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Brand Licensing Derrick Daye

Brand Licensing Case Study: Cinnabon

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Brand Licensing Strategy Cinnabon

In 2001 Cinnabon had no licensing program and no products for sale outside of their mall, airport and kiosk locations across the U.S. and International Markets. Today Cinnabon Licensing has grown to over 70 products with multiple world-class licensing partners like General Mills and Kellogg’s. The program has developed into a best-in-class model for restaurant brands that wish to expand their brand footprint, creating broader brand awareness and incremental revenue flows for the organization. This success and the long-term viability of the Cinnabon program came as the result of careful planning, research and development.   

Choosing the right Cinnabon products was a critical first step for the brand. The Cinnabon Licensing team took several factors into consideration when defining their retail product/licensing program:

Product Lines – Should the retail product line include products sold in the restaurants or products developed exclusively for the retail channel? Are there signature ingredients that can be leveraged in complementary product categories?

Consumer Interest and Acceptance – Cinnabon understood that research findings related to consumer interest and affinity would not only help with product identification, but would prove useful during negotiations with prospective licensees and aid in the retail sales process. Moreover, research gave the brand “permission” to enter certain categories and thus was perceived as a good fit. Finally, consumer taste tests would be integral to ensuring the products met consumer expectations.  Combined with intent to purchase measurements, Cinnabon was able to validate the proposed ROI and provide essential data for forecasting production.

Royalty Rates – Which product categories carry more substantial royalty rates? Cinnabon took into consideration when developing their retail branded product program that product categories with higher royalty rates would offset program development costs and generate ROI more quickly. They also realized these categories might be more difficult to license until the brand was able to demonstrate a track record of success.

Cannibalization of Restaurant Sales – Cinnabon understood that this was a legitimate concern of both its senior managers and franchisees alike. This concern was taken into consideration when identifying the products/categories, which would be sold at retail. Cinnabon addressed this concern by developing products that were brand extensions or which incorporated signature ingredients. In many cases the most successful retail product programs involve signature products sold at the restaurants.

Cinnabon saw that ingredient licensing would be an effective approach to reinforcing the uniqueness and premium quality of their signature ingredient, Makara cinnamon. It addition, ingredient licensing allowed Cinnabon to leverage its brand into numerous products that their restaurants were not necessarily known for – but were considered a good fit with the ingredient. By extending the program into ingredient licensing, Cinnabon was able to incorporate the brand into cereals, snack bars, beverages, coffee drinks and more through their licensing program.

Before committing to Cinnabon, the retailers wanted to see consumer research to back up the product.  Cinnabon understood the research would aid in product selection and help retailers evaluate intent to purchase.  While this required an investment by the brand, Cinnabon understood it was essential to the overall success of their retail program.  

Preliminary research studies can include any and all of the following, shown sequentially:

Product Identification Brand Licensing Strategy

   Product Development Brand Licensing Strategy

Before entering the retail market space, Cinnabon considered cannibalization of restaurant sales as a serious concern.  They realized that many foodservice operators understood that there is a distinction between on-premise and at-home occasions.  Retail outlets, such as grocery stores or convenience stores, tended to be viewed as an impulse occasion, whereas dining at a restaurant was seen as a planned event.

This point is reinforced through the following quote:

“In the past, restaurant chains feared franchisee insurgencies if they licensed their name into retail food products; however statistics show same-store sales of brands who embrace retail licensing actually grow. Now it appears that restaurants see that consumers view their eating-out and eat-at-home meal experiences totally differently…in brand licensing, we call it bringing the consumer closer to your brand.” (QSR Magazine, July 2009)

Though cannibalization does not appear to be a legitimate issue for most restaurant brands, keeping an open and honest dialogue with franchisees remains vital. The relationship between franchisor and franchisee is a delicate one.  Considering that they may lose sales because of branded retail products Cinnabon’s franchisees wanted to understand the program benefit to them. One way Cinnabon addressed these concerns was to have a percentage of their royalty payments go straight into the Franchise Advertising Fund. This motivated the franchisees to support the program as they saw a direct benefit from the retail program.

Understanding that the selection process for distribution channels can vary widely based on the type of operation, Cinnabon targeted retailers favorably predisposed to the program. This included grocery stores and mass merchandisers, such as Walmart or Target, as they reached the broadest audiences and offered Cinnabon the most slotting space available.

Cinnabon also targeted warehouse clubs because their high frequency was ideal for its licensed products.  However, Cinnabon understood that BJs, Costco and Sams could be demanding to ensure the product launch would be successful. In the case of Cinnabon Bakery Mix, the clubs, in fact, required different packaging.  Fortunately, the benefit outweighed the costs in the licensee’s eyes and they put up the resources for the packaging. Cinnabon found that warehouse clubs would offer regional testing to determine if the product was relevant and could survive. In the end, Cinnabon Bakery Mix performed admirably strengthening the overall licensing program.

In considering a brand licensing program like Cinnabon’s, the important thing to remember is that often times distribution decisions for licensed brands are driven by the licensee. These manufacturers are heavily involved in the retail arena and have existing relationships with key decision makers.  In addition, a licensee might be able to bundle their licensed product along with other products in its portfolio, resulting in a more cost-effective solution. In these cases, foodservice operators are happy to let the “expert” take care of distribution. 

Contributed to BSI by: Bill Jachthuber, The Blake Project

Sponsored byThe Brand Licensing Workshop

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