Franchise Marketing: A Split Decision

Imagine being a new franchisee: you just spent a big chunk of money to get your franchise set up. The people are hired and trained, the property is leased, the equipment is installed — all you need now are customers. Your franchiser puts out ads in your area, so the advertising aspect is covered, right? Well…no.

Local Business Marketing vs. The Franchise Marketing Fund

The fact is, every franchiser out there has already established a Marketing Fund — sometimes more than one. You’ll be asked to contribute an amount every month, quarter, or annum in order to pay for the advertisements you benefit from. You’ll also be able to purchase your own advertisements, typically called LBM: Local Business Marketing. Most franchisers will assume you’re going to invest in both the Marketing Funds and in LBM.

You Might Not Want to Invest in LBM…

Imagine being a new franchisee: you just put another chunk of money into your franchiser’s National Marketing Fund, and a second into their Regional Marketing Fund, and now you’re starting to worry a little, because your money is going out faster than you expected. It isn’t endless, and you have to balance your ability to draw in new customers with your ability to stay in business long enough to start turning a profit.

Sorry to make you sweat even harder, but there’s one more aspect of this process to worry about, and it has to do with the different purposes that different advertisements can have. By and large, there are three that are used by businesses:

  • Solicitation: The kind of advertising that gets people to do something — like ‘sign up for your service’ or ‘eat lunch at your place.’
  • Brand Building: The kind of advertising that cements the position of the business within the marketplace — ‘When you hear ‘Business Name,’ you know it means ‘Value’ type of stuff.
  • Promotion: The kind of advertising that alerts customers to a specific initiative being pursued by the business. This can be as traditional as “Product Name is on sale for just $5,” or it can be as unique as the epic failure of JC Penny’s No More Sales promotion.

…But You Really Should!

Now, imagine being a new franchisee and needing customers now to get off the ground. Are you going to be happy when the franchiser takes your money and puts it into a brand-building or promotional campaign? That doesn’t do anything for you directly; it just means people around you are going to be aware of your company’s name. It does nothing to get people in your door. And the majority of Marketing Fund-type advertisements are going to fall into one of those two categories.

If you want to grow your way into success, then, you’re going to have to spend a bit more of your money on LBM — on soliciting your local customers to come in and give you more money. Imagine being a new franchisee…now imagine the kind of cash flow balancing act you need to get to the break-even point not on what you started with, but on what you can make while you’re moving forward — that is why it is usually a good idea to split your marketing dollars between corporate and local advertising campaigns.

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