Start-ups that align their products to existing brands need to demonstrate a guarantee of quality, an expert says, after a bakery franchise launched a range of cupcakes featuring the characters of the highly popular game Angry Birds.
Ferguson Plarre Bakehouses, which operates around 50 bakeries throughout Victoria, unveiled the cupcakes after being granted an exclusive Australian license to the Angry Birds brand.
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According to company director Steve Plarre, it was important for the franchise to gain the licensing arrangement from the game’s developer in Finland.
“A lot of bakeries, particularly in Melbourne, are doing a lot of unlicensed Angry Birds products [but] they’re not doing a great job of it,” Plarre told Franchising.
“I think [the developers] were really happy to have someone who was going to honour the images properly, and so within a couple of weeks… they granted us a license.”
According to Plarre, the Angry Birds cupcakes outsell every other cupcake on offer, describing them as “super colourful” and particularly popular among children.
Ferguson Plarre is promoting the range via Facebook, hoping it will drive traffic back to its own website, where customers can submit orders.
“Just in Melbourne alone, there are 49,000 registered Angry Birds fans that I can target directly through Facebook advertising,” Plarre said.
James Omond, of commercial law firm Omond & Co., says before businesses apply for a license to use another brand, they need to ensure the brand is in line with their offering.
“If you’re starting from scratch and trying to differentiate your product offering, that’s the first step, Omond says.
“I think that the two products need to be aligned in terms of appealing to the same demographic and having the same brand values. If you’re talking about kids’ cupcakes and Angry Birds, that [makes sense].”
“In terms of differentiating yourself from a baker down the road, quality is an important focus because the brand owner is putting their brand in someone else’s hands.”
“You don’t want someone getting poisoned by these cupcakes because they had an Angry Bird stuck in their throat or something like that.”
Omond says businesses need to demonstrate a guarantee of quality. With regard to food, this means having HACCP certification.
HACCP, which stands for Hazard Analysis Critical Control Points, is the main platform for international legislation and good manufacturing practices for all sectors of the food industry.
“After that, it’s about making a compelling case [to the brand in question]. Don’t just draw a design on the back of some recycled paper,” Omond says.
“Get a graphic designer involved to show a level of professionalism, but also go through the benefits you see this accruing to the brand owner.”
“Then it’s a matter of the nitty gritty – how much should you be paying to use [the brand]? With licensing, it depends on the power of the brand which is being licensed.”
“The rule of thumb is that if you’re licensing something relatively unknown… you might be looking at 3% of sale value.”
“But if you’re looking at a really well-known brand proposition, such as AC/DC and wine, I imagine they would be paying around 25% of the sale price because it is such a powerful brand.”
“It’s like having The Wiggles on [children’s] Band-Aids… It becomes a more easily used product. It gives it that differentiation from any other sticking plaster on the shelves.”
Omond says the key for start-ups is to determine whether they can justify the cost of aligning themselves to another brand.
“If you can’t sell you product for more, because it might be there’s some constraint that no one pays more than $2.99 or whatever, then can you afford to do it?” he says.
“Is the benefit going to come in higher turnover with the same fixed costs? Rather than a per-item fee [paid to the brand], you might do it on a turnover basis.”