Overall, these marketing programs are of immense value to franchisees because together they are able buy more sophisticated advertising which will reach a greater number of customers. They will also have a 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.
On the downside, a franchisee generally has no input in how their advertising money is spent which can cause some dissension in the ranks.
If you are ready to join a franchise system, you will want to be sure any mandatory fees you pay will be to your benefit. Therefore, as part of your discussion with the franchisor and your due diligence calls with current franchisees, you'll want answers to the following questions:
- How is the marketing fund calculated? Generally you will find it is either a fixed amount or a percentage of the gross sales of the unit. Ask the franchisor why they use the method they do and ask the franchisees whether they feel the amount they pay is fair.
- Are the marketing materials professional? These days, because we are surrounded by advertisements nearly every minute of our lives, we all consider ourselves marketing experts. In reality, very few of us understand all the nuances of marketing. However, you should be able to determine if the materials look professional and are directed at the appropriate audience.
- Is the marketing budget balanced? There are two major expenses in marketing. The first is the creative input -- creating the materials (such as direct mail campaigns and TV ads). The second expense is getting the materials to the audience. You don't want cheaply-made materials sent to many customers because poorly designed advertisements can do the brand more harm than good. Similarly, a brilliant TV ad is not a good value if you can only afford to air a few times a month.
What you want to see is that the franchisor strikes a good balance between creating memorable and classy advertisements and keeping the brand top-of-mind.
- Will your marketing dollars be spent to attract customers as well as to promote the brand? 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 want customers to be familiar with the franchisor's brand but also to have a reason to buy your product or use your services.
If you are evaluating a franchise that seems to focus only on the brand marketing piece, you will probably encounter many unhappy franchisees. 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. If a number of franchisees are unhappy with the marketing, chances are you will be, too.
You should be able to learn much about the franchisor's mandatory marketing program from the franchisor's development team. However the best way to find out how a franchisor spends its mandatory marketing fund is to ask existing franchisees. There is one caveat: it's unlikely that all the franchisees will be happy with the marketing. It is common to find some franchisees that feel they could do a better job spending the money. What you want to see is a majority of franchisees that are pleased with the management of the marketing dollars.
If the franchisor can strike that magic balance between brand building, customer attraction, production costs and distribution costs, they are doing a marvelous job and deserve your further consideration.
A FranChoice consultant can help you explore a number of franchise opportunities. You are invited to sign up for our free service HERE.
About FranChoice:
FranChoice is the leading network of franchise referral consultants in the United States. Since 2000, FranChoice has been providing a free service to those interested in franchise ownership. Our consultants guide prospective franchisees through all stages of the business ownership process, from franchise investigation to the final sale, matching each individual's interests, talents and investment level with a strong franchise business.
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