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Operating a Co-Branded Franchise Efficiently and Effectively

Co-branding provides customers with added options, different experiences and convenience. 

Schlotzsky’s started co-branding in 2008 with our sister FOCUS Brands Inc.’s Cinnabon brand. Just recently we opened our 200th Cinnabon Express within a new Schlotzsky’s location in Houston. We’ve also begun adding Carvel Ice Cream concepts to new Schlotzsky’s, making them tri-branded franchise locations, and all future franchise agreements for a Schlotzsky’s restaurant include both Cinnabon and Carvel concepts.

Our decision to start co-branding was not taken lightly; we certainly were not trying to force a square peg into a round hole just because Schlotzsky’s, Cinnabon and Carvel are a family of brands. A lot of testing and market research went into the decision to pair the three concepts. Our fear initially was that the fresh-baked items of Cinnabon would steer customers away from the core Schlotzsky’s products, but what we found was that customers saw the brands separately and came to each for a different segment of eating. This leads me to the first essential area of running an effective co-branded franchise:

Brand Complementation 

There are numerous operational and economic benefits to co-branding, but if the customer is confused by the pairing of brands or conversely, sees the offerings as too similar, one or both of the brands in the relationship will be hurt. The key point is to pair two or more brands that complement each other’s offerings either by individual dining experience or by day-part. For example, Cinnabon’s products could be viewed as breakfast, snacks or dessert. Schlotzsky’s traditionally does not play in these segments, so the overlap is very minimal.

Loss of brand identity is a real risk when two concepts enter into a co-branding relationship.

The key objective is to create multiple opportunities for the customer to come into your co-branded location. Also, consider the cross-pollination of demographics that can be accomplished with co-branding. For example, adding a frozen yogurt concept to a burger restaurant may help drive the female demographic.

Operational Synergy 

Having the correct brand pairing can and should benefit the franchisee operationally. Both Schlotzsky’s and Cinnabon prepare baked menu items daily, which is a huge benefit for our franchisees who can train their staffs on how to use the ovens for both concepts at the same time, thus cutting down on additional labor costs.

Operational efficiency goes beyond just food preparation. Staffs should be cross-trained on each concept. Theoretically, you should be able to run each concept with no additional labor costs, the same manager, the same staff, and similar operations with the franchisee benefitting from no additional rent, added revenues or customer flow.  The success of co-branded locations is dependent on how efficiently you can hybrid your operations to benefit from having two concepts in one location.

Franchisees also get the added benefit of gaining experience with running multiple concepts within one location, which can help if they’re thinking about becoming multi-unit owners. If the franchisee trusts the success of their fellow franchisees and the systems in place from the franchisor, he should see impressive return on investment.

Customer Service

This is an under-appreciated aspect of successful co-branding. Good customer service is obviously always essential, but it is doubly important in a co-branded franchise. If a customer feels a difference in service from the primary concept to the secondary concept, you have failed. You’re telling the customer that you do one better than the other, which will in turn send the message that you’re only good for one thing.

This is a vital part of training staffs to be familiar with both concepts so they can fluidly serve customers at both concepts. If you’re a franchisee, do some testing on your own, ask family and friends to act as customers for both concepts and then do some polling on their experience for each. The goal is customer retention. Remember, you’ve made their dining experience more convenient by creating an entire experience and having more diverse options. Don’t make the simple mistake of losing their trust because of something as controllable as service.

Marketing and Identity Retention 

Loss of brand identity is a real risk when two concepts enter into a co-branding relationship. Although it should be a symbiotic relationship, one brand often risks losing its core identity by associating itself with another. It may also pose a threat to your stand-alone franchisees who do not have the benefit of an additional concept.

Much of this can be solved with separate messaging. Make sure each brand continues to do what it does best with as little overlap into the next as possible. You want the customer to appreciate unique aspects of each concept.

Our Cinnabon Express locations are not serving sandwiches, and we’re not adding dessert to our Schlotzsky’s menus, so the customer experience is unique for each. If a customer is craving a Cinnabon Minibon, the added benefit is that they can also get lunch at Schlotzsky’s; the inverse of that situation is true as well. Co-branding provides customers with added options, different experiences and convenience.

Communication 

Co-branding is a relationship between two or more brands with the goal of mutually benefiting from the arrangement. Whatever the situation between parties from each brand, whether they be sister brands under one umbrella or two independent brands with separate executive teams, communication is key. Don’t think that putting two brands under one roof and then operating independently of each will ever work. There needs to be a decided-upon strategy for franchisees for everything from operations to marketing.

We have three independent executive teams for each of the brands that operate within Schlotzsky’s locations. We make a point to meet regularly to discuss any changes to menus, store décor, planned openings and franchise agreements. Everyone is kept in the loop and that has created an important trust between the parties at each brand.

If utilized correctly, co-branding can be a fruitful experience for both franchisor and franchisee; however, as ideal as the economics of the arrangement may appear, it’s important to always look at a potential co-brand from a customer perspective. Test and research and then test and research some more. Make sure that the customer experience is enhanced and not convoluted.

Kelly Roddy, CFE, is president of Schlotzsky’s, which has more than 350 locations worldwide. He can be reached at 512-236-3600 or Schlotzskyspr@schlotzskys.com. 

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