Sure, send the pics of Brown’s chicken medley, I’ll post ‘em. I haven’t seen that combo yet, what part of town is it in? I moved from downtown to the northern suburbs (Lake Forest), and there is a Brown’s chicken but that location isn’t co-branded. The exterior look is quite ugly as a standalone, in my opinion. It looks cheap, low quality.
I would love to see co-branding sales data too. A publicly traded franchisor may have release some information.
http://www.nancyscott.com/page8/page54/page54.html
The above article interviews the development rep from Charley’s Steakery about the co-branding of Charley’s Steakery, TCBY Treats, and the Shell Food Mart. He concluded “In all, the synergy adds somewhere around an additional 10 percent to each concept’s sales.” My gut guess would have been different, that crossover purchases of one taco have to create a lower per ticket sale for each brand.
Ryan, I’ll make a few phone calls and get the photos. They should be amusing to say the least.
Charley’s Steakery huh. They were one of the few sandwich concepts I ran across that customer’s actually exhibited a fairly strong preference for. Unfortunately it seems the lack of standards between units may have hurt the chain and the brand presence itself is minimal. For instance the one at the Yorktown Mall is simply inferior to the one at Union Station in St, Louis or the one at the Pittsburg airport. You would not even think it was the same concept based on taste and portions – a real shame.
FuwaFuwaUsagi
Sent the Photos…LOL…
What do you get when you merge IceCream, Pizza, Fried Chicken, Pasta, Mexican food, Italian Beef, Hotdogs and Pizza – answer an empty parking lot.
Enjoy.
FuwaFuwaUsagi
[...] previous post highlight the not-so-obvious hurdles of co-branding. The omnipotent FuwaFuwaUsagi sent in photos of Brown’s Chicken attempts at [...]