A franchisor’s system-wide marketing program can be a great benefit to a franchisee but also a potential source of conflict when the contributions are mandatory. The real source of contention is not that such a fund exists, and these funds are very common in franchising, but because the franchisor, not the franchisee, decides how it is spent. How do you evaluate whether the marketing program provided will give you a fair value for your money?
First let’s look at why such a fund can be an advantage. When a franchisor pools funds from all the franchisees in the system, it can hire a top public relations or advertising company to create a marketing campaign that will benefit the entire system. It also has a much greater ability to do expensive advertising, such as television. This large-scale advertising helps to build the brand, which in turn helps the individual franchisee build value in their business.
Without a marketing fund, each individual owner would be on his own, doing advertising on a much smaller and less-noticeable scale. Your franchise will be seen in a more positive light if your marketing is done by experienced professionals than if you print off flyers designed by you or someone else inexperienced in the integrated brand building efforts of the franchisor.
A franchisee contributes to the mandatory marketing fund in usually one of two ways, either by a fixed amount or a percentage of the gross sales of the unit. For some reason, many franchisees believe that contributing to a marketing fund makes them instant marketing geniuses and they like to second guess every decision. During your evaluation process, knowing what to look for can help you decide if this franchisor is doing a good job with their allocation of marketing funds.
Consider the most frequent causes for friction in the franchisor-franchisee relationship.
- Problem: When the cost of the production of marketing materials is so great there isn’t enough money left to get the materials to the consumer. There should be a reasonable balance between these two sides of the same coin. Great commercials lose effectiveness if the franchisor can’t afford to air them frequently and in all markets. Poorly designed advertisements aired everywhere, and all the time do more harm than good to the brand.
If the franchisor you are evaluating strikes a good balance between creating memorable and classy advertisements and keeping the brand top-of-mind, your advertising contribution is well-spent.
- Problem: When the amount of money spent to promote the brand is greater than the amount of money spent to attract customers. This is again a matter of balancing two key aspects of marketing. Just as it is important to build a brand, it isn’t enough. You may know the Krispy Kreme name but unless marketing makes you want to pop those donuts into your mouth, the individual franchisee is getting little benefit from his marketing contribution. Thus, a balance is essential between brand building and call-to-action marketing.
If you are evaluating a franchise that seems to put all its eggs in the brand marketing basket, you can assume you will be unhappy down the road. Without a proper balance between brand building and customer attraction, you’re just getting half of the equation necessary to build your business through efficient use of your marketing contribution.
The best way to find out how a franchisor spends its mandatory marketing fund is to ask existing franchisees and then compile their opinions. If most of these franchisees are unhappy about the way their marketing contributions are spent, you can assume you will also be unhappy.
If you find that most franchisees you contact are pleased with the franchisor’s management of their marketing dollars, there’s a strong chance that this company has been able to strike the magic balance between brand building, customer attraction, production costs and distribution costs.
When you know your mandatory marketing contribution is being used to help you grow your business, it makes the mandatory part of the mandatory marketing program much easier to embrace.
