Yum Foods : Cobranding Case Study

About Yum

 Fortune 300 company

 Operates franchises and company owned restaurant of 5 major fast food chains:KFC, Pizza
hut, Taco beil, Long John Silver & All American Foods
 Cobranding strategy adopted by them combine 2 of its Quick Service restaurents at a single
outlet which the CEO refers to as Yums multibrand strategy

Objectives

 To study how Yum implemented cobranding strategy across restaurents and the synergies
gained as a result
 To discuss potential risks and rewards of co branding to individual brands

Gains for Yum as a whole

 Formerly called Tricon Global Restaurents, Yum a subsidiary of Pepsico was spun off as a
separate business entity in 1997
 By 2003 it was a leader in QSR with 30000 restaurents in 100 countries across globe
 For cobranding Pepsi had acquired KFC, taco bell and Pizza hut. Later Yum had acquired
a&W and long john silver food seafood restaurents to intensify its cobranding initiatives
 Its 2 in 1 restaurents offered choice and convenience to customers and by combining these
restaurents company could attract more customers throughtout the day
 Yum gained footfalls and sales spread
 There were incremental sales and unit sales increased by around 45%

Cobranding strategy for Yum

By 1990s, to sustain fast food chains KFC had to differentiate themselves by diversifying their menu.
But this did not work as KFC brand was strongly associated with chicken therefore every innovative
brand extension could not find acceptance

KFC identified the need for cobranding and opened its first cobranded restaurant in 1994with taco
bell in Tappahannock. First year sales were 500000$

Franchisees started experimenting seeing this and partnered with A&W(specialised in hamburgers
and root beer), increasing annual sales by 50%

KFC and Pizza Hut were paired with Taco Bell.KFC and Pizza hut made their sales in dinnertime while
Taco made it during lunch. This combination therefore was an instant success and got in a lot of
customers throughout the day for Yum

Major competitor for Yum had been Mc Donalds whose success was due to the large menu offerings
it provided. In comparison Yum’s brands were the best intheir own category eg: Pizza hut for pizza,
KFc for chicken and so on.This strong brand identity was not allowing them to add more items to its
menu to replicate Mc Donalds success. But with dual branded stores Yum managed to increase its
sales by 25%
The acquisitions made also enabled Yum to enter international markets easily. Eg Taco bell focussed
on Mexican food so there was a reluctance to introduce in international market but an alliance with
Long John silver allowed this easily

By 2002, Yum had 1566 restaurents world wide which ontributed to $1.5billion towards annual
sales.Triggered by this success Yum acquired Yorkshire Global restaurents which owned and
franchised A&W and Long John Silver. This acquisition added 2000 more stores to its existing 30,000

By 2002, Yum was able to command highest market share in all 3 segments – Pizza hut(pizza),
KFC(chicken) & Taco bell(Mexican food)

In 2003, after testing in san diego, Pasta Bravo Inc. (sepcialising in pasta, sandwiches & salads) with
Pizza hut and seeing the success Yum purchased Pasta Bravo too

Synergies

Co branded stores of Yum with A&W, All American Food restaurents & Long John silver seafood
chains helped these relatively less popular brands take advantage from other successful brands of
Yum eg: KFC / Long John Silver generated 20% more in unit sales than KFC stand alone

It encouraged franchisees to renovate outlets and improve brand image. Also the cobranded stores
ensured that both the brands were equally emphasised with proper signange furniture and POS
materials thus protecting each brands individual image while combining each brands individual
equity

Cobranding also gave real estate economies since 2 brands operated in the same space. Eg
remodelling on single brand basis gave 5-7 % incremental sales while remodelling on dual brand
basis gave 30-40% incremental sales

Cobranding companies could also organise wholesale supply of food purchase and reduce inventory
costs considerably

Economies of scale were gained by sharing labour & equipment costs along with costs of land and
construction

Cobranding offered more variety to customers. Yum could also attract more retailers and franchisees
to do business with the company. Negotiating with franchisees became easier as the franchisers
could gain sales volume without having to open more no. Of stores

It enabled penetrating into high cost markets and places where he population density was very low
to support a single brand

Potential Advantages of cobranding to individual brands

 Increased sales revenue.

 Exploring new markets with minimum expenditure.
 Appropriate approach when company seeks quicker response.
 Access to new source of financing.
 Technological collaboration between two companies give better results than what could be
achieved by single company's efforts.
  Royalty income.
 Sharing of risk.
 Companies can fetch higher price for value added by additional brands associated with it.
 Improved product image and credibility with another brand association.
 Increased customer confidence on product.
 Increased coverage and exposure from joint advertising.
 Prospects to develop working relationships leading to future joint undertakings

Potential Risks

 Proper understanding between co-brand partners is must. Greed to fetch too much in short
time may spoil the relations and even result in failure
 Once a co-brand take position in market, it becomes difficult to dismantle co-brand and even
more difficult to reestablish the brand alone
 A very strong Co-brand can dilute the brand identity of the other
 Companies having different visions and culture are in-compatible for co-branding
 If brand don't possess sufficient credibility in market, it can negatively affect the other
partner's brand
 Repositioning of brand by one party may adversely influence the other party's brand or
campaign
 When two products are totally different and have different set of customers, co-branding
may not work
 Inability to meet the requirements of other party may result in termination of co-branding
agreement
 Legal requirements
 Mergers and takeovers of one party may prove detrimental to other party
 Future environmental changes like political, legal, social, and technological or changes in
consumer preferences may give unexpected outcomes