How Much Should I Invest in Franchise Marketing?

Many franchisors require recurring marketing fees, commonly ranging from two to five percent of a franchisee’s revenue. One of the beauties of franchising is that owners are able to buy into an established brand. There is a level of recognition that is almost guaranteed, and it was only established because of the work of the franchisor. So, this recurring marketing fee typically covers the cost of marketing efforts led by franchisors which, in helping the brand as a whole, are inherently helpful to the franchisee.

While the two to five percent range is fairly common, it is not necessarily fair to assume that a two percent pay-in to the franchisor, for example, will secure any and all necessary marketing to guarantee success. In addition to mandated costs, franchisees should use their knowledge of the market they are pursuing and adjust accordingly. 

“A lot of these franchises are in saturated industries,” Corey Elias, franchise broker and founder of Franchise Captain, explained. “That’s fine, but you need to pick up your market share.”

For many franchisees, this looks like a large initial marketing investment. Elias said, “I always tell my franchisees that, in year one, they're going to spend more on marketing than ever. You're starting to get that snowball rolling down the hill, so you're going to spend more on traditional marketing and give away more free products and services than you ever will.” 

For franchisees who are first getting established in an area, these efforts are what will create raving fans who want to talk about your product, recommend your service to friends and family, and really get your name out in the area. “You're going to want to make a stronger investment starting out to build your brand and your reputation in your community,” explained Angela Paules, Buzz Franchise Brands CMO. 

A similar idea is true for new franchisors. Though they bring in revenue through franchise fees, they ultimately need each unit to succeed for the brand to live on. So, in a franchise’s early years, the franchisor will likely put additional resources behind marketing to ensure the brand becomes well known.

Elias also pointed out that the idea of marketing reaches far beyond paper advertisements or billboards. “When a lot of people think about marketing their minds immediately go to bringing in new clients,” he said. “But sales and customer service are neck in neck in terms of importance. You can be closing all the deals you want, but if you’re not following through like you said, a one star review can crush your business.”

In this sense, a marketing budget must consider costs outside of a franchise market fee and independent advertising costs. Outbrain says that “Marketing is the ongoing process of making sure your product or service is compelling to your potential market and buyers.” While this, at times, looks like brand awareness, it can also come in the form of nurturing the working relationship with clients, customers and employees.

Addressing this aspect of a marketing plan should involve consideration of finances — employee compensation, renovations or upgrades to streamline client experience, etc. — as well as other forms of cost. There may be an emotional labor or time requirement that does not fit into a traditional marketing budget. However, committing the time or mental energy can have outstanding impacts on client satisfaction, workplace morale and overall successful operation of a business. “The important thing to remember is that putting a face to your business is really effective,” Paules said. “People want to do business with people, not just with a brand name or a company name. They want a personal experience, so the more that you can get out there and meet potential customers or have your staff meeting potential customers, the better.”

Ultimately, though there is no silver bullet to franchise marketing, franchisees must remember that some things are non-negotiable — franchisor-related fees — and the rest is in their hands. Yes, many entrepreneurs take the franchising route because of the proven model provided, but owning a franchise does not strip the franchisee of all entrepreneurial responsibilities and freedoms. When developing a plan to supplement franchise-wide marketing standards, the entrepreneurial spirit and passion for one’s business is what should guide the franchisee in establishing a plan best fit for their market, community and team.