A common feature of Franchise models offering marketing support is the “Marketing Fund”. Generally, a marketing is a compulsory fund to which all franchisees must make donations, pursuant to the terms of a franchise agreement. Mandatory centralised marketing programs can be easily seen as one of the greatest strengths of franchising. The pooling of funds from all of the franchisees can collectively achieve greater marketing power. The resulting larger fund can afford and accomplish purchasers or strategies that no single franchisee could afford for example running billboard, or radio or television advertising campaigns. Another example is the marketing fund can also be used to hire experts to produce advertising materials of far better quality than what an individual owner could create.
When does marketing go wrong?
Marketing funds have the potential to be a great source of conflict due to franchisees often feeling that the pooled money is not being spent in the way they think it should be. Our experience has shown that conflict has arisen when franchisees believe they have better spending ideas than their franchisors. In some cases, they do. Other factors include franchisees’ cash-flow, or environmental factors such as recessions when all advertising tends to be less effective than in prosperous times. So it is essential for anyone contemplating purchasing a franchise to extensively investigate and understand the company’s marketing system and marketing history to ensure they Franchisor has viable plans to utilise the marketing plan. The following are some indicators of good franchise marketing:
- Will the advertising attract your bread and butter customer?
A marketing fund must attract your core customers to a level validating the expense. If so conflicts will be kept to a minimum. When the franchisor’s marketing activity fails to attract interest and directly benefit your business, the potential for conflict exponentially rises.
- Do your franchisees have a say in how marketing should be done?
Successful franchise marketing programs typically give franchisees substantial opportunity to weigh in with their opinions. The ultimate decision-making authority is normally still reserved for the franchisor; however well-run funds get plenty of input from the people closest to the customer – the franchisees. Advanced brands include a franchisee advisory committee (elected or appointed) that meets with the company’s marketing executives regularly to provide input on future projects and campaigns.
- Are the existing Franchisee’s satisfied?
Contacting existing franchisees to evaluate their satisfaction is a prudent step to take. You will find that they will be very forthcoming on this topic since few things are closer to their hearts than marketing. Be specific and inquire about how well the marketing works or if they think they are consistently getting good value for their contributions to any required marketing fund. If your evaluation reveals a dissatisfied group of franchisees, you will be wise to assume that you will end up as dissatisfied if you become a franchisee in that system too.
- Is the marketing fund split right?
A recurring franchisee complaint is that there is too much expenditure on the wrong items, particularly internal costs/research. Marketing fund dollars tend to be used for three matters. Covering the costs of administering the marketing effort (internal expenses, agency fees, etc.), costs of producing advertising materials (print, direct mail, radio and television ads, etc.), and paying for media purchases to place these advertisements for the benefit of the contributing franchisees. The Franchisor’s ability to manage these issues is paramount. If the fund clearly needs to produce high-quality promotional materials, but if all of the money is spent on production, there won’t be any left to deliver these wonderful materials to consumers. A reasonable balance between these two needs is required. Another common conflict is over the amount spent to promote “brand-building” advertisements versus the amount spent on “customer attraction” advertisements. So again, in the absence of a pragmatic balance between competing needs failure will occur triggering conflict.
Document the Marketing Plan.
A well-thought-out and proven franchise marketing system will be carefully documented by the franchisor. A franchisor is unlikely to provide all the material prior to you executing the Franchise Agreement. You may be able to request at least the table of contents of the marketing support manuals which the franchisor normally provides to franchisees in order to understand the topics addressed and compare these to your business plan. This will give you a good idea of the scope of the strategies they address in training franchisees to market effectively. It will also demonstrate that the franchisor has perfected its systems evidenced by professional documentation and support tools.
Take your time and make sure you know whether or not you are dealing with a good marketing program. This is a critical issue as you are forfeiting revenue and control over marketing decisions by entering into a franchise agreement. Your business’ success wil depend on the success of the marketing program in driving customers to your business. The time and diligence you invest in this area can pay big dividends in the long run, and you will be happy you made the effort.