Multi-branding is a strategy that large firms adopt where they put many brands under its umbrella but under different names intending to increase the sales per unit and also improve the efficiency in operations. One of the giant firms that have adopted such a strategy as its central long-term strategy is the Yum! Brands. However, such an approach has its merits and demerits as this case study shows.
In the recent past, quick-service restaurants all over the world have been faced with challenges due to competition from other companies offering the same products, slow, same-store sales, and economic downtown. Also, people are now more aware of healthier options as opposed to fast foods, which are associated with obesity and heart-related complications. Therefore, to stay afloat, many chains have moved away from the usual discounting methods and are looking for ways to boost sales and increase revenue. Such techniques include improving décor and menus, looking for potential sites, training the crew and provision of customer-loyalty programs.
One chain which is employing a relatively unusual tact of putting together different brands in a single restaurant is Yum! Brands. This is known as co-branding, which according to Aylwin Lewis who is the multi-branding Chief, provides the company with a competitive edge in the market. This is because the company can penetrate very costly markets or those who do not have a lot of people who can sustain a single concept (DiPietro, 2005). This approach has been lauded by Sidney Feltenstein, who is the chairman of the International Franchise Association, who believes that multi-branding is a significant growth accelerator for the quick-service restaurants. Yum! Started with its first multi-branding in 1992 and currently has about 38,000 units spread over 120 countries.
Co-branding is an effective strategy because of several reasons. One of the reasons is that offers diversification especially when a particular group of people, say teenagers have a preference of a specific product that their parents do not have and therefore provides their customers a lot of choices. This is made possible by having many chains offering different products under one roof. Also, it makes it easier for the company to synergize and transfer the skills available to other units around the world. For example, what would work for Americans may not work in India, and therefore there is a need to have a variety of skills which co-branding provides.
According to statistics, operating a multi-branded unit brings in higher unit volumes than those that operate singly. This would, in turn, bring in more cash and more profits as Yum! Reports that it gains a 30% rise in profits every time it puts together brands into one unit. Another benefit accrued from such a strategy is that it enables a company to settle in the expensive places that one brand cannot afford. It allows the company to shares the crew, assets, and space used for production which effectively reduces the production cost. The other advantage co-branding helps the lesser known products to become known. Usually, customers are attracted to try what’s new, and therefore there are varieties to choose from. Due to the sales volume, Yum! can remodel and modernize its assets and make them more appealing and attractive.
As Yum! Grows in profits and volume, it would be safe for them to consider a casual-dining idea rather than have all quick-service outlets. This concept would give customers more time to know the varieties available and also can provide their feedback to help the management to make more improvement in the service and products.
DiPietro, R. B. (2005). The case against multibranding strategy. Cornell Hotel and Restaurant Administration Quarterly, 46(1), 96-99.