Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchise Co-Branding Boosts Revenue Per Location
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- Lucas: So you walk into a KFC, and there's a Taco Bell counter right next to it. Same ordering line, same cashier, two menus. That's co-branding — and it's one of the fastest-growing strategies in franchising right now. Luna: I've seen those combos. It feels efficient, but I've also wondered — does it actually improve the numbers, or is it just a branding gimmick? Lucas: The data says it's real. A 2025 FRANdata study looked at co-branded quick-service locations and found that average revenue per square foot was 22 percent higher than single-brand units. That's not a rounding error. Luna: Twenty-two percent — that's significant. But revenue per square foot doesn't tell you about costs. You've got two supply chains, two training programs, maybe two sets of equipment. Lucas: Right, and that's the tension. The cost per transaction typically drops because you're spreading fixed costs — rent, utilities, management — across a bigger sales base. But if you don't execute well on the operations side, those savings vanish. Luna: So who's doing this well? Yum Brands is the obvious example with KFC and Taco Bell. But I know Pizza Hut is also part of that portfolio — are they doing tri-branded locations? Lucas: Some exist, but the sweet spot seems to be two brands. Yum has about 2,500 co-branded units globally. Most are kfc taco Bell. They've been testing and refining since the nineties, so they've got the playbook. Luna: And the playbook includes a combined kitchen layout that lets one fryer station serve both menus? Or are they running two separate kitchens under one roof? Lucas: It's usually one kitchen designed to produce common items. For kfc taco Bell, the fryers handle both chicken and taco shells. The grill can do both. The cold prep area is shared. That's where the efficiency comes from — you're not duplicating equipment. Luna: But what about a franchisee who already has a single-brand location? Can they just add a second brand to their existing store, or does it have to be a new build? Lucas: Conversion is possible, but it's harder. I spoke with a multi-unit operator in Houston who ran a standalone Taco Bell. He added a KFC to the same building — gutted the back half, reconfigured the kitchen, spent about $350,000 on the remodel. He said the first year was brutal because the team had to learn two sets of recipes and procedures. Luna: Three hundred fifty thousand — that's not cheap. How long until he saw a return? Lucas: He told me breakeven on the incremental investment came in about 14 months. By year two, the combined location was doing 40 percent more total revenue than the Taco Bell had done alone. And his labor cost as a percentage of sales actually dropped three percentage points. Luna: That's a strong outcome. But I imagine not every brand pairing works. What about something like a Subway and a Dunkin'? They share a customer base — quick breakfast and lunch — but the operations are fundamentally different. Subway has fresh produce, Dunkin' has beverages and baked goods. Lucas: That's a harder pairing. The FRANdata study found that co-branded units with complementary dayparts — like a breakfast brand and a lunch brand — tend to perform best. But if the operational complexity is too high, the margin benefit disappears. Luna: So the real skill is in operations design, not just brand selection. What about service-based franchises? Can you co-brand a cleaning service with a lawn care company under one roof? Lucas: It's less common, but it happens. There are examples of a Mosquito Joe and a Lawn Doctor sharing a local office — same dispatch, same scheduler, same customer service line. The field teams are separate, but the overhead is shared. That model can work if the services don't compete for the same time slot. Luna: That makes sense — a customer who needs pest control might also need lawn care. So it's a cross-selling opportunity too. But do franchise agreements typically allow that? I'd imagine some brands restrict you from operating another concept. Lucas: Most franchise agreements have a non-compete clause, but they're usually narrow — you can't operate a directly competing concept. Co-branding within the same franchisor family is usually fine. But if you want to combine a brand from one franchisor with a brand from another, you need both franchisors to sign off. And they often won't. Luna: So the real growth in co-branding is happening within large multi-brand franchisors — Yum, Inspire Brands, Focus Brands. They own the trademarks, so they can bundle them. Lucas: Exactly. And they're pushing it because it's a way to grow unit count without saturating the market with standalone stores. A co-branded unit counts as one location, but it represents two brand footprints. Luna: I've also seen some interesting data on customer satisfaction. A 2024 study from the Journal of Retailing found that co-branded locations scored slightly lower on customer satisfaction in the first six months — attributed to confusion during peak hours. But after a year, scores normalized. Lucas: That aligns with what the Houston operator told me. He said the first few months, customers would get to the register and say 'Wait, can I get a Crunchwrap and a chicken bucket in the same order?' The staff had to learn to guide them. But after a while, it became routine. Luna: So there's a learning curve for customers too. That's an important point — you can't just slap two logos on the door and expect it to work. You need training for both staff and customers. Lucas: Absolutely. And that training investment is real. Some franchisors provide a co-branding operations manual — Yum has one that's about 300 pages. It covers everything from menu board placement to how to handle peak traffic when both lines get busy. Luna: Three hundred pages — that's serious. It's not a side project. It's a core operating model. Lucas: And that's why we're covering it. For a franchisee thinking about expansion, co-branding can be a smarter path than opening a second standalone unit. You get higher revenue per square foot, shared overhead, and built-in cross-selling. But you need the operational discipline to pull it off. Luna: And the franchisor support. If the franchisor doesn't have a proven co-branding playbook, it's a lot riskier. Lucas: Right. So if you're a franchisee listening — and these conversations have moved your work forward in some small way — here's something honest. This show is ad-free, and it stays that way because a small group of listeners chips in monthly through buy me a coffee dot com slash fexingo. Luna: Yeah, it's a handful of people covering the costs for everyone else. If that's something you'd want to be part of, it genuinely helps. No pressure, just putting it out there. Lucas: And it means we can keep drilling into topics like co-branding — real numbers, real cases, no ads. So thank you to those who already do. Luna: Back to co-branding — I want to wrap with a forward-looking question. Do you think we'll see more tri-branded units, or will the industry settle on two-brand combos as the standard? Lucas: I think two-brand will remain the standard for the next few years. Tri-brand adds complexity that most operators aren't ready for. But if Yum or Inspire refine the model, we might see it in high-traffic locations like airports or stadiums. Luna: So keep an eye on those big franchisors. And if you're a franchisee, maybe start by visiting a co-branded location — not as a customer, but as an observer. Watch the flow, talk to the manager. Lucas: Great advice. Co-branding is one of those strategies that looks simple from the outside but reveals its depth once you dig in. And for the right operator, the numbers can really work.