While co-branded restaurants have become commonplace over the past decade or so, Focus Brands is going a step further and expanding its Schlotzsky’s/Cinnabon/Carvel tri-branded units.
The triple branding model is not entirely new. Dunkin’ Donuts tri-branded with Baskin Robbins and then-sibling chain Togo, and Kahala Corp. has nestled its Cold Stone Creamery and Great Steak brands with Tim Horton’s. In addition, Tricon Global, which later was renamed as Yum! Brands, in 1998 tested a tri-brand Pizza Hut, Taco Bell and KFC unit in Carrollton, Texas.
Focus Brands, however, has beyond the test phase, with 17 tri-branded units operating and more are on the way.
“The first from-the-ground-up tri-brand was in Midland, Texas,” said Kelly Roddy, president of Austin, Texas-based Schlotzsky’s. The tri-brand units cover the same 2,800-square-foot building that a stand-alone Schlotzsky’s would, he added.
“The real estate costs are the same,” Roddy said. “The obvious reasons are you can get three brands into the same square footage with one manager’s salary, one rent, one utilities. The unit-level economics is great when you are only talking about the additional costs of pieces of equipment.”
The advantage for the operator is getting incremental business in non-peak hours. “You have a dining room that fills up at lunch, gets a little busy at dinner,” Roddy explained. “But you have these snack dayparts where traditional restaurants find themselves pretty empty, in that 2 to 4 [p.m.] range. We find a lot more people coming in to have a cup of coffee or a Cinnabon, or grab an ice cream after lunch or dinner. It fills in the gaps really nice for us.”
Dan Quintana, who created LotzFresher Delis of El Paso, Texas, and plans to open his first of seven stores in the El Paso and New Mexico area in summer, said, “It’s a great opportunity to have three concepts under the same roof.
“It gives me the opportunity to serve my customer better. And a happy customer will keep coming back,” he added.
Quintana plans to position his stores in shopping center end caps, allowing for drive-thrus.
“Because of the Cinnabon inclusion, we probably will open at least the drive-thru early for coffee and Cinnabon,” he said. “Schlotzsky’s doesn’t have an extensive breakfast menu. Some franchisees do serve the limited menu.” Stores generally open at 11 a.m. for lunch, and Quintana foresees the possibility of opening at 7 a.m. or 8 a.m.
Roddy said Schlotzsky’s plans to continue its co-branding with Cinnabon as well. “We have slightly more than 100 Schlotzsky’s-Cinnabon co-brand units,” he said. “By the end of this year, I’m expecting we’ll have, on the low end, 160 co-brands to 190 or 200.” Schlotzsky’s currently has 370 units.
Prospective tri-brand franchisee do have to negotiate three different franchise agreements, Roddy said. “That’s the only real complexity. Otherwise, it’s still one operational unit.
Focus Brands is an affiliate of Roark Capital Croup, the private-equity firm in Atlanta, and also owns the Moe’s Southwest Grill restaurant brand.
Contact Ron Ruggless at [email protected].com.