Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / Why Franchisees Are Opening Second Brands Under One Roof
Transcript
- Lucas: Ever walk into a fast-food place and realize it's actually two brands under one roof—like a KFC and a Taco Bell sharing the same counter? Luna: Yeah, those combos are everywhere now. I've seen Pizza Hut–WingStreet, Dunkin' with Baskin-Robbins. It's basically a franchise within a franchise. Lucas: Exactly. And what's interesting is that more franchisees are voluntarily doing this—not just the corporate headquarters pushing it. They're signing two franchise agreements and operating them out of the same four walls. Luna: So the franchisee runs two separate concepts, but shares the real estate, the kitchen, the staff? Lucas: Right. Shared back of house, shared dining room, sometimes even shared point of sale. But they pay two royalty streams, two marketing funds. The economics get tricky. Luna: Let's talk about the numbers. What kind of revenue uplift do these dual-brand units see? Lucas: There's a 2025 survey from Franchise Business Review—about 1,200 multi-brand franchisees responded. They reported that dual-brand locations generate, on average, 18 percent more revenue per square foot than single-brand units. That's significant when your rent is based on square footage. Luna: Eighteen percent—that's not a small edge. But is it purely from selling more items, or does it come from things like longer dayparts? Lucas: Both, actually. A KFC might peak at lunch and dinner. If you add a coffee and donut brand like Dunkin', suddenly you've got a breakfast rush and an afternoon snack window. You're using the same kitchen for more hours of the day. Luna: That makes sense. Spread fixed costs over more sales. But I imagine the operational complexity jumps, too. Lucas: It does. You're training staff on two menus, two prep procedures, two brand standards. And the franchisors often have separate training programs. One franchisee I spoke to in Chicago said his staff had to complete 40 hours of training for each brand. That's 80 hours per employee. Luna: And turnover in fast food is high. So you're constantly reinvesting in training. That eats into the revenue gain. Lucas: Exactly. That same franchisee said his dual-brand unit's labor cost was about 32 percent of sales, versus 27 percent for his single-brand store. So the margin compression is real. Luna: But the top line is higher. So net profit might still be better, depending on rent. Lucas: And that's where real estate comes in. Landlords actually like dual-brand tenants because they draw more foot traffic—more reasons to visit. Some landlords offer rent concessions, like a 10 percent discount for the first two years, to attract a dual-brand operator. Luna: So the real estate market is basically subsidizing the complexity. Lucas: In a way, yes. And then there's the inventory angle. Dual-brand units often have more waste because you're stocking ingredients for two menus. But some brands have designed shared ingredients—like KFC's coleslaw and Taco Bell's lettuce—to reduce that. Luna: So the smart franchisors are engineering menu overlap. What about franchisees who do this on their own, without corporate encouragement? Lucas: That's happening more. A franchisee who already runs a successful Jimmy John's might open a Dunkin' in the same strip mall, but not in the same unit. That's multi-brand, but not co-located. The co-located version is harder because you need both franchisors to approve the combined operations. Luna: And some franchisors don't allow it at all. They want their brand standalone. Lucas: Right. Yum! Brands has been aggressive about dual-branding—they own KFC, Taco Bell, Pizza Hut, and they've been rolling out combos for years. Inspire Brands, which owns Dunkin', Baskin-Robbins, and Jimmy John's, is testing more hybrids. But smaller franchisors often prohibit it because they worry about brand dilution. Luna: Brand dilution is a real concern. If a customer walks into a dual-brand unit and the Taco Bell part is messy, they associate that with KFC too. Lucas: That's the downside. But the upside is customer retention. If one concept isn't busy, the other might be. And the franchisee gets two shots at capturing the same customer. Luna: Let's zoom out. Is this trend likely to accelerate, or is it a niche play for big brands only? Lucas: I think it accelerates, but selectively. The 2025 survey also found that 41 percent of franchisees said they'd consider adding a second brand to an existing location if the franchisor offered financial incentives. So there's latent demand. Luna: And if the franchisors start offering those incentives—reduced royalties for the first year, say—that could tip the scales. Lucas: Exactly. And I think landlords will continue to push for it because dual-brand units tend to have higher occupancy rates. A single-brand store might close if the concept fades, but a dual-brand store has more resilience. Luna: Speaking of resilience—this show itself is a kind of dual operation. Two hosts, one conversation. And it stays ad-free because listeners chip in. Lucas: Yeah, we keep it straightforward. If these conversations have moved your work forward in some small way, a handful of listeners already support the show through buy me a coffee dot com slash fexingo. That's literally what funds making this many episodes available to everyone. Luna: And it keeps us independent. No sponsors to please, just the topic and your questions. Lucas: Appreciate every person who's part of that. Now back to dual-brand economics—there's one more angle I want to flag. Luna: What's that? Lucas: Franchisee exit strategy. If you own a dual-brand unit, selling it is more complicated than selling a single-brand store. You have to find a buyer who's approved by both franchisors, which narrows the pool. Luna: So it's harder to liquidate. That could be a deterrent for some investors. Lucas: Exactly. But for franchisees who plan to hold for the long term and want to maximize per square foot profit, dual-brand is a compelling model. It's not for everyone, but it's becoming a standard option in franchise real estate strategy. Luna: And the data shows the revenue lift is real, even if the complexity is higher. Sounds like the key is picking complementary brands and getting the franchisors on board early. Lucas: Right. And negotiating the real estate terms to offset the training costs. That's where the best franchisees are making their money.