Are Two Brands Better than One?
Still wondering if you should jump on the
multi-brand bandwagon? The Quarterly helps clarify and untangle a
popular topic among franchisees.
By Christa Gala
What if the Colonel hadn’t discovered the
Bucket? Where would we be if consumers had snubbed the drive-thru
window? Without these innovations—and several others—the American
notion of fast food may well have fizzled out several decades ago.
But it didn’t—and for one big
reason: convenience. The Bucket and the drive-thru made life easier.
And when folks discovered these conveniences were coupled with good
food, an industry was born.
The next innovative pillar in fast
food is multi-branding. And why not? The concept follows the tenets
of convenience and good food, with a bonus offering of one other
thing consumers love—choice.
Still, multibranding is often a
tricky juggling act, making it tough for operators to match quality
between brands and operational standards without dropping any balls.
As a franchisee, is it a viable option for you? Here, we discuss the
challenges and benefits of multibranding, as well as what Yum! is
doing to soften the transition.
You need only look at the numbers to understand
how serious Yum! is about multibranding. The first multi-brand
restaurant made its debut in 1992; today, there are more than 2,100
restaurants in the United States alone, representing more than 12
percent of the system and accounting for 14 percent of Yum!’s
profits, says company spokesperson Dennis Whittington.
Speaking of profits, corporate
statistics show that multi-brand restaurants produce higher unit
volumes and higher cash flows than stand-alone restaurants. In
addition, the customers whispering in Yum!’s ear, saying they prefer
multi-brand restaurants six to one because there is a greater
likelihood each family member will find something they like to order
since there are more menu choices, says Rick Trebilcock, Yum!’s
Chief Marketing Officer of Multibranding.
“By providing a branded choice
variety, multibranding solves the group and family meal dilemma and
helps overcome the veto vote,” says Trebilcock. “This is a key point
of differentiation versus the competition and one that cannot be
Another reason multibranding is so
important is that it can provide a “growth engine” for the system in
several ways, says Trebilcock. First, multibranded concepts will
help the system grow in trade areas that might not support a single
restaurant. Second, multibranding will help fuel lesser known brands
such as Long John Silver’s and A&W.
In 2004, much progress was made in
multibranding, particularly with strong sales for new openings,
including Taco Bell/LJS, KFC/LJS and LJS/A&W restaurants, according
to Trebilcock. These pairings are recommended for franchisees, along
with KFC/A&W and limited pairings with KFC/Taco Bell.
A large part of the recent success
of multibranding is due to training programs and operational
streamlining to ensure the success of two concepts under one roof.
It’s an ongoing task for Yum!
“We continue to improve our
operational execution in all multi-brand restaurants with programs
like the new RGM assessment and Back of House improvements like the
new integrated line,” Trebilcock says.
Is Multi-branding for you?
Corporate projections estimate multibranding
will earn nearly $400 million in profits and fees by 2006. Although
it’s easy to get swept away by the numbers, is multibranding for
every franchisee? What qualities make for a successful multi-brand
Although Aylwin Lewis
recently left his presidential post at Yum! to take the helm as CEO
at K-Mart, he had some definitive ideas about what needed to be
present for a multi-brand restaurant to produce big numbers, things
that aren’t likely to change anytime soon.
“Multibranding will not work
if we do not pick great locations; have two strong brands
represented to the customers as close to fifty-fifty as the KFC
Franchise contract will allow; pick the right management team with
strong skills to lead the restaurant; and pick great operators to
open and run multi-brand restaurants,” he says.
Another important aspect of success
as a multi-brand operator has to do with “scale,” according to Tom
Burress, Yum!’s Vice President of Restaurant Excellence.
“Multibrands are definitely more
complex to operate than a single brand,” he says. “In order to build
expertise in the concept brand, the franchisee will need a number of
the same type of multi-brand restaurants proportional to the size of
their operation. We believe it is so critical to success that it’s
now part of the multi-brand contract.”
franchisees to remember that A&W and LJS, two of the main pairing
concepts, are “smaller, lesser known brands than KFC, Pizza Hut or
Taco Bell. Franchisees should be prepared to do more trade area
marketing activities like local sponsorships and events, as well as
print coupons, bouncebacks, billboards and so forth to help build
awareness for these smaller brands.”
The Growth Ready Process
Still, as a franchisee, how do you know if
multi-branding is a good investment or that you’ll be as successful
as you are as a single-concept operator? That’s where the Growth
Ready Process comes in. Burress says it was designed to indicate
whether or not a franchisee’s current performance in a variety of
areas will mesh with multibranding. Requirements are based on
lessons learned from opening hundreds of multi-brand restaurants
over the past two years.
