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Buying a Franchise means buying an end-to-end process: the mechanism for how companies define and then execute the strategy through a combination of the corporate team and franchisees. You are also buying the franchisee feedback loop that may or may not exist to influence decisions. The marketing process is especially crucial.
Please note that the corporate team may change at any time. That brilliant and proven marketing leader you met on Discovery Day who influenced your decision to move forward could be leaving. If you are lucky they will make for a good replacement. If you’re unlucky, an underqualified junior staffer will get a battlefield promotion. Don’t make your decision about the team alone. Like everything else with franchising, it’s about having and following a great system.
Related: The 4 Marketing Moves Every Franchisee Should Make
1. How does the franchise marketing strategy come about?
Why have some franchise brands come up with bad ideas? marketing strategies† First, many concepts are created by founders who come up with a great business model that later becomes a franchise. But they may not have good skills or instincts in the science and art of marketing. They just don’t know what they don’t know and haven’t hired a strong marketing leader to help them yet. Second, concepts can’t do enough data analysis or keep up with the times. Established brands in particular can fall into this trap and become very old. Third, many concepts rely too heavily on franchisees to create customer demand, no matter how much money franchisees pump into the national brand fund. That’s really a strategy for shifting marketing responsibility to franchisees.
To create the right marketing strategy, start with three basic questions: Who are our best customers? Why do these customers buy our product or service? How do we know? Understand the level of sophistication and data-driven decision-making you choose when evaluating franchise opportunities. Most branded funds charge between 1% – 6% of gross sales. That is a lot of money. How and where do they spend that money? Is it effective? How do they know?
View current campaigns and customer messages. Why were those specific messages and campaigns created? For example, if an education brand is heavily marketing their own curriculum, but consumer data shows that parents are actually more concerned about safety, they may be spending money on the wrong theme. The brand can tout convenience or price or unique experiences if customers really value something else. What data drives decisions? Some brands are brilliant at marketing and are highly data-driven. But many are not.
Related: The 4 Essential Elements of a Franchise Marketing Plan
2. How does franchisee feedback affect marketing strategy and budget allocation?
The franchise needs to track leads, how and why they convert into customers, and what leads to higher tickets, frequency, referrals and repeat purchases. But often there is one data point missing from the marketing feedback loop: input from franchisees.
In a strong franchise system, there is a well-functioning mechanism to collect, process and report feedback from franchisees. The brand fund must be a separate fund and include a board of directors with elected representatives of franchisees. Ask for examples of marketing course corrections based on franchisee feedback. Some of the best ideas come from the field, but only in systems that respect, aggressively collect, and act on that valuable feedback.
Most franchise agreements give the franchisor the last word on how the brand fund is spent. Most agreements also state that the franchisor is not obligated to spend one cent of your monthly brand fund contribution within your market. With some brands, small markets pump money into the brand fund, but the money is actually spent in larger metropolitan areas with a higher density of operators that generate higher royalties for the franchisor. Small markets can ultimately subsidize large markets. Talk to franchisees. Ask to see the budget allocation. Understand what the brand fund is being spent on and your ability to influence that spending.
Related: Smart Marketing Strategies That Attract Franchisees
3. What is the division of labor between franchisor and franchisees?
When it comes to implementing tactical marketing, who is responsible for what? What does the franchisor do to generate demand? What should franchisees do themselves?
For example, many home service brands make heavy use of door knocker campaigns, yard signs and direct mail during their major seasonal campaign. If you’re in that business, you must be willing to do whatever it takes to get you and your team into your community during that time, because your business depends on it. You are responsible for that work and expenses, not the franchisor.
It is also possible that any required local marketing minimums are set too low. If your budget is based on the minimums or the lower end of the range described in the Franchise Disclosure Document, you may be underestimating a realistic comparison between expenditure and demand. Talk to franchisees about customer demand, revenue and growth. What question is needed to break even? What demand is needed to be profitable? What expenditures are needed to stimulate that demand?
Watch out for hidden marketing costs. For example, in retail concepts, the franchisor may require Class A (high-end) locations with high rents to match. This can be very appropriate for some concepts. For example, many brands of fast restaurants must be located in specific high-traffic locations. Day spas with premium branded graphics take advantage of being located in high-end retail locations. But unfortunately some retail brands need Class A sites as their marketing is actually weak. They hope (but can’t prove) that Class A sites will make them more visible. That is, in effect, an additional burden on franchisees to make up for marketing shortcomings. Ask franchisees, would they rent this location again? This size and configuration? A higher rent should only be paid if it is the core of the brand image, where your customers want to buy and if this is supported by a profitable economic model.
Remember: when you buy a franchise, you also buy their marketing process. So make sure that the franchise you buy and their marketing system, are worth your time and investment.
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