Co-branding isn’t a new concept to the world of business, in fact one of the earliest instances of co-branding can be tracked back to 1956, when French automobile manufacturer Renault had jeweler Jacques Arpels of jewelers Van Cleef and Arpels collaborate on the recent Renault release, the Dauphane. Jacques Arpels designed the dashboard and turned it into a piece of art.
There is a great deal of variety in co-branding, from two F&B brands owned by the same franchisor sharing a single roof to a car repair brand sharing space with a coffee franchise. Co-branding is all about creating a synergy between the two brands, and delivering additional value to the customer.
We’re also seeing franchisors who own multiple brands integrating two or more brands under a single roof, increasing revenue opportunities and lowering costs for all brands.
“About seven years ago, we had an empty room behind one of our first restaurants. We had a liquor license, and it was kind of starting to irritate me. And I said, why don’t we just open a bar?” said Akash Kapoor, co-founder and CEO of Curry Up Now and Mortar and Pestle.
“You’re sharing quite a bit of infrastructure. Cleaners, HVAC, water and much more. So, there’s always going to be a reduction in operational costs.
“There’s also the ease of operations, instead of operating two different businesses, you’re operating one. The costs are lower, and the dollar that we spend goes further.”
Essentially, co-branding is all about delivering extra value to customers and when executed correctly, leads to higher sales and lower costs. Smaller brands can also greatly benefit by sharing a space with a more well-recognized one in an undeveloped market.
The benefits of co-branding
The modern consumer is inundated by choice for almost every single product or service they purchase. Consumers have gotten used to it over a long period of time, and now expect it. Mall food courts serve as the strongest example of this.
“You get more occasions [to visit]. The beauty of a co-brand is you have two brands that may be different in terms of needs,” said Kelly Roddy, CEO of WOWorks.
“Today I really feel like I need to be healthy after coming out of the holidays, but there may be a day where you know I want to treat myself. It’s nice to have a single brick and mortar unit where I can eat healthy one day and be a little bit more indulgent a couple of days later.”
“In today’s world where so much of your business is digital, at the end of the day, the guest doesn’t really care where it comes from. They just want it to come to them.”
This is good news for every single business in the locality, as it means there are more potential customers milling around at any one time. The franchise brands that are sharing space might also be able to pick up new customers who would not have previously interacted with the brand.
This extra footfall is something landlords are always on the hunt for. It makes their spaces more attractive and helps lease-owners meet their landlord-given targets. Therefore, brands will have more bargaining power when approaching a landlord together.
Increased sales and marketing opportunities
This is an area in which co-branded locations can make a lot of gains, and create a different type of marketing opportunity in collaboration with another brand, instead of trying to one-up it.
In 2019, McDonald’s and Burger King, sworn rivals in the F&B industry, teamed up for a charitable cause. McDonald’s would donate $2 to child cancer charities for every Big Mac purchased. Burger King responded by removing the Whopper from its menu, and encouraged its customers to purchase a Big Mac for a day instead. Unsurprisingly, most consumers loved the collaboration and it no doubt increases sales for both brands in the short term.
“You really have to create some marketing content because these brands have a very different look and feel, but they’re both positioned as good for your brands, which is helpful”, said Roddy.
Some co-branded locations share marketing budgets, allowing for every dollar spent to go further, and the opportunity of gaining customers from the co-brand.
When brands share a space, they also share credibility. This is particularly good for smaller brands that are able to enter into co-branded spaces with larger and more widely recognized brands.
Positive connotations associated with one brand can easily be shared with another brand sharing the space, benefitting the smaller brand overall, and not just in a single location.
Franchisors co-branding currently
Co-branding is all around us and has been something of the norm for decades, though it seems that more disparate brands that don’t have an obvious connection are pairing up with each other. Here are two franchisors that demonstrate different yet similar types of co-branding:
WOWorks is a franchisor of F&B concepts, but mainly that of healthier concepts as opposed to the many pizza and chicken franchises around.
The WOWorks portfolio consists of Saladworks, Garbanzo Mediterranean Fresh, Frutta Bowls and The Simple Greek, none of which can be considered ‘unhealthy fast-food’. While all four brands share certain similarities, they have significantly different menus that will invariably cater to different people.
“The commercial efficiencies come from paying one rent, one manager’s salary and the same team and so it is very efficient. The brands work together, not only from a brand positioning standpoint, but also an operational standpoint and an economic standpoint,” said Roddy.
In 2021, the franchisor opened six co-branded locations. This undoubtedly will lead to more co-branded locations in 2022 as the franchisor sees customers take to them.
Curry Up Now
Curry Up Now is an Indian fast-casual food brand based in San Francisco, California. The Akash and Rana Kapoor-founded brand also has the Mortar and Pestle cocktail bar brand, which often works as a complementary offering to the main food brand, as well as a standalone bar. It allows franchisees to generate extra revenue with alcohol sales, and Curry Up Now to develop a respected bar brand
“There’s always more revenue, because there has to be for the business to work. They are larger in square footage and have more staff. With the bar, that part of the building has more of a service element,” said Kapoor.
“Then the footfall comes naturally, because a lot of people may not want to eat Indian or may not want to eat at all. But they do want to have a cocktail or a drink on the way to the movies or to another restaurant.”
Future of co-branding
In some aspects, co-branding is an entrenched part of a brand’s offering today. In places like malls, stadiums and truck stops, co-branded F&B is par for the course, and what consumers expect.
“About seven years ago, we had an empty room behind one of our first restaurants. We had a liqour licence, and it was kind of starting to irritate me. And I said, why don’t we just open a bar?”
However, franchisors like WOWorks have put a slightly different spin on co-branding. While it isn’t the lead strategy to grow the brands, the franchisor has found that it can grow the profile of the smaller brand when paired with whatever the bigger brand may be in a certain locality.
Co-branding is also helping WOWorks reach a greater variety of customers at a lower cost, since less real estate is required, less gas and water and less staff to manage the location. Brands are also coming to terms with the fact that the customer only cares about getting their product, they’re not outwardly interested in the brand.
“There are a lot of there are a lot of brands that are starting to co-brand and they work really well together,” said Roddy.
“You don’t do it if it doesn’t make sense, but we have ideas for the future as well to be able to do additional programming. In today’s world where so much of your business is digital, at the end of the day, the guest doesn’t really care where it comes from. They just want it to come to them.”
The extra revenue that co-branded locations bring could result in more co-branded units on Main Street, and in other locations where the high rent may previously have held the franchisor back. Now, the franchisor can open that high-rent location in a high-footfall area and attract more customers of the multiple brands housed in the single unit.
The synergy between like-minded brands represents extra capacity that a franchisor can make use of. Customers who are set into their likes and dislikes may reconsider when entering a co-branded location with a similar, adjacent brand. Or, they may have no interest in one brand, but are interested in the other, as is often the case with Curry Up Now and Mortar and Pestle.
Use co-branding strategically
Co-branding is an effective way to reduce costs for a franchisor’s brands. A reduction in costs opens up other possibilities in terms of real estate options and the level of marketing a co-branded location engages in.
Franchisors need to be careful. While it may be a simple thing to have McDonald’s, KFC and Burger King sharing one space, most franchises should consider the synergy of the brands under a single roof.
Co-branding represents a strong way to grow a brand in an undeveloped market, but it requires careful consideration and planning to ensure that both brands benefit from each other, as well as sharing a space to save on costs.