The ready-made franchise marketing developed by the franchisor has a great benefit to franchisees. These effective marketing tactics and strategies are used to attract customers or clients to bring high returns to the franchise company. On the other hand, if it is not successful, the franchise business will most likely fail.
Typically, the mandatory marketing fee is included in the fees collected by the franchisor on a bi-monthly or monthly basis. So, how do you evaluate whether the provided marketing program will give you a fair value for your money?
Let’s consider these ways to help you evaluate if the franchise marketing a franchise performed is worthy of your investment.
1. Know the difference between a franchise company with pooled funds and without funds
Understanding the benefits of pooling funds from all franchisees within the system to market the brand is a significant part of your evaluation. You will know where your money goes.
Advantages of Having a Franchise Marketing Fund
When a franchisor pools funds from all 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.
A Franchise Without a Marketing Fund
Without a marketing fund…
- Each individual owner would be on his own, doing advertising on a much smaller and less-noticeable scale.
- The franchise business will not be seen in a more positive light if it is done by someone inexperienced in the integrated brand efforts.
A franchisee contributes to the mandatory marketing fund usually in one or 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.
2. Know if the Franchise Marketing Fund is Properly Allocated
During your evaluation process, knowing what to look for can help you decide if this franchisor is doing a good job with its allocation of marketing funds.
Consider the most frequent causes of 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 actually 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 of 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.
3. Talk to the Existing Franchisees in the System
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 a majority 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.
And when you know that the mandatory contribution for franchise marketing is being used to help you grow your business, it makes the program much easier to embrace.