Where do your dollars go? One of the main reasons for investing in a franchise is the marketing support and experience that comes in the package. But who pays for the marketing and where do the funds go?
The franchisor will have tried and tested methods for delivering the messages so creating a marketing plan, selecting the appropriate distribution avenues, and producing the marketing material is an easier job for franchisees.
There are two aspects of marketing in franchise chains: firstly the promotion of the brand, which benefits franchisees network-wide; secondly there is local area marketing, or LAM, which is directly advertising the individual franchisee.
So itÕs not surprising there are two funding elements to a franchise marketing program.
1. A marketing fund
Franchisees are often required to pay into a marketing fund, which is then used to promote the brand nationally, or across elements of the network. This could be in the form of a national newspaper advert, a local radio campaign, an ad slot on tv; or it could be the production of a catalogue which is distributed to all franchisees.
If franchisees are required to contribute to a marketing fund, the Franchising Code of Conduct requires the franchisor to prepare a financial statement detailing all of the fundÕs annual receipts and expenses for the last financial year.
This statement has to be prepared and audited within four months of the end of the relevant financial year, and both the financial statement and auditorÕs report need to be given to franchisees within 30 days of being prepared.
However, if 75 percent of the contributing Australian franchisees in the network agree, the franchisor need not have the fund audited. The reasonable costs of any administration and auditing of the fund must be paid from the fund itself.
2. Local area marketing
Conversely, the franchisee is responsible for funding their own local area marketing even if they are provided with material to conduct the promotions — and for many franchisees, the initial franchise package includes a starter pack of marketing tools.
It is common for the franchisorÕs marketing department to create a series of graphics, approved text and promotional material and the franchisee then picks the appropriate communication tool for the specific promotion, whether thatÕs a flier for a letterbox drop or a local newspaper advertisement.
Promotions are not just limited to this monthÕs special offer, a bonus gift with purchase or an advert in the local paper; many franchisees choose to interact with community projects and charities in their local area, in addition to the franchisorÕs selected fundraising activity.
The best franchise networks have a website and social media as part of their marketing campaign, and the rules governing control over franchisee content will differ between the franchise systems.
Franchisor support
Regardless of the channel, digital or offline, both guidelines tend to apply to marketing projects, with franchisors at times subsidising the costs, says Paola Tanner, director of Fuse Franchise Partners.
“The channels are changing quite rapidly and some franchisors are much more creative, but the basic rules are that local is supported and facilitated by the franchisor.”
Sometimes there is a quota the franchisee can order for free, at other times LAM might be driven by incentives or possible supplier rebates. “We know for a fact a lot of franchisors also help in this area, both in the way of an incentive, matching dollars or funding part of a campaign and also some money from supplier rebates can go into an LAM fund for each store.”
Says franchisor John Newton, “At Jumping J-Jays and Stufflers we reduce the franchiseesÕ marketing fee up to 50 percent and their booking fee by 40 percent when our franchisees excel in their LAM that gives them more kids data on our database. As our franchisees meet targets of 6000 kids then 9000 kids then the final one of 11000 kids in their territory they get those massive reductions in fees.”