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The Pros And Cons Of Co-Branding For Franchises

Bek Agius — 14 August 2019


The world of franchise presents an amazing opportunity to become a family-owned, integrated part of a local community with the benefit of being backed by a large, reputable brand. One of the best ways to become immersed in the fabric of local business is to network and form mutually beneficial relationships with other business owners in the neighbourhood.

This activity may take many forms, one of which is co-branding endeavours with other businesses in psychically similar industries. Whether the co-branding activity is the sharing of physical space or simply a shared campaign, the intention is primarily to capitalise on the strength of two brands to expand the pool of customers and attract more business.

While co-branding is a common practice that may benefit multiple parties, as with any partnership in business, there are also risks associated. Below we'll detail both pros and cons of cobranding for franchise organisations.

Pro: It Can Increase Visibility and Market Share

The primary reason behind any franchise entering into a co-branding endeavour is the power of two known brands under one roof or behind a common goal. Both partners bring with them a loyal customer base which, in turn opens up a co-branded initiative to double the number of eyes compared to a franchise's standard activity.

In an industry with major players monopolising market share, the right co-branding activity may be just what's required to gain the customers attention and compete in a more serious capacity. There is no better time to capitalise as research conducted by Roy Morgan suggests that 90% of Aussie consumers would prefer to buy locally.

Con: It Can Create Confusion

For loyal customers, co-branding with a lesser known brand or even just a brand that your customers are not familiar with may cause confusion within their consideration process.

As customers become more and more invested in the ethical, motivational, sustainability and commercial drivers behind the organisations they buy from, a new unknown thrown into the mix may create enough of a barrier to reduce their loyalty to your organisation.

To mitigate some of this risk, the best recommendation is to spend as much time as possible on due diligence before entering into any co-branding agreements.

Pro: It Shares Your Costs

If co-brand partners are carefully selected, there is a huge opportunity for cost savings in overheads. Economy of scale becomes a large factor in assessing the effectiveness of bang-for-buck. When marketing and promotion costs are cut in half with higher quantities of materials being produced with consistent creative, there is suddenly less pressure and more room for margin.

In addition, every cost is shared between co-brand partners which only further decreases the financial outlay required to market both businesses and their offering.

Con: It Can Risk Your Brand’s Reputation

Even in a co-brand situation, each business is running its own race to stay successful and profitable. Each company will go through phases of high and low performance. The difference is that in a co-brand scenario, the ebbs and flows of another business will reflect on your own - and these are not always factors you can control.

The same is true of general brand reputation. Any unfavourable publicity surrounding a co-brand partner may prove an unconscious link to your business. Whether you support these moves, your logo is on the posters, right next to theirs.

Pro: It Can Give Existing Customers More Value

For those loyal customers who have been buying your product for many years, expanding your product with the right complimentary partner can open customers to new offerings that are backed by your brand - a brand they already know and trust, in a way that simply feels like an enhancement of their buying experience. Not only can this transfer the pool of customers across both businesses but also create a stronger bond between brand and consumer if their experience is a positive one.

The key takeaway when building relationships as a franchisee is to focus on maintaining consistency and integrity of your brand while growing and expanding your horizons. Whether this is in the businesses you work with, the collective way you speak to customers and the level of service they receive or simply the aesthetic and quality of collateral you put out into the market.