Many casual dining chains, seeking both brand exposure and revenue, are showing a growing appetite for licensed food, potentially expanding their brand beyond the restaurant door and into the grocery aisle.

To be sure, brands such as California Pizza Kitchen, PF Chang, TGI Friday’s and Cinnabon have long had a foothold in grocery store freezers. But with improvements in food quality and better matching of flavors, chains large and small – Qdoba Mexican Eats, Bob Evans, Pink’s Hot Dogs, Tony Roma’s and others – are using licensing to raise their brand profile.

“More people are going to see our brand in the grocery store in some markets like Malaysia where we have 12 restaurants,” says Jim Rogers, Chief Marketing Officer at the 150-store Tony Roma’s, which is in the midst of international expansion. “We are going to get the word out on the brand and build a new usage for it.”

But in jockeying for space on grocery store shelves, restaurant brands face the daunting task of typically having to replace a competitor, especially in frozen food aisle where licensed brands have found a high-profile home. That is leading many restaurant brands to turn their attention to other categories — refrigerated foods, deli, snacks and chips and sauces, among others.

For example, Tony Roma’s has a long-running licensing agreement in the U.S. with Rupari Foods for ribs and pulled meats, but it also is considering marinated meats, chips and snacks and sauces. Licensee Bellisio Foods, which sells Chili’s and Boston Market entrees, is considering adding breakfast meals and flat bread pizzas to the mix, says SVP of New Ventures Jeff Tuttle. And Bellisio is expanding outside grocery stores, having landed Chili’s chicken fajita rice bowl and chicken alfredo at Walgreen’s and Boston Market pot roast and parmesan chicken in discount chains, including Jack’s Stores in New York City.

Matching the Flavor Profile

“Years ago it was hard to deliver the right flavor profiles and quality products and you were hurting your brand if you put something out that was substandard,” says Global Icons’ Bill McClinton, whose firm is bringing the Qdoba Mexican Eats chain into licensed food for the first time this year. “Now when you see the innovation in that space, licensors’ quality control and R&D people are feeling suppliers can deliver some equity in that space. This is more brand building and it helps get other companies into the category.”

Among the restaurant chains and food suppliers growing their presence in the branded business are:

• Qdoba Mexican Eats last year named Global Icons its agency, moving into licensing as it plans to open 60-70 restaurants this year in expanding in California, Utah, Arizona, New Mexico and Texas. The 699-store restaurant chain, which recently changed its name from Qdoba Mexican Grill, sees room for 2,000 restaurants in the U.S., executives have told analysts.
• Tony Roma’s licensee Rib World, which has an agreement for Europe, is near a deal with a major European retailer to launch sales of branded pulled meats in Spain this spring. Tony Roma’s has 24 restaurants in Spain. It also has licensed pulled meats sold through Walmart’s Superama in Mexico, where it has 5 restaurants, and is currently using U.S. supplier Rupari. Agreements also are being negotiated for Australia and Canada, says Broad Street Licensing’s Bill Cross, whose firm represents Tony Roma’s.
• Bellisio Foods, which was purchased by Thailand-based food processor Charoen Pokphand Foods Public Co. for $1 billion in December, is being given a charge to expand licensing, which accounts for about 85% of its annual revenue, says Tuttle. It gained the Boston Market license in buying Overhill Farms in 2013 and added the Chili’s brand a year later. “We will continue to pursue the strategies that were in place” prior to the sale with “one of them being growth through licensing which may go faster and broader than before,” says Tuttle. In addition, Bellisio also is weighing selling entrees through dollar stores, which are in the midst of expanding their freezer sections.
• Red Robin Gourmet Burgers and Brews is expanding its brand into barbecue and other sauces under a new licensing agreement with Vita Foods, says Valen Group’s Gus Valen, whose agency represents the chain. The new sauces, expected by spring, will take their cues from Red Robin’s Whiskey River, Campfire and other sauces used in the restaurants. Red Robin has an existing licensing agreement with Lamb Weston for frozen seasoned steak fries and onion rings.
• Conagra Brands Inc. is testing returning the International House of Pancakes (IHOP) brand to breakfast meals with French toast and Signature Buttermilk Pancakes, company executives have told analysts.  The products are being tested at Food Lion stores in Raleigh, NC; Marsh stores in Indianapolis, IN and Safeway and Raley’s in Sacramento, CA, says a ConAgra spokeswoman The 1,695-restaurant chain previously had a licensing agreement with Golden County Foods foran IHOP at Home line of breakfast items in 2011, including omelet crispers and French toast stuffed pastries. Golden County filed for bankruptcy in 2015 and was sold to Monogram Foods. IHop also has pancake syrup that is sold through Walmart.
• Lamb Weston spun off from Conagra in November, taking with it several licensing deals for fries including those with Red Robin, Arby’s, Nathan’s Famous, Checker’s Rally and Sonic. Licensing is a small portion of Lamb Weston’s business, which largely focuses on making fries for commercial customers such as McDonald’s. For its part, Conagra kept licensing agreements for IHOP and P.F. Chang’s, the latter expanding beyond frozen meals into sauces.
• -ink’s Hot Dogs, a fixture on the Hollywood celebrity scene that has grown to 15 locations, hired Firefly Brand Management to bring the 78-year-old company into licensing for the first time. Known for its chili dogs that gave the company its start as a push-cart business, initial efforts will seek deals for its signature chili, promoting the brand’s status as a family-owned business, says Firefly’s Cynthia Modders.
• The Bob Evans Farm Inc.’s packaged food business, long known for producing side dishes such as mashed potatoes and macaroni and cheese under the restaurant chain’s brand, is working with Global Icons to license out the name. Global Icons, which started representing Bob Evans about a year ago, is targeting refrigerated meals, biscuits that could be sold in the deli section, biscuit mix and gravy. The product plans parallel popular menu items, biscuits and gravy being one of them, says McClinton. Meanwhile Bob Evans Farms’s packaged foods business – BEF Foods — will keep its licensing business after striking a deal last week to sell Bob Evans Restaurants to Golden Gate Capital for $575 million.

