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Evaluating a Mandatory Marketing Program

person handing over money

A franchisor’s mandatory marketing program can offer its franchisees many benefits. However, the very nature of this type of program can cause conflict in the franchisor/franchisee relationship. The fact that the fund is mandatory, requiring franchisees to contribute either a fixed amount or a percentage of gross sales, is not usually the perceived problem. Mandatory funds are actually very common in franchising. Rather, the frequent sticking point is that the franchisee has little to no say in the way these dollars are spent.

Advantages of a Mandatory Marketing Program

Pooling funds contributed by all of its franchisees gives a franchisor more to work with. The franchisor will have more buying power to create a marketing campaign that will benefit the entire system. It can hire a top-tier public relations or advertising firm. It can purchase more expensive advertising, such as television spots, that single franchisees might be unable to afford on their own. Strategic, integrated, large-scale advertising helps build the brand, which in turn benefits individual franchisees. Without a pooled fund, each individual owner must advertise on a smaller and less-noticeable scale.

Look for Balance

Not all mandatory marketing programs are created equal. When evaluating a franchise, take a good look at the marketing program. Assess its quality and whether you’ll receive adequate bang for your buck. Knowing what to look for can help you decide whether the franchisor does a good job of allocating marketing funds.

Consider the most frequent causes of friction in the franchisor/franchisee relationship:

Problem: The cost of producing marketing materials is so great that distribution (i.e., getting the materials in front of the consumer) suffers.

What to look for: Balance between these two sides of the same coin. Great commercials aren’t effective unless they air frequently and in the right markets. Poorly designed ads that air frequently and broadly could do the brand more harm than good. Look for high-quality advertisements that are frequently and widely aired/distributed to a desirable range of potential customers.

Problem: The amount of money spent to promote the brand is greater than the amount spent to urge customers to take action.

What to look for: Again, balance between these two key aspects. Brand name familiarity isn’t enough in itself. Krispy Kreme may be a household name but unless its marketing makes you want to seek out its donuts, the individual franchisees are getting little benefit. Look for a balance between brand building and call-to-action marketing. If a franchisor puts all of its eggs in the brand marketing basket, you’re likely to be unhappy down the road.

Ask the People Who Know

The best way to assess the strength of a franchisor’s mandatory marketing fund is to ask franchisees. Consider it a red flag if the majority are unhappy about the way their marketing contributions are spent.