Multi-brand retail

06 November 2008
Retailers always look for opportunities to grow their businesses, in good times and in bad.  Growth can be achieved through multiple brand chain or multiple brand franchise businesses. However there are advantages and disadvantages with both. 

One way for retailers to achieve growth is opening multiple brand chain retail stores using different brand names.  Many retailers trade under different brands.  Briscoes (New Zealand) Limited runs BRISCOES and LIVING AND GIVING. Hannahs is behind the HANNAHS and NUMBER ONE WAREHOUSE. Hallensteins runs GLASSONS and HALLENSTEINS.  Having multiple brands enables retailers to target different customers, offer different stock, and trade at different price points.

Other retailers operate and run multiple brand franchise businesses. Often multiple brand franchise businesses are in the same or related industries, but not always.  For example, the DONUT KING and BB’s CAFÉ brands are owned by Retail Food Group, the MUFFIN BREAK and JAMAICA BLUE brands are owed by Foodco Group.

Is one business model better than the other?

The answer is no. The model you choose to grow your retail business is dependent on many factors and variables.  The key to success is choosing the business model that suits you and the way you like to work.

Multiple brand chain retail

Multiple brand chain retail businesses are most often driven by the degree of success of the first brand.

Good management is often behind a successful first brand. Success comes from efficient back-office processes, experienced staff, selling expertise and operating skills. A business owner can use these same management processes and without incurring significant costs, build a second brand in parallel with the first brand.

For example, the parent company has good contacts and relationships with property owners in strip and shopping centres.  Negotiating leases and rentals for two sites costs little more than negotiating leases in only one location.

Having two brands working closely alongside each other, does give a business the capacity to promote the new brand alongside the first brand.

Two brands also offer alternatives to customers. If you have a potential customer who does not resonate with your product range, or thinks your prices are too high, then an alternative product and different prices may give your customer exactly what they want.  We see how this works with JUST JEANS, PORTMANS, DOTTI, JAY JAYS and JACQUI.E - all owned and operated by the Just Group.

Common training facilities could be used for more than one brand.  And your marketing department should be capable of developing the marketing collateral for a second brand just as an external agency may work for two clients.

Economies of scale at head office mean that duplication of all head office infrastructure is not immediately necessary and the new brand can be run from the same office. This would appear sensible and an excellent way to leverage talent and physical resources. Other mutually acceptable opportunities such as advertising, can arise which may mean having both brands sharing the same advertisement occasionally.

However, like all good opportunities, there are risks that have prevented aspiring multi-brand chain businesses from profiting from this theory.

Examples of multi-brand retail chain businesses that have met with real challenges in Australia include the Signature Brands Group which owned the BRIAN ROCHFORD, KOALA BLUE and PULP brands; the Retail Brands Group which owns the successful WENDY’S SUPA SUNDAES brand, but has so far failed to develop the QUIZNOS brand; and the RCG Corporation Limited (formally Retail Cube Group) that owned the KING OF KNIVES and AMAZING PAINTS brands and still owns THE ATHLETE’S FOOT brand.

Closer to home, Hannahs failed to keep the fire alive in its multi-brand retail chain of HANNAHS, BAREFOOT ORIGINALS, MIDAS, HENDERSONS, and SHOEMART. 

When we examine the reasons for success or failure of a multi-brand retail chain, it seems key success factors are:

  • the primary brand is a proven business idea providing cash flow and profitability
  • the management team is strong
  • the chosen second brand is piloted and proven before the business begins
  • there is someone in the organisation who is a dedicated and passionate champion of the new brand.

Failures often stem from not fully exploring and understanding how the entry of a second brand in a retail stable will impact on the landscape you trade in. Uncommitted management and a poor choice of unproven and unprofitable business models can also contribute to failure.

Multiple brand franchise retail

Owning a franchise can be a life changing experience.  Owning two or more can be commercial suicide or commercial euphoria.

Signing up as a franchisee means you will be investing your time, money, and resources into a business that can bring you great success personally and financially. 

As franchising grows in New Zealand so are the number of franchisers that run more than one brand. It is not uncommon for franchisees to want greater success by being involved in more than one franchise. 

Choosing which franchise to be involved with can be a hard decision.  You may be interested in more than one franchise opportunity. Some franchise holders are prepared to open different types of franchises to challenge themselves and increase potential profits.

Sometimes franchisees have experienced enormous success with one franchise, and the allure of opening another is too hard to resist especially if they feel they have the resources and expertise to take on the challenge.

The franchises that may attract you might involve quite separate brands, but may be attractive because they occupy the same retail shopping centre space.

One of the first questions you need to answer if you are thinking about owning more than one franchise is whether you are allowed to. Many franchisers will not allow you to own or run other businesses while owning a franchise from them. This makes sense. The first franchiser wants you to focus on their brand. They do not want you distracted by someone else’s brand. You will need to think through  your duties to each franchiser carefully and be open and honest about how you see each relationship and business working.

If you are able to buy and run multiple franchises you will need to be equally and fully committed to each franchiser.

Owning multiple different franchise businesses means different agreements, duties and relationships with franchisors. This can be quite difficult to manage. 

But having multiple franchises in different industries can be rewarding both personally and financially. You can spread your risk of failure – how likely is it that two unrelated industries will underperform at the same time?  Your exposure to another franchiser and how they run their franchise can be insightful and provide you with skills and knowledge that could be transferred to your other business.

Other advantages could include better use of frontline retail staff and perhaps increased career opportunities, back-office systems and office space, and training.

Occasionally one franchiser will offer multi-brand franchises within the same industry.  Staying focused will drive business growth and historically almost all multi-brand groups have developed from one core brand. That core brand will often remain the major contributor to profitability for the group.  A franchiser with a multi-brand group of franchises will be attractive to many franchisees.

Running more than one retail brand, whether it is your own or franchised, can be a rewarding and challenging experience. The key to success is not confusing the brands, but keeping them separate and relevant to your customers.

An edited version of this article was published in NZ Retail, November 2008.

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