CO-BRANDING : THE DICHOTOMY OF OVERCOMING THE HIGH OPERATING COSTS IN THE RETAIL AND FOOD SERVICE SECTOR.
FranchisingAuthor :
Martin Greenspon 
Martin Greenspon founded M-Four in 1981. His lifetime career has included the manufacturing sector as well as being a Director of one of Canada's leading investment firms. He can be reached at martin@mfourintl.com
As we move forward toward 2009, both the risks and opportunities for small business are multiplying. Competition has forced businesses of all sizes to reorganize and restructure in order to meet the challenges of an increasingly demanding consumer. As conditions in the marketplace change so must business philosophies change.
With franchising representing the safest opportunity in small business it becomes essential that successful retailers and food service operators respond to the timely and proven growth strategies that are available to them in today’s marketplace.
Licensing and franchising, as a method of doing business, has enjoyed a great deal of success over the past few decades. Certain blueprints that once guaranteed success in the retail and food service industry may no longer provide those same assurances. Relying on “location, location, location” alone may have allowed many businesses to succeed in the 80s and 90s, but is no longer a guarantee for ongoing success in today’s economy. While location is still a key component of the mix, it now becomes a question of how a location is utilized that will determine the difference between success and failure.
With increased competition in virtually every sector of the retail and food service industry, mounting pressure to discover new ways of increasing profits and lowering costs, should be of some concern. As has already been discovered in the US, and to some measure in Canada, the best solution lies in a fundamental approach to the utilization of leased space. Businesses need to look more carefully at optimizing the usage of valuable space. 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 the foodservice and retail industry are clear. Rent and many other expenses can be shared and thereby lowering the overhead costs substantially. Labor costs can also be reduced by using cross-trained employees to operate foodservice and retail units. There are meaningful 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 can be increased with “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 can become a “destination” location.
One of the most successful “co-branding” Programs in Canada is Tim Hortons and Esso. Two totally different businesses operating under one roof, where one fully complements the other and together they have created a destination location.
The synergy feature allows “co-branded” units to send a clear message of “animated buzz” to the consumer. With each brand offered, this message is further exemplified. As businesses look for “co-branding” partners, it is very important to consider the degree to which they will complement one another. For many businesses, co-branding is the ideal solution to addressing the problem of how to offset weaker sales during certain “day parts” or seasonal slowdowns throughout the year. Many companies are beginning to realize that this is the most prudent way to insure continuity. In the US and Canada “co-branding” efforts have resulted in increases in sales of between 20% and 35% and have boosted profits significantly.
Retailers and foodservice operators are now entering the dawn of a new era. Businesses are desperately seeking ways to increase sales and maintain profitability in an increasingly competitive marketplace. Co-branding is now regarded as a very important dimension in the development of a successful business. It is a creative entrepreneurial response to current economic conditions, as they exist today, and creates opportunity for small business entrepreneurs to do big things in the 21st century.
We should always remember the old cliché that “two can live as cheaply as one” and that pretty well substantiates the merits of “Co-Branding”.
With franchising representing the safest opportunity in small business it becomes essential that successful retailers and food service operators respond to the timely and proven growth strategies that are available to them in today’s marketplace.
Licensing and franchising, as a method of doing business, has enjoyed a great deal of success over the past few decades. Certain blueprints that once guaranteed success in the retail and food service industry may no longer provide those same assurances. Relying on “location, location, location” alone may have allowed many businesses to succeed in the 80s and 90s, but is no longer a guarantee for ongoing success in today’s economy. While location is still a key component of the mix, it now becomes a question of how a location is utilized that will determine the difference between success and failure.
With increased competition in virtually every sector of the retail and food service industry, mounting pressure to discover new ways of increasing profits and lowering costs, should be of some concern. As has already been discovered in the US, and to some measure in Canada, the best solution lies in a fundamental approach to the utilization of leased space. Businesses need to look more carefully at optimizing the usage of valuable space. 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 the foodservice and retail industry are clear. Rent and many other expenses can be shared and thereby lowering the overhead costs substantially. Labor costs can also be reduced by using cross-trained employees to operate foodservice and retail units. There are meaningful 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 can be increased with “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 can become a “destination” location.
One of the most successful “co-branding” Programs in Canada is Tim Hortons and Esso. Two totally different businesses operating under one roof, where one fully complements the other and together they have created a destination location.
The synergy feature allows “co-branded” units to send a clear message of “animated buzz” to the consumer. With each brand offered, this message is further exemplified. As businesses look for “co-branding” partners, it is very important to consider the degree to which they will complement one another. For many businesses, co-branding is the ideal solution to addressing the problem of how to offset weaker sales during certain “day parts” or seasonal slowdowns throughout the year. Many companies are beginning to realize that this is the most prudent way to insure continuity. In the US and Canada “co-branding” efforts have resulted in increases in sales of between 20% and 35% and have boosted profits significantly.
Retailers and foodservice operators are now entering the dawn of a new era. Businesses are desperately seeking ways to increase sales and maintain profitability in an increasingly competitive marketplace. Co-branding is now regarded as a very important dimension in the development of a successful business. It is a creative entrepreneurial response to current economic conditions, as they exist today, and creates opportunity for small business entrepreneurs to do big things in the 21st century.
We should always remember the old cliché that “two can live as cheaply as one” and that pretty well substantiates the merits of “Co-Branding”.