Home > Article > Expert Articles

Franchise co-branding: pros and cons

Written by : Expert Articles
2009-06-15
Co-branding is used in franchising as a strategy to stimulate and rejuvenate growth, particularly in a mature franchise sector.

It involves two or more brands combining to create a mutually beneficial single product or offering to reach similar target audiences and is most commonly seen as a fast food franchise teamed up with a service station. 

McDonald's/McCafe is another franchise co-branding arrangement.

Asia-Pacific Centre for Franchising Excellence PhD candidate Owen Wright examined the McDonald's/McCafe co-branded arrangement to identify the benefits of co-branding.

Mr Wright said growth was a key factor for entering franchise co-branded arrangements.

"Entering a co-branding arrangement can assist with attracting customers, give a competitive advantage, reinvigorate brand equity and lead to growth," Mr Wright said.

"This was the case with the McDonald's/McCafe arrangement. McCafe was developed to reinvigorate the McDonald's brand and used to attract customers back."

Evolution of McCafe Co-brand

McCafe started as a coffee pot on the restaurant counter for peak hour commuters in a restaurant in Melbourne, Australia in 1993.

Over the next six years McCafe evolved into a sophisticated retail offering with the first fully integrated McDonald's/McCafe opening in Coorparoo, Brisbane in 1999.

Mr Wright said as McCafe evolved it developed its own discrete brand identity.

"While some attributes of both brands were seen as similar, separate identities for both brands were established, focused on discrete customer segments," Mr Wright said.

"This is an important part of the co-branding function - providing separate values to the respective audiences but combining the experiences of both brands at the point of exchange."

Co-branding Barriers

For co-branding to be successful large investments in cultural realignment and systems is required.

"Franchise co-branding faces very high investment costs to implement the required cultural change for the new format and to cover the property and other system costs of co-managing two branding systems," Mr Wright said.

"The development of another brand, using the ‘Mc' took a great deal of management and cultural change to ensure it was successfully adopted internally.

"There was concern the McCafe brand may erode the credibility of the ‘golden arches' and franchisors considering co-branding need to ensure their brand is strong enough to carry a sub-brand."

Co-branding Conclusion

The development of co-branding occurs because of the sector's need to find new means of expansion beyond the standard model of franchising and is most effective when there are synergies across the brands, Mr Wright said.

"Co-branding may require a large investment, but if done effectively can generate large returns."

Other articles on Columnist franchise
If franchisors are reluctant to negotiate the terms of their franchise agreements, what is the point of having it reviewed by a franchise lawyer before signing? Consider The Following Issues BUYING A READY-MADE BUSINESS IS APPEALING TO MANY MID-LIFE ENTREPRENEURS BY JAMES PASTERNAK