Caribou, Einstein Bros. and Argo Tea locations hope to cultivate the "right mix of brands at right time."

Tuesday, May 23, 2017

Are Three Brands Better Than One? JAB Hopes So

In the heart of Wells Fargo Center in downtown Minneapolis sits a trend that's been largely abandoned""the tri-brand restaurant. The Coffee & Bagels operating company, a Caribou and Einstein Bros. Bagels mashup under JAB Holding Company, has teamed up with Argo Tea to develop tri-branded units throughout Minnesota.

Nestled in the second floor of the center, the store appears to be dominated by Caribou Coffee over the other two brands. A smaller section for Einstein Bros. bagels and pastries sits to the left of Caribou's area, and Argo Tea's logo is almost nowhere to be found, aside from some samples and tea bags in the corner.

With a faux fireplace, acoustic music in the background, and businessmen and women taking a break for a cup of joe, it seemed like a regular coffee shop""with some fresh bagels. It was not overly flashy, and didn't scream out that it offered multiple brands.

 Last year, JAB, the privately held business group that owns all three of the brands, inked a deal with Argo Tea to develop 40 of the tri-branded shops both in and outside of Minnesota. So far, JAB has five tri-branded locations throughout the Twin Cities suburbs.

Owners of the tri-branded initiative, which kicked off last year, are planning a huge expansion throughout the state. Many major conglomerates, such as Yum Brands and Focus Brands, have tried and failed to incorporate tri-brand locations for their restaurants throughout the years, so this is a gutsy plan for JAB.

On the surface, it seems like combining successful brands under one roof should work well for operators. A combination of two, even three brands under one roof saves a significant amount of square footage, and can be used to combine rent and utilities.

Yum tried its hand at combining its three biggest entities, Pizza Hut, Taco Bell and KFC, into one location in the late '90s and early 2000s. The locations failed to drum up adequate business, and the last tri-brand Pizza Hut, Taco Bell and KFC location ceased operations in 2016, closing the book on Yum's foray into tri-branding.   "You didn't have the right mix of brands in the right time in their life cycle," said Jim Greco, a senior executive at Results Thru Strategy. "Ideally they have to complement each other in product, instead of just competing with each other, which is what Yum brands do." Dunkin' Brands tried this with Dunkin' Donuts, Baskin Robbins and Togo, but its experiment fizzled once Togo was sold. The Dunkin'-Baskin Robbins dual-brand combinations used to be a mainstay for the company, but Greco said he's seen fewer of these in recent years, as more singular Dunkin' units are opening up.

Greco said part of this is because the frozen dessert business has gone through several boom or bust cycles over the years, with frozen yogurt, premium ice cream and Korean yogurt hogging the spotlight at various times.

Focus Brands started testing Schlotzsky's, Cinnabon and Carvel tri-brands in 2007, opening more in 2011. The Schlotzsky's/Cinnabon unit is still going strong without Carvel, and Greco says this is because the two have a complementary relationship.

"Cinnabon is basically a dessert or a snack," while Schlotzsky's serves as a meal, Greco said. "By offering Cinnabon, Schlotzsky's also has something to offer in their snack department, which is lacking in their core menu." Based on the conservative, complimentary approach taken by JAB, it seems as though the company might have the right recipe for success. These aren't competing brands, and the concept of coffee, bagels and tea is pretty safe in avoiding boom and bust cycles.

"I think that JAB, whether by intent or by accident, has put together a big piece of the morning/lunch kind of concept," Greco said, referring to Caribou's and Einstein's parent company.

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Phone: (609) 737-7266
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