The Growth Ready
Process was implemented for franchisees at the beginning of 2004—a
year after company restaurants. The first step to becoming a
multi-brand operator is to achieve the “entity level” standard. A
company or franchisee must get to this level before multibranding
growth can even be considered.
The entity level screen or test is
completed just once a calendar year, in January. In order to pass,
franchisees must successfully utilize the following categories in
their current operations: Balanced Scorecard, Bench Planning, Mania
Training and Training & Ops Infrastructure. In layman’s terms, it
means franchisees should use the Balanced Scorecard process to
evaluate people, sales and profits; use the Yum! Brands Bench
Planning tools; conduct customer mania training four times a year;
and have one training restaurant for every ten multi-brands of the
Entity level approval is not
given if the organization cannot answer “yes” to these categories,
meaning they actively utilize them; the organization or franchisee
must then wait until the next calendar year to reapply. If approval
is given and a multi-brand site is chosen, the Yum! Multibrand team
will send a coach to the training restaurant to conduct concept
training for the future management team, including specific brand
training and multi-brand mindset training. Typically, this training
occurs 90 to 120 days prior to the opening.
Once the entity screen
is passed, franchisees operating in more than one demographical area
are required to successfully pass the DMA (Demographic Marketing
Area) screen in each DMA before multi-brand growth can occur.
Dovetailing with The
Growth Ready Process is the Run Great Restaurants Program. The
Growth Ready Process basically identifies those operators who have
been adhering to and succeeding with the Run Great Restaurants
Program all along. In other words, it would be hard to pass the
Growth Ready Process if you’re not already following the Run Great
Restaurants program. The two truly go hand in hand.
The secret behind the
RGR program is excellence and consistency. After all, if a customer
has a good experience once at your restaurant, then returns and has
a bad experience, what are the chances he or she will return a third
time if unsure about food quality or customer service. Why wouldn’t
he or she choose another restaurant? Wouldn’t you?
That mentality is what
launched the program and what keeps it running. To jog your memory,
RGR goals include:
Number one status in all C.H.A.M.P.S
measurements (Cleanliness, Hospitality, Accuracy, Product Quality
and Speed of Service) both internally and externally;
A minimum score of 95 percent or
higher on CER;
Consistent sales growth of at least 2
Ensuring 95 percent of employees
system-wide are Customer Maniacs;
Above average target on Balanced
Employee retention—exhibiting no more
than 50 percent team-member turnover.
It seems like a tall order, but the good news
is that these programs—The Growth Ready Process and Run Great
Restaurants program—are proven to work. So, as a franchisee, what
you’ve got is a guide to follow, a veritable formula for success.
Help in Hiring
improvement and innovation count, franchisees know the key to
success in this business is in hiring and training good people. It’s
especially important for multi-brand restaurants, particularly when
it comes to the Regional General Manager. Proficient RGMs are
critical to multibranding success.
The RGM Assessment &
Development program, developed by Yum!, helps franchisees measure a
candidate’s skills in four skill sets: communication, business
reasoning, time management and dealing with change. Each assessment
Here’s how it works: The RGM
candidate is given a set of case study materials and allowed to
review it for 45 minutes. Then, professional assessors conduct a
series of role-plays via telephone, lasting one hour and forty
Just 24 hours after the assessment,
the candidate is given an overall rating as well as feedback based
on the four skill sets. The rating scale is refreshingly direct and
lets the franchisee know not only if the candidate is ready
for the RGM position, but, if not, when he will be.
For example, passing ratings
include “Ready Now” and “Ready in 1 to 6 months.” Candidates must
simply complete suggested activities from the RGM Development Guide
before they’re eligible to start work.
A candidate can also be rated
“Ready in 7 to 18 months” and “Ready in Greater than 18 months.”
These scores, considered failing, indicate to franchisees that the
candidate isn’t ready for a RGM position. Candidates, however, are
encouraged to complete activities from the Development Guide and
retake the assessment when their rating time (7 to 18 months or
greater than 18 months) has expired. Candidates may take the
assessment three times. The test has become the barometer for
“More than 1,200 Regional General
Managers have now taken the assessment, and independent research
indicates that RGMs passing the assessment operate better
multi-brand restaurants as measured by sales, profits, Balanced
Scorecard, C.H.A.M.P.S. and speed with service,” says Burress. “The
assessment measures the critical leadership skills proven necessary
to successfully operate a multi-brand restaurant. It should be
viewed as tool that identifies skills in need of further
In an effort to help RGMs focus on
building skills that may need further development, Burress says an
expanded toolkit will be available by the end of the year to help
keep skills sharp.
