Retail Co-branding

First, reviews the main theories that attempt to explain the evolution and development of franchising Next, the phenomenon of co-branding in a franchising environment is introduced Finally, using the unique case of McDonald’s Australia’s conception and introduction of McCafe as an example of co-branding, the methodology and findings of an in-depth case study are revealed Retail co-branding is dominated by businesses that provide convenience benefits to consumers. 2 Hence, we observe examples of fast food franchises teaming up with service stations (fuel retail) and grocery stores, as demonstrated by McDonald ’ s and Hungry Jacks with Shell and BP, and Subway with 7-Eleven. What motivational factors instigated co-branding arrangements within McDonald’s / McCafe? Why it is co-branding not brand extension? 1, this movement of the McDonald’s brand from company as brand to a master brand position (parenting its own brand equity and that of McCafe) in a brand hierarchy scheme explains the shift from a single brand to that of a brand portfolio. , Other examples of this retail co-branded environment are Allied Domecq ’ s use of Dunkin ’ Donuts, Togo ’ s and Baskin Robbins in the United States and Canada where the three brands were combined in one retail offering but operating discretely under the one roof. One franchisee was encouraged to own the entire outlet containing all three brands. Another more notable example is that of Yum Restaurants International combining the three brands of Pizza Hut, Taco Bell and KFC in a similar fashion.

Ultimately, these examples differ slightly from McDonald ’ s in that the master brands of Yum Restaurants International and Allied Domecq do not facilitate the same brand meaning at the consumer exchange level as the McDonald s brand. 3, McDonald’s / McCafe can therefore be seen as a collaborative venture constructed to further the interests of the two brands (one master and one sub-brand) in a planned, strategic format. It has attracted multiple market segments simultaneously to patronize a range of facilities provided by the combined retail entities.

This strong customer focus differentiates co-branding from other forms of brand associations such as brand extensions. 32 Hence, there appears to be sufficient evidence to classify the McDonald’s / McCafe relationship as co-branded. Themes: 1. Attracting customers 2. Competition 3. Reinvigorated brand equity 4. Growth incentives 5. Systems 6. Culture Inhibitors to co-branding 7. Legal issues Franchising is a complex, inflexible institution, not well equipped to deal with innovation.

Franchising co-branding faces very high investment costs to implement the cultural change needed to introduce the new format and to cover the property and other system costs of co-managing two branding systems. Advantages & Disadvantages of Co-Branding Among Franchises A. Increased market. Co-branding can increase the visibility and market share of both franchises. B. Share costs and maximizing operational efficiencies. Co-branding allows individual franchises to share promotional and running costs. This can be especially important with national franchise brands.

This can be especially important with national franchise brands. For example, Taco Bell and Pizza Hut have many franchises that share the same building, and in some case the same staff, counter and kitchen. C. Reducing investment and operational costs and diversifying risk. D. Share reputation. Co-branding can allow franchises to share a reputation. This can be both an advantage and a disadvantage. Consumers generally develop positive associations with their favorite brands, and these can transfer to the co-brand.

However, if the co-brand has some negative associations, these can also transfer to the other brand and cause a drop in its reputation. Another drawback to franchise co-branding is brand equity dilution. In this case, consumers begin to associate the two brands as one combined brand, and each brand loses some of its unique identity and appeal. E. Financial issues. One disadvantage to co-branding is the need for a complex joint-venture and profit-sharing agreement. Reaching an agreement on co-branding can be a time-consuming and complex process, generally involving lengthy negotiations and complicated legal agreements.

Whatever legal and financial agreements the franchises come to, it is important that neither franchise has a differential or financial advantage over the other. This can be a delicate balance to achieve and is easiest when there is an obvious fit between the two brands. For example, when two fast-food franchises co-brand, or when gas stations co-brand with convenience stores. F. Co-branding can increase operational complexity, which can lead to substandard products and poor customer service.

What’s more, it will confuse customers about the brand. When a co-branding strategy is successfully implemented by a franchisee it can generate a significant increase in sales. The idea is to bring customers in more often and/or appeal to more customers by having two (or more) well-known brands less than one roof. You’re expanding the potential customer base you can attract and retain. And that in turn, of course, can increase sales and boost the bottom line. Employees can be cross-trained and, in effect, work both sides of the fence.

It’s likely that you’ll even be able to adapt elements of support mechanisms – such as training – to any of your brands. There are marketing and market share efficiencies that can result from co-branding. You can spend a lot of money and time opening a separate new franchise location for a brand. But a co-branding scenario with your existing franchise location can reduce the time, effort, and marketing dollars needed to develop and nurture a new business. It’s important to note that co-branding is not merely just taking on another brand.

It’s a business strategy that should be carefully and strategically planned out and executed. You’ll want to do your research to make sure there’s a market – and demand – for both brands in your area. You want to make sure that each of the brands is equally represented in a single location. The idea is two equal brands under one roof. Be mindful of any contractual issues with the respective franchisors. In a co-branding alliance, agreements may include rights, obligations, and restrictions that are binding on both parties.

Look for important provisions and needs to be carefully drafted so that you have clear operational guidelines for all brands. Your franchise agreements will also explain other important factors such as marketing, brand specifications, confidentiality issues, licensing specifications, warranties, payments and royalties, indemnification, disclaimers, term and termination. The success of co-branding rests upon on finding an ideal partner for your business, but if you can find one, your franchise can reach all kinds of new markets.