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Key Lessons for Restaurants Offering Consumer Packaged Goods: First Caution, then Rewards

By Rick Zambrano

Key Lessons for Restaurants Offering Consumer Packaged Goods: First Caution, The

Advancing retail strategies by Starbucks, Dunkin' Brands, P.F. Chang's, T.G.I Friday's and Jamba Juice into all types of packaged consumer offerings point to a multi-billion dollar opportunity for concepts. However tempting an all-out retail-licensing blitz is, chain leaders need to exercise caution, and follow a strategic and methodic plan to reap rewards.

“First, it is important to determine how you want to go to market: Do it yourself, which can be costly and risky, or find a licensing partner," says Janna Markle, vice president for The Valen Group. “Second, you need to determine what products to launch at retail."

Markle says that taking your own in-store hits and translating those to at-home experiences for guests isn't necessarily the right move. She says restaurant executives need to take into account consumer expectations relative to convenience and portion, for example. Restaurateurs need to do extensive consumer research and careful planning with distribution partners. Often, the process is outsourced to consulting firms like The Valen Group, based in Cincinnati, Ohio.

"Your products must meet consumer expectations in order to be successful, drive repeat purchases, and grow into a long-term business," says Markle.

Here are five key best practices based on both a consulting and chain perspective, from brands and players driving retail-licensing success:

  1. Be Strategic — Use a planned approach to licensing with the right business intelligence and consumer insight at your side.
  2. Understand the consumer packaged goods (CPG) arena. The needs of consumers in their homes are different than in your restaurant.
  3. Communicate clearly to franchisees.
  4. Know your own brand and be true to it.
  5. Vet your licensing partners carefully to avoid disasters.

The rewards of a successful retail licensing initiative can be great: Green Mountain Coffee Roasters (GMCR) leveraged the success of the Keurig single cup (K-Cup) platform to reach approximately $2.7 billion in sales this year; Dunkin' and Starbucks have already moved into the platform; and Starbucks said earlier this year, that K-Cups will prove to be a billion-dollar opportunity worldwide.

Cinnabon CPGOther success stories include Focus Brands, a Roark Capital portfolio restaurant company that has been growing its retail licensing business, and Moe’s Southwest Grill, which will expand distribution of its consumer products to additional grocery and retail outlets based on the success of a retail program at BJ's Wholesale Clubs.

Cara Becker, vice president of Consumer Products Licensing for Focus Brands, has successfully deployed Cinnabon products across many retail categories in partnership with strong CPG partners, like Pillsbury and Kellogg's. She says that understanding how you'll lead the program and communicate to franchisees is core to retail-licensing. Often franchise groups are fearful of cannibalization, and don't fully understand a restaurant's differentiated retail products.

Becker also suggests restaurant executives fully understand the positioning of the brand and stay true to it. Cinnabon dabbled with products having a health-attribute messaging, but it was not a good fit. It provided a strong lesson for the retail development team.

Doing the proper research on partners and undergoing a careful selection process can avert many issues down the road, says Becker.  "Vet your partners carefully," she says. In Cinnabon's success, it's clear to see that her partnership with several licensing partners are now strong, and provides a platform for expansion and growth—as well as an increase in revenues.

Full-service partners are also leading by example. IHOP has launched successfully into the frozen products category, and P.F. Chang's has brought the taste of its upscale Asian cuisine to consumers with its frozen line of skillet products.

"IHOP entering the frozen breakfast category with high quality, consumer driven, convenience oriented products is changing the game in the frozen category," says Markle.

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(09-22-11)

Copyright: Kandessa Media. All rights reserved.

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This story appears in:  Franchise & Licensing