In the Store | February 2013 | By Amanda Baltazar

New Kind of Marketing

Brands turn to merchandising for an added revenue stream and stronger fan engagement.

Merchandising programs like Sloan's offer customers new engagement options.
Sloan’s Ice Cream sells everything from candy and stuffed animals to clothing and headlamps branded with its name and logo. Sloan’s Ice Cream
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With marketing and advertising proving more challenging for quick-serve restaurants in the age of social and digital media, some brands are looking to a retail-based approach to get their name out: merchandising.

“I think merchandise is an excellent idea,” says Jonathan Raduns, food-merchandising consultant at National Restaurant Consultants in Denver.

“If I walk around with a [branded] mug or T-shirt, I’m essentially marketing—giving my stamp of approval—to that brand,” he adds. “It’s a way to brand and, at the same time, to sell a profitable product that’s marketing your restaurant in a passive sort of way.”

Freddy’s Frozen Custard sells its proprietary Freddy’s Seasoning, as well as baseball caps and T-shirts featuring the brand’s name and logo.

“We really believe, when someone has Freddy’s Seasoning in their cabinet, that only helps our brand,” says CEO Scott Redler. “Every time they open up the cabinet and see our label, it might spur them to come after dinner for a frozen custard. It increases brand awareness when your logo is in someone’s house.”

The merchandise has been available for three years, both in stores and online, but the bulk of sales are made in the restaurants. “It’s easy as an extra item to grab and go,” Redler says.

But if operators want to sell branded merchandise, they must be sure it’s consistent with the brand’s message, the experts say.

Sloan’s Ice Cream sells branded merchandise galore in its brightly colored ice cream, candy, and toy shops. Much of the merchandise features the Florida chain’s name and works both as a brand extension and as a reflection of the brand, says director of franchising David Wild. “It really identifies with what Sloan’s is—a unique place in a commoditized world of ice cream.”

The merchandise constitutes almost a quarter of total sales, founder Sloan Kamenstein says. “It’s important for sales and for keeping our name out there. The more we can get our name out there, the better off we are.”

Wild says retail items are a big hit with local customers and help to create new fans, too. “Whenever you have people out there championing your brand, it always has a positive effect in drawing people into your store and building revenue,” he says.

Revenue is fairly easy to build with merchandise, Wild adds, because operators can considerably mark it up. “The prices are set at what the market will bear, but are a minimum of a 100 percent markup,” he says.

“What we have found is that there is an additional premium people are willing to pay for something that says Sloan’s on it because it enhances their experience, creates a strong memory, and is available at only one place in the world.”

Another ice cream brand, Jeni’s Splendid Ice Creams, also sells merchandise that reflects its brand. Having sponsored a bike team for many years, the nine-store, Columbus, Ohio–based chain decided to start selling a cycling jersey last fall.

While Jeni’s merchandise constantly changes, the chain sells T-shirts, baseball caps, a cookbook, food, ice cream products (bowls, spoons, and paddles, for example), and even one-pieces for its littlest fans.

“It all has to be consistent with what we’re trying to do as a company, which is to be a company that people can believe in,” says CEO John Lowe. “We stand for nothing but the highest quality and are dedicated to making the world a better place.”

For some companies, being true to the brand is the only part of merchandising that matters. Illegal Pete’s, a Denver-based chain of burrito restaurants, teams up with local bands to produce limited-edition pint glasses featuring both the band’s and the chain’s logos. Illegal Pete’s sells them at the bands’ restaurant shows, and all proceeds go to the band.

“We feel this is a great way to support a cause we believe in,” says marketing manager Virgil Dickerson. “We’ve got great press and word of mouth through this, and I feel we’ve gotten people into the stores that we wouldn’t have seen otherwise.” Though the brand often loses money on its merchandise, it’s enough of a marketing vehicle for that to be fairly insignificant, Dickerson says.

When Illegal Pete’s began the program in late 2011, it sold the pint glass with a beer for $10. It then decided to sell just an empty glass for $5 to lose less money on the promotion. But the change was made primarily because customers felt they were expensive. The $5 price point “seems to be easier to digest,” Dickerson says.

Illegal Pete’s has dabbled with more traditional forms of marketing, but prefers this method, he says.

“I’d rather spend our money on making pint glasses, and spend it on something that’s real and tangible and gets our fans excited about something,” he adds. The merchandise has been a huge success, he says, and the 17-year-old company sold 1,500 pint glasses in the past year, with some fans buying every new edition.

“We’re doing something real, connecting with something we believe in. The bands have fans—and we have fans—that are passionate about what we’re doing,” Dickerson says. “In the end, people will see the glasses every day [in their house] and maybe when people come over, they’ll see our name, too.”

But for many other brands, revenue is the true endgame. Dickey’s Barbecue Pit plans for its merchandise sales to explode this year, and president and CEO Roland Dickey Jr. sees it as not only a marketing opportunity, but also a great revenue booster. “It’s such an easy way to add incremental revenue streams without adding overhead,” he says.

The 71-year-old, Dallas-based brand has been selling barbecue sauce and rib spice for the past 20 years in its stores, and started ramping up its product mix with T-shirts, baseball caps, and a cookbook last year.

The company also sells branded whole honey-baked hams, turkeys, briskets, and spicy Cheddar sausages. The items were tested in two stores and have now rolled out to 120 of the chain’s 315 restaurants.

Dickey’s restaurants already sold meats by the pound, but including the whole meats “allows us another avenue to serve our customers who are catering events on a larger scale or for the holidays,” Dickey says.

“I don’t have to add one penny of extra overhead to sell you that product,” he says. “It’s great business for us and a new way for customers to use us.”