Here we will see about the Is ALDI USA a Franchise?
More and more companies are popping up that carry another company’s brand name, and ALDI is no exception. ALDI opened its first store in Germany, but has since come to the United States, making its way into more than half the states. Considering places like Walmart are very similar, one can only ask this important question: is ALDI a franchise like other popular, growing companies? What makes a franchise, anyway?
According to Collins Dictionary, a franchise is a company that gives “[authority to] an organization . . . allowing them to sell its goods or services or to take part in an activity which the organization controls” (“Franchise”). In short, companies like McDonald’s or Starbucks that make and sell their own goods are a franchise, but another company, like Walmart or ALDI, needs permission to sell Starbucks’ products as a franchisee. So, no, ALDI is not a franchise. There are many factors regarding why ALDI is not a franchise, especially when they have their own private labels, so let’s jump in and see what brought us to this conclusion.
What is a Franchise?
The Collins Dictionary has more or less answered our question, but what exactly makes a company a franchise? Places like Walmart have their own brands too, such as Great Value, but ALDI’s has even more private labels than Walmart; they practically have a label for every kind of food and non-food product on their shelves.
So, what else does “franchise” mean? Collin’s says that a company can “franchise its business” to other businesses. As far as we know, ALDI has a web page where you can sign up to supply their products to your own business as their franchisee (“Suppliers”), but they warn their future suppliers of a couple things:
- because they do not have very many private labels available, they would send a large volume to their suppliers;
- and because their company guarantees “Everyday Low Prices,” that automatically means a significant product (“Become a Supplier”).
For example, one of the private labels is Millville. Like many of their other brands, Millville is made at the same breakfast cereal facilities as some of the other North American cereal brands (“MOM Brands”). In fact, because their prices are so cheap, the quality naturally comes into question, but because national competitors have greater reputations, labels like General Mills are able to hike up the price on exactly the same product. ALDI even claims to have a test kitchen, which is where they check products for either “the same [taste] or better than national brands” (“ALDI History”).
There are difficulties behind naming ALDI a franchise, but because they did not directly make their own brand and then open a location selling only that product, they are not a franchise. If we were to take Starbucks and run the company through the same conditions, then they would come out as a franchise because they created and made their own brand, and then allowed other companies to sell their product once they became an internationally known franchise.
As ALDI is a discount store, the marketing is different (“The Key Differences Between Buying a Franchise and Starting Your Own Brand”). Starbucks doesn’t need another store to sell its product; they just want to distribute more and make more based on their reputation. In order to make money at all, ALDI needs to have brands that are not their own under their belt to even get started.
A large part of the reason why ALDI has been growing so fast in recent years is because their grocery stores are filled with quality ingredients and products that are no different than competitors, but also have outside products that are popular among consumers at a discounted price. Even if the number of outside labels is significantly less than ALDI’s, it’s still a product that is not their own. Starbucks, on the other hand, never carries another brand unless it’s to make a food or drink item sold under their name.
What Makes a Brand?
If ALDI is not a franchise, then what exactly makes it a brand? On the History section of the ALDI website, it is said that ALDI was the very first “discounter store in the world.” Because they do not mention having their own private brands at the beginning, ALDI would have started selling other labels to gain recognition. Clearly they had done that well, as they opened their first American location in 1976 (“ALDI History”). They had a discount title, but not a product.
For clarification, the Collins Dictionary lists that a brand “of a product is the version of it that is made by one particular manufacturer” (“Brand”). Picture the Great Value brand under Walmart, and that is essentially what ALDI is in the business. They are both dealers, but with their own copied, cheaper brands to further participate in their recognition as discount stores.
So why is a title like General Mills only a brand but not a franchise? General Mills has its own facilities to make their product, but not sell. They rely on supermarkets and private stores to distribute their product for them. Companies like McDonald’s and Starbucks don’t need to do that. They established their own name and product at the same time, whereas Millville and Great Value would have come later once the discounted store had a reputation of its own.
Conclusion
To pull it all together, ALDI is a great place to shop, especially if you don’t mind cheaper brands that have no national reputation behind them. After all, General Mills competes against ALDI’s private brand of cereal, but Millville reportedly tastes the same, so why not go with the cheaper one? That’s technically the whole idea behind ALDI’s company promise of “Everyday Low Prices.” Even though ALDI is not a franchise, there many other companies that are not franchises and are doing just as well or better than ALDI. They start by selling other brands and then branch out.
FAQ
Q. Is Amazon a franchise?
Amazon does not have its own brand that it started with either. The website merely deals with other products that they did not create. The company is huge but became so without selling its own product.
Q. Did General Mills manufacture Millville cereal?
A. No, they did not. Despite having similar names, Millville was actually manufactured by Malt-O-Meal Company, now known as MOM Brands.
