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Co-Branding An Extraordinary Opportunity in the Franchise Sector

Written by : Diane Champagne
2006-03-15
As we move forward in 2006, both the challenges and opportunities for small business are multiplying. Competition has forced businesses of all sizes to reorganize and to restructure in order to stay competitive in a dynamic and increasingly global marketplace. As conditions in the marketplace change, entrepreneurs respond with creative solutions to enable small business to succeed.

One of the fastest-growing sectors of small business development is franchising. We then must examine how franchising represents one of the best opportunities in the small business sector and how creative entrepreneurship has responded to take advantage of these new opportunities.

Franchising, as a method of doing business, has enjoyed a great deal of success over the past few decades. But this industry too is a dynamic one and one that continues to evolve in the marketplace. Ingredients that once guaranteed success in the franchise industry yesterday may no longer provide those same assurances today. Relying on"location, location, location” alone may have allowed many franchise businesses to succeed in the 80s and 90s, but is not a guarantee at all as unlimited ongoing success. While location is still a key component of the mix, it now becomes a question of how a location is used that will determine the difference between success and failure.

With increased competition in virtually every sector of the franchise industry, foodservice operators, in particular, are under increased pressure to discover new ways of increasing profits and lowering costs. As has already been discovered in the U.S., and to some measure in Canada, the best solution lies in a fundamental approach to the use of space. Businesses need to look more carefully at optimizing space utilization. With this in mind, more and more businesses are turning to the concept of co-branding.

"Co-branding” or"multi-branding” is the idea of putting two or more complementary, but separate, businesses under the same roof. The advantages in foodservice industry operations are clear. Rent and expenses can be shared thereby lowering the overhead structure for all business units involved. Labor costs can be reduced by using cross-trained employees to run multiple units and there are great efficiencies to be enjoyed by cross-utilization of equipment, including storage and production facilities. Natural synergies that exist between complementary businesses can be exploited to the mutual benefit of all. Traffic is increased to co-branded locations by offering a wider choice to the consumer. And, if the co- branding is done in such a way as to create variety and excitement, it becomes a"destination” location.

Using branded units sends an unmistakable message of quality to the consumer and with each brand offered, this message is further reinforced. As businesses look for co-branding partners, it is very important to consider the degree to which they will complement one other. For many businesses, co-branding is the ideal solution for addressing the problem of how to offset slower times during the day or weaker seasons during the year. Co-branding offers a type of insurance policy in the franchise industry today at a time where there simply are no guarantees.

The need for incremental sales has never been as important in the foodservice industry as it is today. Many companies are beginning to realize that this is the only way to insure the continuity and survival of any foodservice operation. In the U.S. co- branding efforts by the likes of KFC / Taco Bell and Arby’s / T.J. Cinnamons have resulted in increases in sales of between 20% and 35%. Some early examples of successful co-branding in the Canadian market include Tim Horton’s / Wendy’s combination and the Dunkin’ Donuts / Baskin & Robbins operations."Small business is now entering the dawn of a new era with franchising leading the way.

Businesses are desperately seeking ways to increase sales and maintain profitability in an increasingly competitive marketplace.” Co-branding is now regarded as the next important dimension in the development of the franchise industry. Co-branding is a creative entrepreneurial response to current conditions in the foodservice industry today, and creates opportunity for small business entrepreneurs to do big things in the 21 st century.


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