At Second Location: Tim Hortons’ Chief Operating Officer, David Clanachan, encourages franchisees to bring co-branding opportunities to corporate but to keep in mind the importance of complementary operating philosophies.
Q: I’m a single-unit franchisee and see a great co-branding opportunity for my second location. Where do I begin?

A: One of the greatest strengths of a franchise concept is you have phenomenal people who are fully engaged and partners in your business, meaning your franchisees. Many of our good ideas come from store owners. They’re living it day in and day out, executing the brand. We’re not proud; we’ll take good ideas from anywhere.

For potential co-branding franchisees, we look at their level of operational experience within the business; we look at financial wherewithal; we look at the specific location to make sure both brands would work well together from a demographic perspective; and we’re looking at their existing performance prior to making that decision. Both companies need to approve store owners.

But co-branding isn’t necessarily written from the beginning in the franchise agreement. We’re testing co-branding with Cold Stone, and it’s really one of those situations where we as the two parent companies identify potential locations within our existing real-estate portfolio. And then we’ve been approaching the store owners to gauge their level of interest in trying this format. So ours is being driven by the two corporate offices.

In our case, all the units were existing Tim Hortons stores that were already up and running. What we’re doing is going to existing real estate saying, “How do we now bring this new concept into our stores?”

Having said that, though, we’re also starting to get store owners who are putting their hands up, saying, “We’ve heard about the positive customer reaction and how the two fit hand-and-glove. Would you consider my location for co-branding?” The control really remains with the corporate office, but the impetus comes from the store owners themselves.

Financially speaking, co-branding allows you to leverage the efficiencies from real estate to operations that you’ve already sunk into the business. If I’m bringing a Cold Stone store into a Tim Hortons, it’s not the same cost as X plus X equals 2(X). There is an incremental capital cost for equipment, but that’s the extent of it.

But the real key to co-branding is both companies should share very similar operating philosophies, like we do with Cold Stone.

You also have to make sure you have complementary menu offerings. It doesn’t make sense to cannibalize each other’s business and fight for the same business under the same roof. The next thing is [to] really research and test it and analyze it. Then do it all over again. Make sure you’re constantly checking back with consumers to make sure they’re happy with the offer. You also need to make sure your brand attributes and brand positioning is not eroded [by] being with another brand.

In terms of the organization itself, make sure that the organization has very clear objectives and communicates those ahead of time. You not only need to do that to your own organization but to your co-branding partner so you both know you’re on the same page.

Any time two brands work together, they need to make sure they have the same attitude and same values—really importantly, you have to check your ego at the door.”The last thing is, any time two brands work together, they need to make sure they have the same attitude and same values—really importantly, you have to check your ego at the door. Often when two companies come together everyone has their own way of thinking about the business. You really need to approach it with a real spirit of cooperation because that’s going to be the most difficult part. They have to be able to listen twice as hard as they speak.

There is also additional training franchisees need. We send our franchisees to Cold Stone’s training class in Scottsdale, Arizona, where the company’s head office is. They do the Cold Stone training there and also market training. It’s very important to embrace and understand the culture of the other brand in order to deliver on that brand’s promise.

It’s the same for Cold Stone operators who want to add a Tim Hortons to their business. Those operators are coming to our international training center in Oakville, Ontario. They spend their time there learning about the culture and understanding the value so they’re able to deliver that brand value and culture to their consumers.