Article
Cinnabon: Innovation strengthens brand
QSRweb.com recently visited Cinnabon's headquarters to talk with president Gary Bales about how the mall-based brand is combating slumping retail traffic.
April 5, 2010
*Click hereto view a slideshow of images from QSRweb.com's visit to FOCUS Brands.
Cinnabon first opened in 1985 with the perfect formula for success: hot, fresh, indulgent cinnamon rolls baked onsite to tempt hungry mall shoppers. In just 25 years, the brand has grown to more than 770 franchised locations worldwide — now also in airports and travel plazas. Thanks to its licensing program, the brand and its signature Makara cinnamon has become a household name.
But being well known wasn't enough to keep sales from sliding as the recession took a bite out of retail traffic, the company found. Cinnabon is fighting back, with a multi-pronged strategy to keep the brand relevant and lure in those shoppers still in the malls.
Gary Bales, president of FOCUS Brands' two quick-service chains, Cinnabon and Carvel Ice Cream, is ready for the fight. He took on the dual presidency in January after former president Geoff Hill moved to a new role with FOCUS parent Roark Capital Group.
Bales said that just as Cinnabon has been affected by the drop in retail traffic, the industry overall has discovered its customers have become more discriminating. Their expectations are higher than they've been in his 35 years in the industry.
"They expect more for their money, whether it's service or quality or the experience," he said. "The bar has to be raised. From our standpoint, that's something we're constantly challenging ourselves to get better on."
New developments in drinks, baked goods
To raise that bar, Cinnabon has been increasingly focused on innovation in its baked goods as well as its specialty drinks line. Tests for new drinks include a look at iced tea as well as a new dairy-based product to complement its Chillattas frozen drinks.
Also in the works is a possible deal with another company to brand its coffee. Always open to more licensing options, Cinnabon is in discussions with other QSR brands to sell menu items featuring its trademarked Makara cinnamon, including a test at Taco Bell. The Mexican QSR is testing a a frosting-filled donut hole rolled in Cinnabon cinnamon and sugar for its upcoming breakfast menu, said Cara Becker, director of brand licensing for FOCUS Brands.
Cinnabon's most significant innovation is its recent launch of cupcakes — its first non-cinnamon baked item — and is focusing on new growth opportunities. On the product development side, the premium cupcakes do much more than add a new menu offering. Bales said the new line also offers new merchandising and even catering opportunities as the company jumps on the cupcake trend.
The cupcakes come in four flavors — vanilla, cinnamon-swirled vanilla, carrot and chocolate — and are topped with attractive swirls of frosting. Unlike the cinnamon rolls, the treats can be held at room temperature and allow for more creative, eye-catching displays to draw passersby into stores.
The $2.49 price point also offers a lower point of entry, and Bales said the company expects more new customers to try the brand as a result.
"We think with the quality we offer with the Cinnabon brand and at the right price point, we've kind of got a good niche here within that category," he said.
The price point and quality should also do well as the company branches into catering for the first time, Bales said. Its cinnamon rolls, which are baked fresh in its stores, never lent themselves to outside sales, so franchisees are being trained on local store marketing to spread the word.
Debi Reynolds, who owns two Cinnabon franchise stores and is president of the company's franchise advisory council, said she likes the opportunities the new cupcakes present.
"It's a product that's front and center right now, so people are more aware of them and they watch for them," she said. "So that drives interest."
Reynolds also likes that the cupcake line can provide limited-time-only offerings for holidays, such as Easter and Mother's Day. Customers tend to buy the brand's CinnaPacks the day before holidays and special events, but "the cupcakes are cute, unique and have a really great flavor" that she anticipates will attract even more sales for such occasions.
Darren Tristano, executive vice president with foodservice consultants Technomic Inc., said the new product is a good opportunity for snacking and catering for Cinnabon, even though the cupcake trend is beginning to peak.
"Cinnabon's strategy to add cupcakes will provide good short-term success as their price point is much lower than what you would pay at Sprinkles on the West Coast or Magnolia Bakery in New York," he said. "It will appeal during off-peak hours and is very kid-friendly with broad demographic reach."
However, Tristano does foresee the cupcakes cannibalizing some sales of the brand's core product.
Growth strategy
Cinnabon's growth plans have been challenged not only by the slump in retail sales and mall traffic but also by the harsh lending environment for new franchisees. So the company is looking at added avenues for growth.
The company isn't abandoning its traditional mall venue as a growth target but does see larger opportunities in nontraditional locations and co-branding opportunities. On the mall side, Cinnabon just launched a reimaging program to contemporize its store and open up merchandising opportunities for its new specialty drinks. The refresh replaces the former blue and white color scheme with brown and white and adds a "cinnabar" to showcase its drink offerings.
| |||||
 | Pizza Executive Summit '10 – FREE Early Registration! | ||||
Bales said a number of franchisees are finding the refresh — which costs about $30,000 — is allowing them to renegotiate their lease at a better price. The new look also has boosted traffic and sales at test sites.
"Between the return on investment that they're getting from the increased guest count and sales along with what they might be able to do with the renegotiated lease with the mall operators, it makes it a very profitable direction," he said.
Cinnabon has been in airport and other such locations since 1991, and is working with developers like Sodexo to continue to expand into travel plazas and other locations. A smaller express unit should also make expansion into airports easier, he said.
The company also sees co-branding as a large growth vehicle. Cinnabon now has 50 co-branded stores with sister brand fast casual Schlotzsky's, with Cinnabon's products adding a snack product to the deli chain's regular menu. Those stores are doing well for both brands, and Bales expects the co-branding initiative to expand.
Bales said the larger opportunity in cobranding is in other QSRs seeking to partner with Cinnabon beyond just licensing opportunities. Those non-competing brands see Cinnabon's baked goods as a chance to build snack and breakfast traffic. He cannot name those companies but said negotiations are moving forward carefully.
"We want to do that (co-branding) in a controlled way," he said. "We want to make it right for everybody."
Technomic's Tristano sees Cinnabon's expansion into non-traditional and co-branding as a smart move.
"Cinnabon can strengthen its brand recognition, take advantage of additional product outlets and utilize lower cost locations to maximize their product sales," he said. "As a dessert/snack product, the right co-branding will provide good opportunities to sell with low overhead risk."
Headquarters: Atlanta
Parent company: FOCUS Brands Inc., a multi-concept restaurant franchisor and affiliate of private equity firm Roark Capital Group. Sister brands include QSR Carvel Ice Cream and fast casuals Schlotzsky's and Moe's Southwest Grill.
Systemwide sales fiscal year 2009: $237.9 million
Stores: 770 worldwide, in 41 states and the District of Columbia, as well as 33 countries.
Menu: Cinnamon rolls, including classic, pecan, minis and sticks; cupcakes in four flavors, including chocolate and cinnamon-swirled vanilla; and specialty drinks, including blended frozen beverage line of Chillattas.
Recent innovations: Cinnabon recently launched a line of indulgent cupcakes, the first QSR to tap into the cupcake trend and its first non-cinnamon roll-type product outside of its specialty beverage line.
QSR brand rivals: Mall-based chains, especially those with baked items, including Auntie Anne's, Pretzelmaker, Great American Cookie and Mrs. Fields Cookies Inc. as well as fast casual bakery café brands. Also multiple competitors in specialty drink category.
Related Media
Subscribe
Get the latest news and resources from QSR Web.
