Industry News | November 24, 2015 | QSR Exclusive Brief

Nestlé and Red Mango Offer Two-for-One Franchising Deal

image used with permission.

Two is better than one. At least that is the thinking behind a new franchise partnership. Red Mango and Nestlé Toll House Café by Chip have teamed up to incentivize new and existing franchisees to operate cobranded stores.

Ziad Dalal, cofounder of Nestlé Toll House Café by Chip and CEO of Crest Foods, which is the master franchise of Nestlé, says he has known the Red Mango team for some time and found the two cultures to be similar from the operator standpoint.

“We both felt that our brand and their brand could be a great fit. One is more about indulging on the Nestlé Toll House Café side, and Red Mango is more of a healthier alternative,” Dalal says. “It’s a great, great opportunity for franchise partners to capitalize on their investments, and it’s a great offering for the customer to have these two offerings side by side.”

Cobranded locations have been secretly under construction in the two brands’ home market of Dallas-Fort Worth. The first location in the mixed retail-residential CityLine development is expected to open in a few weeks with a second location in Sundance Square in downtown Fort Worth to follow. Boasting a relatively small footprint, cobranded units will be roughly 1,000 to 1,200 square feet.

To streamline operations, the cobranded locations will use a shared POS and employees will be cross-trained to serve customers both products.

“Clearly you would want to get the labor efficiencies based on different dayparts, different seasonalities,” says John Antioco, chairman of BRIX Holdings LLC, which owns Red Mango. “If it works as well as we hope it will, it’s an opportunity to get incremental volume, top-line sales done in a very efficient manner both in the initial construction cost and on ongoing basis. We believe it adds revenue at a very affordable investment rate.”

Moving forward, both brands will inform prospective franchisees of the option to cobrand. Nestlé Café and Red Mango have also communicated to their existing operators the opportunity to add a second concept. Dalal says that while the build-out cost for the second brand, it is still much easier to build a cobranded unit from scratch rather than retrofit an existing one. New operators must only pay $30,000 in franchise fees, which include both brands.

Next year, the two brands expect to open 45–55 units. Dalal says the actual count could exceed that goal, but the first priority is to make sure the two brands do it right. Antioco says that ultimately the market will determine whether the growth of cobranded units exceeds that of individual stores for each brand.

A new franchisee who decides to open a cobranded unit will move forward with the Discovery Day and training with one of the two brands. The other brand will then instruct the franchisee in procedures unique to it without repeating material.

“The two brands require the same discipline so really you’re talking about the same franchisee being able to execute on both sides,” Dalal says. “We will both conduct training, but it’s not duplicated. In other words, if it’s a Nestlé Toll House franchisee, we will do the whole training and Red Mango will do operational training only—not management training—so you’re training is not doubled up. … The same holds true if they are training, we will train them on operations.”

And while Dalal says the cobranded stores allow operators to serve healthy snacks alongside indulgent treats, Antioco says that the two core menu items—frozen yogurt and baked goods—also increase the store’s appeal through the seasons.

“Yogurt and smoothies are generally more appealing products in warmer months, and baked goods [have] all-year-round demand but clearly do better in cooler months,” Antioco says. “Put all that together, and it would appear to make sense from an economic perspective for a franchisee and for a product assortment standpoint for a customer.”

While he concedes that consumers will likely flock to baked goods as the holidays approach, he says that the New Year will bring with it resolutions to indulge in healthier treats, so both sides of the new cobranded units could see good business this winter.


By Nicole Duncan

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