GENCO MEMO-12-4-24: Business Turnaround Month: Mall Brands Find New Life Beyond the Food Court
No. 2 in examing business turnarounds to get ready for 2025.
This is the second installment of my December Business Turnaround Series, where I’m exploring innovative strategies for business revival as we approach 2025.
In the first installment, we examined Barnes & Noble's remarkable transformation through localization.
Today, we'll analyze how several mall-based food brands have discovered a recipe for success by completely reimagining their business model.
I got some interesting ideas that I look forward to talking about with my clients.
Especially now that our firm has moved into new offices in Mcallen.
Here’s a good video summarizing the strategy:
Here’s my summary and takeaways:
The Mall Exodus Challenge
The story begins with a troubling trend: the decline of American shopping malls. These retail spaces, once the crown jewels of suburban commerce, were designed around architect Victor Gruen's vision of creating community hubs that would blend social life, recreation, and commerce.
However, as e-commerce rose and consumer preferences shifted, the symbiotic relationship between malls and their tenant businesses began to unravel. Many traditional mall brands found themselves facing extinction.
A Strategic Renaissance
Enter Goto Foods, a company that has masterfully orchestrated one of the most interesting turnarounds in retail food service.
Their portfolio includes familiar names like Jamba Juice, Auntie Anne's, and Cinnabon – brands that were once completely dependent on mall foot traffic.
The numbers tell a compelling story:
- Jamba Juice rebounded from struggling sales in 2015 to achieve $513 million in sales by 2023
- Auntie Anne's grew from $559 million in 2017 to $762 million by 2023
- Cinnabon jumped from $353 million in 2019 to $497 million by 2023
The Innovation Playbook
What makes this turnaround particularly fascinating from a business perspective is the innovative three-pronged strategy that drove success:
1. Strategic Licensing and Brand Extension
The company discovered that licensing could serve as both a revenue generator and a marketing tool.
Taking Cinnabon as an example, the brand expanded beyond mall locations to launch over 164 different products, creating new revenue streams while also expanding brand visibility.
2. Location Reimagining
Instead of remaining tethered to dying malls, these brands ventured into standalone locations with modern amenities.
Jamba Juice, for instance, introduced modular grab-and-go formats and drive-through options, adapting to changing consumer preferences.
3. Co-Branding Synergy
Perhaps the most innovative aspect of the strategy was the introduction of co-branded locations.
The company's first Auntie Anne's drive-through in Texas wasn't just a pretzel shop – it was paired with a Jamba Juice, creating a powerful combination that maximized real estate value and customer convenience.
Legal and Business Strategy Implications
For me, this transformation offers several important considerations:
1. Intellectual Property Strategy: The extensive licensing programs require sophisticated IP management and protection strategies.
2. Real Estate Innovation: New location formats and co-branding arrangements demand creative legal frameworks for leasing and operations.
3. Franchise Agreement Evolution: The shift to multi-brand locations necessitates careful structuring of franchise agreements to accommodate these new business models.
4. Regulatory Compliance: Operating outside traditional mall environments often means navigating different zoning and local business regulations.
The Economics of Transformation
As the video illustrates, the financial results speak volumes about the strategy's success.
By 2023, Focus Brands achieved $5.7 billion in retail sales, secured over a thousand franchise deals, and opened hundreds of new stores. This success demonstrates how traditional retail brands can adapt and thrive in a changing market landscape.
Looking Forward: Lessons for 2025
As businesses prepare for 2025, the Goto Foods turnaround offers valuable insights:
1. Asset Flexibility: Success often requires reimagining how core assets (in this case, well-known food brands) can be deployed in new ways.
2. Strategic Partnerships: Finding synergistic partnerships within a portfolio can create value greater than the sum of its parts.
3. Consumer-Centric Innovation: Understanding and adapting to changing consumer preferences is crucial for survival.
4. Scalable Systems: Building infrastructure that can support multiple brands and formats creates operational efficiencies and competitive advantages.
The Broader Implications
This case study illustrates a crucial point for businesses facing disruption: survival often requires more than mere adaptation – it demands fundamental reimagining of the business model.
While some mall brands like Wet Seal failed to adapt and disappeared, others found new life by breaking free from traditional constraints.
As we continue our exploration of business turnarounds this month, this story serves as a powerful reminder that with the right strategy and execution, even businesses facing severe structural challenges can find paths to renewed growth and success.
That is all.
Have a good rest of your week.