Co-Branding Offers the Best of Both Worlds

Co-branding has been described as the combining and retaining of two or more brands to create a single, unique product or service. No matter how you describe it, it's a strategy that has really taken off in franchising during the past few years. You've probably been on a road trip and come across a McDonald's or Subway paired with a service station. That's co-branding. When properly done, it's simply a business strategy that makes sense. After all, if you're on a lengthy drive, you'll need to eat and refuel the car - why not take care of it all in one stop? What co-branding boils down to is leverage and efficiencies, but it requires the right brands, the right management, and the right time and place.

For many franchise brands, co-branding can be a perfect strategy. Combine complementary or compatible brands or concepts, a single location (with shared space, equipment, and cross-trained employees), and you can create a win-win situation.

Typical benefits attributed to co-branding include:

  • expanding customer base/gaining market share
  • maximizing operational efficiencies
  • diversifying risk
  • reducing investment and operational costs
  • boosting sales and revenue
  • maximizing marketing efforts and dollars
  • strengthening competitive position
  • increasing perceived value in consumer's mind
  • leveraging multiple brands

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 under 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.

If co-branding sounds like a strategy that you'd like to explore, then look carefully at potential franchise partners. It's due diligence time. Look for franchise brands that have experience with co-branding (some won't be interested in the strategy at all). You want companies that are not only open to the idea of co-branding, but know the benefits of it firsthand. Look for brands that are willing to assist you with your co-branding endeavors - that could be financially, with training, operational support, or any number of other ways. Compatibility - just like in a marriage - is a crucial part of the co-branding relationship. Seek brands with similar management styles, philosophies, and ways of operating. Remember, you'll be working closely with two brands. The idea is to build a better business that benefits all parties.

Next time we'll look at some franchisees who have successfully implemented co-branding strategies.

12.4: Master Franchising
13.2: Complementary Brands

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