Dive Brief:
- Wetzel’s Pretzels and Cold Stone Creamery will open at least 17 co-branded locations this year as part of MTY Group’s Kahala Brands portfolio, according to an emailed press release.
- The brands just opened a location in Clifton Park, New York, and have three more co-branded units in development in May. They have already opened a handful of such locations this year, including a store in Columbus, Ohio, which was the first Wetzel’s in the state. Additional openings are expected in Texas, New York, Kentucky, Arkansas, Virginia, New Mexico, Nebraska and Oklahoma.
- Wetzel’s has expanded into non-traditional development channels using a store-within-a store format, which pairs well with Cold Store Creamery to “maximize efficiency and enhance guest experience,” the company said. Wetzel’s has been expanding more into convenience stores and other retailers as well, including Walmart and Macy’s.
Dive Insight:
Many restaurant holding groups have turned to co-branding as a growth strategy, especially companies that have several complementary brands that pair well and create additional revenue streams for operators.
Dine Brands, for example, plans to have 80 dual-branded Applebee’s/IHOP restaurants open in the U.S. by the end of the year. These restaurants are reaping 1.5 times to 2.5 times more sales compared to a single-branded restaurant. GoTo Foods has long used co-branding as an expansion strategy, and debuted its Cinnabon Swirl concept last year, and already has several co-branded Auntie Anne’s and Cinnabon locations.
The combination of Wetzel’s and Cold Stone is expected to improve daypart performance by appealing to consumers interested in both snacks and desserts. Cold Stone has roughly 1,500 locations in 30 countries and strong brand recognition, which could help expand Wetzel’s brand recognition. Comparatively, the pretzel chain has about 500 units.
“The co-brand model allows us to deliver two highly complementary, craveable experiences under one roof while creating a more impactful and efficient opportunity for our franchisees,” Eric Weigel, brand leader of Wetzel’s Pretzels, said in a statement. “As we look ahead, this partnership will build on the momentum we’ve seen across recent openings and position us for accelerated growth with a robust pipeline of co-brand locations set to debut in markets nationwide.”
The combination of stores could yield higher unit volumes for franchisees. Individually, Cold Stone outlets reported average gross sales of $604,392, according to the chain’s franchise disclosure document. At Wetzel’s, average gross revenues were $813,125. Assuming a one-to-one combination of sales, these concepts could generate about $1.4 million on average.
While Dine Brands Applebee’s/IHOP combinations have roughly double the volume of a standalone unit, co-branding is not always so additive. Auntie Anne’s single enclosed mall locations have an AUV of about $792,000, and its outlet center locations generate about $958,000 on average, according to a franchise disclosure document. Cinnabon’s franchised mall locations have an AUV of about $665,000.
If co-branding reliably resulted in unit volumes equivalent to combining brand standalones, Auntie Anne’s-Cinnabon locations would have unit volumes between $1.4 and $1.6 million. Instead, the co-branded locations have an AUV of roughly $1.2 million.