So, what’s working now? Lewis points to new
building and kitchen designs for multi-brand restaurants, as well as
profit margin improvements, standards for the Growth Ready Process
and the RGM Assessment and Development program.
Burress says: “By the end of 2004,
we will have opened 122 KFC/Long John Silver’s, 307 KFC/A&Ws and 671
KFC/Taco Bells. We have expended much energy and effort during the
year optimizing our multibrand back-of-the-house layouts in the new
Y04 buildings. We have achieved considerable improvement in speed of
service and labor productivity by integrating our service lines.
Currently, we are testing several versions of a combined and
integrated KFC/Taco Bell line and anticipate having a more
integrated KFC/Long John Silver’s line in testing by the end of the
New marketing strategies are doing
well too, not to be outdone by financial and operational programs.
“What’s working from a marketing perspective is our new 4-1-4
balanced menu boards, better integration of brand promotions in a
multi-brand environment and many of our focused marketing tactics
that are helping improve co-brand sales,” says Trebilcock.
Apparently 2004 provided good
lessons regarding the importance of balancing the brands in a
co-branded restaurant. “Consumer focus groups told us that if one of
the brands is perceived as secondary, they believe it isn’t of the
same quality as the larger brand,” Trebilcock says.
As a result, that’s
one of the things Yum! plans to work on in 2005, in addition to
stronger tactics for Grand Openings and an added focus in co-brand
markets by forming co-ops with base A&W franchisees.
Another objective to note for 2005
is the continuation of the “Fish First” strategy, pairing Long John
Silver’s with the sturdy legacy brands of KFC, Taco Bell and Pizza
Hut, in an effort to broaden the LJS chain. It was in large part
responsible for impressive profits this year.
“As the LJS concept has expanded,
we continue to gain operational learnings, as well as trade area and
demographic learning,” says Chuck Rawley, Yum!’s Chief Development
Officer. “The Multibrand engineering team is working to optimize the
back of house and improve productivity through new layouts and
equipment. The Development Team continues to pursue Value
Engineering initiatives to offset building and equipment inflation.”
Amazingly, Yum! and its collective
franchisees plan to build, convert or rebuild another 500
multi-brand restaurants in 2004, according to company spokesperson
Dennis Whittington, company spokesperson, with another possible
10,000 restaurants slated for the future.
It looks like multibranding is here
The Costs of Multibranding
So, what would it cost to have a Yum!
Multibrand franchise? It basically depends on what you want to
build, according to Chuck Rawley, Chief Development Officer at Yum!
With a construction cost index of
1.0 (as seen in Dallas, TX), these figures represent the funding
involved with baseline standard building and equipment costs:
- KFC/Long John Silver’s: $781,000
- KFC/A&W: $794,000
- Long John Silver’s/A&W: $762,000
Rawley points out that a variety of
construction costs—including those for land, lease and site
work—varies significantly from site to site. And remodeling costs
vary as well and are dependent upon the market costs and the
condition of the existing building.
Regardless of whether you plan to
build new or remodel, franchisees are required to go through the
following, says Rawley:
- Growth Ready Approval
- Financial Approval
- Scale Requirements
- Site Registration (including deposits)
- Brand Approval
- Architectural & Engineering Approval
(including site layout, seating package, décor, back of house
and exterior elevations).
Rawley suggests franchisees contact their
Franchise Development Director for more information.
An Update on Fish First (Sidebar)
Co-branding Long John Silver’s with Yum!’s
legacy brands (particularly KFC and Taco Bell) and also A&W is
fueling the LJS concept and spreading the popularity of
multibranding among consumers. From January 1 through September
2004, 99 Long John Silver’s restaurants were added, resulting in a
Long John Silver’s system that is 30 percent multibranded, according
to Chuck Rawley, Chief Development Officer at Yum! Consider the
pairings this past year as a result of Yum!’s Fish First Initiative:
Pairings 2003 Year
End September 2004
A&W/Long John Silver’s
KFC/Long John Silver’s
Taco Bell/Long John Silver’s 48 67
Growth Potential for LJS pairings
According to Rawley’s figures:
- A new KFC/Long John Silver’s can average
$23,500 a week in total sales, with a LJS sales mix of 39
- A replacement KFC/Long John Silver’s
averages $25,300 a week in sales with a LJS mix of 32 percent.
- A remodeled KFC/Long John Silver’s
averages $21,700 a week with a 28 percent LJS mix.