The unique feature of Franchising is the way it evolves with the changing times. What was once traditional is rapidly moving to the non-traditional. Both Franchisors and Franchisees are constantly seeking new avenues to maximize facilities, human resources and competitive positioning. One manner of breaking the traditional mold is through co-branding. This concept is normally thought of as a formal or loose association of more than one brand with one or more owners of the business concepts. Cobranded operations may exist “under oneroof” or cover large geographical areas. Everyone has visited the gas station convenience store which often has several franchises at one location. The possibilities are almost as varied as ones imagination. I recently became acquainted with a Franchisor which licenses its system for making homes and businesses baby safe. When the company began cobranding with the Franchisors of designer baby furniture and day-care franchises, it was able to reach out to an entirely different clientele.
How often have we heard that a Franchisee’s success depends upon “Location, Location, Location.” What better way to get that prime location that was once cost prohibitive than cobranding. Be careful though, if there is no synergy between brands and concepts the co-brand may draw away from your successful franchise. If brands are too similar in nature the second brand may dilute the first. Franchisors must be careful and conduct the proper research before jumping into the co-branding arena. In addition, Franchisors and their counsel face the challenge of ensuring that their brand and system are fully protected before embarking into co-branding. One way of obtaining that desired protection is by using a master agreement between each Franchisor and then, tailoring each concept’s Franchise Agreement for the cobranded operation. In existing operations consider an addendum to the existing Franchise Agreement, modifying the agreement in pertinent areas to accommodate co-branding. Franchise counsel will also want to review the Franchise Disclosure Document (“FDD”) to ensure full disclosure is made about the co-branding relationship. This review should encompass analyzing Items 1, 5, 6, 7, 9, 11, 12, 16, 17 and 22 of the FDD.
The concept of co-branding continues to evolve. Before leaping into the arena make sure you have fully researched the co-branded concept and are satisfied the brands have synergy with each other. Take the precautionary steps to make cobranding increase your bottom-line and not become a “black hole.”