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Understanding how marketing funds work across pre-opening, local and systemwide efforts is critical. KidStrong VP of Marketing Courtney Moscovic shares what drives sustainable franchise growth.
How do I structure marketing funds? For franchisors and franchisees alike, it’s a deceptively simple question. But it’s also one that can carry legitimate financial consequences. Marketing is one of the largest recurring investments in franchising. And it starts early. When it’s not properly structured, it can fail to generate consistent leads. But, when it’s structured correctly, it can become a growth engine capable of supporting local performance alongside long-term brand value.
In franchising, marketing funds aren’t just about spending money. They’re about how that money is allocated, when it’s deployed and who controls it.
So how do successful franchise systems structure marketing funds?
Most franchise systems do not rely on a single marketing budget. Instead, they structure marketing funds in layers, with each layer serving a different purpose within the system.
The most common structure includes three core components: pre-opening marketing, ongoing local marketing and systemwide brand marketing.
Each layer plays a distinct role. Understanding how they work together can help franchise owners at the local level better evaluate marketing requirements disclosed in the Franchise Disclosure Document.
The first layer of marketing spend typically happens before a location ever opens. This is often where franchisees feel the most pressure (because that investment is made before revenue has even begun).
Pre-sale marketing is designed to build awareness early, generate leads and establish a customer base before doors open. The goal is to create buzz. Digital advertising, social media, community outreach and live events are common ways of going about that.
“All throughout pre-sale, we do digital marketing as well as on-the-ground events,” said Courtney Moscovic, vice president of marketing for KidStrong. “Digital will get the majority of your leads, especially social media like Instagram. But we very aggressively spend on marketing in pre-sale because the better you do there, the better things will be.”
Because pre-opening marketing directly impacts opening performance, many franchisors require higher spend during this early stage of the franchised business. Structurally, that means franchisees should plan for marketing as a line item that is separate from ongoing monthly expenses (rather than assuming it will just taper naturally).
Once a franchise is open, marketing funds tend to shift into a more predictable rhythm. This is where many franchisees misunderstand how marketing funds should be structured.
Rather than viewing marketing as a discretionary expense, many franchise systems actually require local franchise owners to maintain a minimum level of ongoing local spend. This helps ensure consistent lead flow while offsetting natural customer turnover. It also helps protect unit performance over time.
“Marketing is not your first stop every day – but at least your second,” Moscovic said. “You will always be churning through members, which means you will always need new members. That means more leads. And that means marketing.”
Structurally, ongoing local marketing is often handled one of two ways:
Within those requirements, franchisors may provide a playbook of proven tactics while allowing for local flexibility.
“We have a playbook for what we have seen success with,” Moscovic said. “But with grassroots marketing we let the area directors choose their own adventure with how big they want to go.”
That balance allows franchisees to tailor campaigns to their local communities while still operating within a consistent, structured, nationally-branded system.
The third layer is the systemwide fund. This national marketing fund is typically funded through a required contribution and is often expressed as a percentage of gross sales.
These funds are generally controlled by the franchisor and are used for initiatives that benefit everyone, including:
From a structural standpoint, system marketing funds allow the franchisor to invest in initiatives that individual franchisees could not properly execute on their own.
So, the key for franchise owners is transparency. Understanding how system funds are used, and how those efforts support local performance, is critical during the franchise due diligence process.
While marketing fund structures are defined contractually, the most effective systems treat them as living frameworks rather than rigid rules.
“The biggest thing that leads to the biggest success in franchise marketing is collaboration,” Moscovic said. “A good idea can come from anywhere.” Structurally, that collaboration often manifests itself through pilot programs, testing budgets or franchisee ideas that can be scaled systemwide if successful.
For franchise owners at the local level, this means marketing funds are not just an obligation. And they should be treated as an opportunity to contribute mutually beneficial ideas.
How do I structure marketing funds? Five things to consider:
So, how do I structure marketing funds? In the franchising world, that answer lies in layered planning. Effective systems separate pre-opening investment from ongoing spend, balance centralized brand initiatives with local execution and treat marketing as a continuous operational function as opposed to a temporary cost.
For franchise owners at the local level, understanding this structure upfront can help set realistic expectations early. For franchisors, clear structure and collaboration turns marketing funds into a shared growth strategy. And one that supports individual units while strengthening the brand as a whole.
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