Have you ever passed or visited a restaurant or drive-thru that features two very recognizable, but entirely different brands? It could be a combination of Mexican food and pizza, or hot dogs and ice cream.
The merging of two franchises and their products under one roof is an example of a co-branded location. Through these pairings, franchisees can grow revenues without the additional rent or labor costs that come with separate units. Co-branded locations can also help develop a loyal customer base that can position franchisees for greater earning potential.
Let’s discuss the basics of co-branding and how a franchise lawyer can help you launch and develop this specialized type of business.
What Franchises Can Be Co-Branded?
Though different food offerings are the go-to examples for co-branded locations, a franchisee can host nearly any combination of goods or services. A coffee brand may be situated in the entrance lounge to a franchised gym, or a hot dog retailer might have a small space at a gas station. The two brands will usually not be in direct competition, but may supplement or complement each other.
The popularity of co-branding is resurging as customers return for dining services. Business owners who adapt to COVID-19 health and safety protocols, but are a bit bearish on opening a single-concept unit, are embracing co-branding.
One Franchisor, Two Brands
A franchisor (or franchising company) that owns both brands may present the easiest way to launch a co-branded location. If you have a good relationship with the franchisor and/or a solid reputation as a franchisee, this may be the opportunity to prove you can handle two brands.
Some franchisors have incentivized owners by reducing some of the fees for franchisees who look to take on a co-branded store. By allowing for mutual marketing and a combined development strategy, this scenario can position franchisees for great earning potential.
Two Franchisors, One Location
Franchisees can initiate discussions for a co-branded location. As previously discussed, you might speak with a franchise consultant or broker to find the right match. If different franchisors own the brands that you want operate, you will need to ensure they agree to the arrangement.
For example, separate identities may need to be established. In addition, The operator may need to maintain separate records and that may start with managing two different point of sale (POS) systems.
This process will be intricate and complex, which is why you will need the expertise of a franchise lawyer to explore your options.
Additional Considerations
Furthermore, you will want to clearly address how resources and expenses will be allocated. This may include furniture, fixtures, equipment and supplies, which will all be housed under one roof, as well as employee costs.
And even if the two brands require the same discipline, cross-training is not a given and there is always a chance that there will be distinct training. Manage your expectations and expect some growing pains – for yourself and employees – as you adapt.
Through one co-branded location, franchisees can cater to a wider audience and potentially increase a customer’s spend. This can be highly lucrative and also present several challenges, which is why you should consult your franchise lawyer to weigh the risks and rewards.
You can learn more about co-branding in Lusthaus Law’s free ebook, A Guide to Multi-brand Franchise Expansion.
Contact Lusthaus Law
Whether you have been approached by a franchisor or believe you can operate a co-branded location, first contact a franchise lawyer. Lusthaus Law has extensive experience representing franchisors and franchisees and can help you avoid mistakes and protect your interests.
