A lot of franchise opportunities include a mandatory marketing requirement of some kind. Sometimes this means mandatory contributions to a marketing fund administered by the franchisor, either of a fixed amount of money or of a percentage of the gross revenues of the business. The franchisee may have no control over how these funds are spent.
For some people who are deciding on a franchise business opportunity, seeing the mandatory marketing requirement is a reason to look elsewhere. We hear people worry about having to put money into marketing at the beginning of their business, when money might be scarce. They don’t want to be committed to a certain amount, or they want to be able to choose how to spend their marketing dollars.
Is the mandatory marketing fund requirement really a problem?
Franchisee weighs in on mandatory marketing fees
We spoke to a franchisee in a weight loss program. “We have to devote 7% of our earnings to marketing,” she said. “We can decide how to spend it, in a sense, but we have to have approval from corporate, and we know our options are limited.”
For this franchisee, spending that money usually meant paying for the TV or radio time for commercials created by the franchisor.
“Sometimes we would have liked to be able to try something else – internet marketing, for example is something we wanted to do and couldn’t. I could let it be frustrating, but in my position…I just think of it as compliance. I couldn’t afford the quality of spots they send us as an individual business, so it’s a fair trade-off.”
That advantage of pooled funds is something you might not be able to appreciate until you’ve been in business for a while.
Think of the typical independent business.
When a new business starts up without the support of a franchisor, they usually find that advertising costs more than they originally thought. The price of a professional TV spot or website is often a surprise, and the price of broadcast advertising is almost always much more than people expect. What’s more, the rule of thumb is not to expect any results at all from a marketing initiative for the first five months. You might get results, but it’s gravy if you do. Instant results are not the reality of marketing.
The small business tries to cut corners, and their results are disappointing. At this point, many small business owners decide to forgo spending money on marketing until they make a profit. Without marketing, though, it’s hard to bring in customers.
It’s a catch-22 that explains why so many businesses end up closing their doors shortly after the business opens.
Franchises start out with the advantage of ongoing marketing campaigns and an existing well-respected brand. The day a new franchise business opens their doors, there are people who recognize their products and logo. Professional ad campaigns and slick ads are often available to new franchisees immediately – not when they have thousands of extra dollars to invest.
This is unquestionably one of the big advantages of opening a franchise business.
If the franchise you’re considering requires a mandatory marketing investment, look at the quality of their marketing and its appropriateness in your market. The weight loss franchisee we spoke with appreciated the lavish, celebrity-studded ad campaigns she got with her franchise and thought of ways to connect that brand awareness advertising with calls to action for her own franchise business location.
She also appreciated, after she had been in business for a while, the requirement that she do the marketing. “I wouldn’t have done it on my own,” she admits. “I’m too cheap!” In the long run, the investment has paid off for her.
