Topic: Co-Branding

Title: Little Caesars and Kmart

Though Kmart is one of the world’s largest mass merchandise retailers, it

has sustained substantial revenue losses over the last decade. Primarily
take-out-only concept, little Caesars, once financially strong and growing
faster than its chief rivals Pizza Hut and Domino's, had less than half the
units of Pizza Hut. As of mid-1995, there were over 600 Little Caesars in
various Kmart units. The expansion by Little Caesars into mass
merchandising sites provided access to a new market segments of dining in
consumers that went previously mapped by the pizza franchise. The
heightened brand awareness was also expected to result in increased sales
at freestanding units. The relationship between Little Caesars and Kmart is
that of the standard franchisor-franchisee contract. Kmart is a franchisee a
Little Caesars franchise system and thus must pay franchise fees and
royalties. The opportunity to own and operate a fast-food unit in a Kmart
was not offered to any of the Little Caesars freestanding unit franchisees.
Some franchisees openly expressed concern over the co-branding decision,
fearing the Kmart units would cannibalize sales of existing freestanding
operations. As both companies entered the year 2000, their individual
struggles continued. Little Caesars announced the closing of many of its
stand-alone location due to a company restructuring effort. Kmart did
likewise.