In bringing products to market, many suppliers try to mirror the restaurant menu, focusing on core items and trying to match flavors and seasonings so that the store version’s taste is consistent with that found in meals in the restaurant. Tony Roma’s recently revamped its menu to include 35 items, about 20-25% of which could be good candidates for licensing, says Rogers.

“We always tell brands that the closer the licensed products are to the food service experience the better,” says Cross. “Those brands that say ‘you can’t put anything on our menu at retail’ are set up for failure.”

A Line, Not an Item

A licensing effort has to include at least 3-5 SKUs to ensure the brand is identified as a line rather than a single item, says Valen. The brand exposure also comes at a cost. Licensees typically pay slotting fees that are common in supermarkets, and are
responsible for promoting the products. Because of the costs, licensees usually pay a 3-5% royalty and may lose money the first year before starting to turn a profit during the course of a typical 5-year agreement, say industry executives.

Promotional strategies can vary. Tony Roma’s pulled meats are sometimes packaged with coupons offering discounts at the restaurant, says Rogers. And many licensees take to their social media feeds to promote new items available at retail. Both coupons and social media are critical to a licensed brand’s success, given that chains rarely promote the licensed foods in their restaurants where franchisees are sometimes fearful that will eat the supermarket version instead of going to the restaurant.

But industry executives insist that casual-dining restaurant customers aren’t typically the same consumers buying the products in the stores, say industry executives.

“It is critical to get franchisee buy in beforehand because that way they will know before the products hit the market,” says McClinton. “When you tell them the benefits up front, it makes things a lot easier.”

Logically, it’s easier to license restaurant-licensed brands when the chains are national since many of the larger grocery retailers are reluctant to buy licensed goods on a local or regional level. Costco can be the exception since it buys products in four separate regions in the U.S.“Many chains don’t like to buy regionally,” says an executive at one licensee. “The products won’t pull with the same velocity across all the stores and they would have to segment their buying. Costco does buy regionally and sometimes can be used to test a product for proof of concept, but then it is a slower build.”

In seeking to gain that shelf space, licensees also need to prove that a restaurant brand can be extended across categories and create a portfolio of products. For example, Nathan’s Famous (French fries) and TGI Friday’s (snacks and appetizers) started in the frozen food section. But Inventure Foods has extended them hot dog-flavored potato chips in the case of Nathan’s and snack mixes and tortilla chips for TGI Friday’s.

“It helps to be able to show that a brand has leverage and can be extended at retail where it makes sense,” says Cross. “You may not want to say you are going to have a Steak and Shake T-bone steak, but in sandwich meat it makes sense.”

Contacts:

BEF Foods, Michael Townsley, Pres., 614-491-2225

Bellisio Foods, Jeff Tuttle, SVP New Ventures, 612-758-8410, JTuttle@bellisiofoods.com

Broad Street Licensing, Bill Cross, SVP Business Development, (973) 655-0598 x12, bill.cross@bslg.com

ConAgra Foods, Trevor Foster, Chief Counsel Commercial Transactions, 402-240-4000, trevor.foster@conagra.com

Firefly Brand Management, Cynthia Modders, CEO, 818-209-2678, cynthia@fireflybrandmanagement.com

Global Icons, Bill McClinton, SVP Licensing, 310-873-3554, bill.mcclinton@globalicons.com

IHop/Sunshine Restaurant Group, Janet Alexander, Marketing Dir., 954-618-6300, jalexander@srpihop.com

Inventure Foods, Steve Sklar, SVP, 623-932-6200, steve.sklar@inventurefoods.com

Lamb Weston, Michael Smith, SVP Growth and Strategy, mike.smith@conagrafoods.com

Pink’s Hot Dogs, Richard Pink, CEO, 323-931-4223

Tony Roma’s, James Rogers, Chief Marketing Officer, 321-281-9330, jimrogers@romacorp.com

Valen Group, Gus Valen, CEO, 513-842-6300, gvalen@valengroup.com