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Buy a franchise means buying an end-to-end process: the mechanism by which the business defines its strategy and then executes it through a combination of the business team and the franchisees. You also buy any franchisee feedback loop that exists or does not exist to influence decisions. The commercialization process is particularly critical.
Note that the corporate team may change at any time. That brilliant, proven marketing leader you met on Discovery Day who influenced your decision to move forward might leave. If you’re lucky, they’ll make a good replacement hire. If you’re unlucky, an underqualified junior staff member gets promoted on the battlefield. Don’t make your decision solely on the team. Like everything else in franchising, it’s about having and following a great system.
Related: The 4 Marketing Actions Every Franchise Should Do
1. How is the franchise marketing strategy created?
Why Some Franchise Brands Design Badly marketing strategies? First, many concepts are created by founders who invent a grand operating model that later becomes a franchise. But they may not have good skills or good instincts in the science and art of marketing. They just don’t know what they don’t know and haven’t yet hired a strong marketing leader to help them. Second, concepts may not perform enough data analysis or keep up with the times. Established brands in particular can fall into this trap and become very stale. Third, many concepts rely too heavily on franchisees to create customer demand, regardless of how much money franchisees put into the national brand fund. It’s really a strategy to transfer the marketing responsibility to the 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 are buying into when evaluating franchise opportunities. Most brand funds charge between 1% and 6% of gross sales. That’s a lot of money. How and where do they spend this money? Is it effective? How do they know?
Take a look at current campaigns and customer messages. Why were these specific messages and campaigns created? For example, if an education brand is heavily marketing its proprietary curriculum, but instead consumer data shows that parents are actually more concerned about safety, they may be spending money pushing the wrong theme. The brand can tout convenience or price or unique experiences when customers really value something else. What data drives decisions? Some brands are brilliant at marketing and are heavily data-driven. But many are not.
Related: The 4 Essentials of a Franchise Marketing Plan
2. How does franchisee feedback influence marketing strategy and budget allocation?
The franchise needs to track leads, how and why they convert to customers, and what generates higher tickets, frequency, referrals, and repeat business. But often there is one data point missing in the marketing feedback loop: the franchisee’s contribution.
In a strong franchise system, there is a well-functioning mechanism for collecting, processing and reporting feedback from franchisees. The brand fund should be a separate fund and should include a board of directors made up of elected representatives of the franchisees. Ask for examples of marketing course corrections based on feedback from franchisees. Some of the best ideas come from the field, but only in systems that respect, aggressively collect – and do something with – that valuable feedback.
More franchise agreements giving the franchisor the final say on how brand funds are spent. Most agreements also stipulate that the franchisor is not obligated to spend a penny of your monthly brand equity contribution within your market. In some brands, smaller markets inject money into the brand fund, but the money is actually spent in larger metropolitan areas with a greater density of operators which generate higher royalties for the franchisor . Small markets can end up subsidizing 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: Clever Marketing Strategies That Attract Franchisees
3. What is the division of labor between the franchisor and the franchisees?
When it comes to tactical marketing execution, who is responsible for what? What does the franchisor do to generate demand? What should franchisees do for themselves?
For example, many home service brands make heavy use of door-to-door campaigns, signage, and direct mail during their big seasonal outreach campaign. If you’re in this business, you must be prepared to do whatever it takes to get you and your team out into your community during these times because your business depends on it. You are responsible for this work and these expenses, not the franchisor.
It’s also possible that the minimums required for local marketing are actually too low. If your budget is based on the minimums or the lower end of the range shown in the Franchise Information Document, you may be grossly underestimating a realistic expenditure-demand equation. Talk to franchisees about customer demand, revenue and growth. What demand is needed to break even? What is the demand needed to be profitable? What expenditures are needed to stimulate this demand?
Watch out for hidden marketing fees. For example, in retail concepts, the franchisor may require Class A (high-end) locations with high rent to match. This may be quite appropriate for some concepts. For example, many quick-service restaurant brands need to be in specific high-traffic locations. Day spas with high-end brand images benefit from being located in high-end shopping locations. But unfortunately, some retail brands require Class A sites because their marketing is actually weak. They hope (but can’t prove) that Class A sites will make them more visible. It’s actually an additional tax on franchisees to make up for marketing shortcomings. Ask the franchisees, would they rent this location again? This size and configuration? Higher rent should only be paid if it’s core branding, where your customers want to buy, and backed by a profitable business model.
Remember: When you buy a franchise, you also buy their marketing process. So make sure the franchise you buy, and their marketing system, are worth your time and investment.
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