How To Evaluate a Franchisor's Marketing Program

April showers may bring May flowers but April is equally well known as tax season. And, if you’re thinking about taxes, you’re sure to be reminded that accounting for every business expense as a franchisee will improve your bottom line. That brings us to the area of Franchising that may be the most contentious – the franchisor’s mandatory marketing program.

A franchisor’s system-wide marketing program can be a great benefit to a franchisee but is 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 the money is spent.

So just how do you, as a potential franchisee, evaluate whether the marketing program provided by the franchisor you are thinking of joining will give you a fair value for your money?

First let’s take a look at why such a fund can be an advantage. When a franchisor pools funds from all of 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.

If you doubt that being part of a known and national brand has value, name the first coffee shop, pizza delivery and lawn service businesses that come to mind. Chances are each of the businesses you just thought of is a well-known, national Franchise company.

Businesses without mandatory marketing funds require the individual owners to do their own advertising. As an extreme example, compare the number of people who viewed the Taco Bell commercial during the January 2007 Super Bowl to the number of people reached by a single owner’s solo advertising campaign. USA Today reported that advertisers paid up to $2.6 million for a 30-second ad in Super Bowl XLI, which had an estimated 93.2 million viewers.

A second advantage to a managed marketing program is that each unit will be focused on achieving the same results. If your Franchise Company is doing a national “Spring Break” radio promotion and your store is sending out to your customer base a corporate-provided direct mail piece on the “Spring Break” theme, your results will be magnified because each element will reinforce the message of the other. In addition, your franchise store will be seen in a more positive light if your marketing is done by experienced professionals and does not consist of hand-drawn flyers you posted on telephone poles.

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. Now most of us, experienced shoppers and consumers that we are, believe that we are marketing geniuses because we certainly know what makes us buy a product. But allow me to make a few suggestions on what to look for when deciding if a particular franchisor is doing a good job with their allocation of marketing funds.

First, look at how the franchisor spends the marketing fund money. There should be a reasonable balance between money spent to produce the advertisements and the money spent to place these ads. 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.

There should also be a reasonable balance between money spent to promote the brand and 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. People may know the a bagel or sandwich franchise very well because of national brand advertising. However, unless the advertisements also convince people to buy a dozen bagels on their way to work, or entice people to come in for a sandwich several times a week, the individual franchisee will get little benefit from her 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 may 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 as part of your due diligence 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.

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.

Kim Ellis is president of Bison Advertising, Inc., a leading online resource for Franchises and business opportunities.  Drawing from a diverse background in franchising, marketing and operations, Kim specializes in Internet marketing, lead generation and branding.

Prior to Bison, Kim served as vice president of FranChoice, where she helped establish one of the industry’s most successful franchise referral networks. Her responsibilities included franchisor relations, brand management and lead generation. Prior to FranChoice, she served in executive positions for Regis Hair Salons, Premier Hair Salons International, and for a business-to-business marketing agency in Minneapolis. Her franchise experience started with a family-owned Schwinn Bike franchise and extended to her first position after college with Great Clips for hair.  Currently, Kim serves as chairperson for the International Franchise Association (IFA) Women’s Franchise Committee and as a member of the IFA Supplier Forum.