Reading this week's news of Burger King's licensing deal with ConAgra Foods Lamb Weston might tempt the uninitiated to view the concept as a sure, quick route to additional revenue. That deal calls for marketing BK-branded crispy, microwaveable French fries through Walmart and other select retailers -- and is BK's second such deal in under three months, amid a growing number of such ventures by restaurant brands including Starbucks, California Pizza Kitchen and Dunkin' Donuts.
It's not hard to understand why licensing has become desirable. "Restaurant chains have traditionally feared licensing to retail because they worried that it would cannibalize profits and sales by encouraging consumers to eat at home rather than eat out, because it could upset franchisees, and because it might not end up being worth the effort, financially," sums up Bill Cross, VP, food licensing for Broad Street Licensing Group, the Montclair, N.J.-based company that brokered both of Burger King's deals.
"But in these leaner times, restaurant chains are recognizing licensing as an excellent way to simultaneously generate new revenue and promote the brand," Cross tells Marketing Daily. "They're starting to understand that consumers view eating at home and eating out as very different occasions -- that offering them your brand for home consumption doesn't dissuade them from visiting your restaurant. When people have decided to eat in, they're going to buy frozen and packaged foods. The only question is whether they're going to buy products with your brand name or someone else's."
However, as with most concepts that have the potential for attractive returns, retail licensing is a lot more complicated than it sounds. For every success, there are many more launches that seem promising but fade into oblivion fairly quickly.
Having a sufficiently strong brand and a partner with the right business model fit and clout in the retail marketplace (almost always a wiser route than self-manufacturing and distributing) are prerequisites, but meeting them will not guarantee success in today's brutally competitive retail environment, says Cross.
"To succeed, there has to be strong buy-in on the part of the brand's senior management, because brands can no longer just sit back and take in their royalties, even with a strong partner doing most of the heavy lifting," he stresses. "Today, with retailers reducing SKUs, the brand has to be committed to supporting the retail effort."
Burger King, for example, understands the challenges, has realistic expectations, and is supporting its licensing partners -- including Crunch Pak, which began manufacturing and distributing BK Fresh Apple Fries in supermarkets in June, according to Cross. BK is helping licensees promote the retail availability of the products via trays liners and other in-store support.
Starbucks took such support to unprecedented levels earlier this year when it gave out coupons at its coffee shops for its new retail line of coffee-flavored ice creams, as well as its established line of branded packaged coffees, Cross points out.