Franchisees are required to contribute to marketing funds for national and regional advertising run by the franchisor, but this type of advertising often focuses on brand building and promotions rather than direct customer solicitation. As a new franchisee needs to quickly attract local customers, investing in their own local business marketing is also important to supplement the broader campaigns and directly bring people through the door. Balancing contributions to required marketing funds with discretionary local advertising requires cash flow management to cover costs and reach profitability.

1. Franchise Marketing: A Split
Decision

2. Imagine being a new franchisee!
You just spent a big chunk of money to get your
franchise set up...

3. ● The people are hired and trained;
● The property is leased;
● The equipment is installed.
All you need now are customers...

4. Your franchiser puts out ads in your area, so the
advertising aspect is covered, right?
Well… No.

5. Local Business Marketing
vs.
The Franchise Marketing Fund

6. 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.

7. 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.

8. You Might Not Want to Invest in LBM…

9. Imagine being a new franchisee:
You’ve just put another chunk of money into your
franchisor'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.

10. 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.

11. 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.

12. 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.’

13. ● 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.

14. ● 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.

15. …But You Really Should!

16. Now, imagine being a new franchisee
and needing customers now to get off
the ground...

17. Are you going to be happy when the
franchisor takes your money and puts it
into a brand-building or promotional
campaign?

18. 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.

19. 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.

20. 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 —

21. That is why it is usually a good idea to split
your marketing dollars between corporate
and local advertising campaigns.

22. For further info, check out:
http://franchisecity.net