Building a FranDev Marketing Budget

Not all franchise marketing budgets are created equally. When establishing a franchise development budget, there are a few things to consider, including starting with a blind budget, looking at the deal holistically and thinking about how much you’re willing to spend to get the right franchisee candidate in place.

Budget $25K Per Unit: Here’s Why.

In the 2021-2022 time frame, a typical sales budget is $25,000 per unit. So if you want 10 deals in the next year, you would set up your budget by multiplying 10 x $25,000, which is $250,000. Some may look at that number and wince. First, that’s not going to apply to every sale or every franchise unit. Second,  here are two compelling reasons why it’s a reasonable figure. 

1. If you use a franchise broker network, that’s what you’ll pay.
   Currently, the typical cost of using a broker is in the neighborhood of $25,000. The benefit of paying a broker is that you’re working a deal that’s come to you. You’re not spending money and time chasing leads that may or may not pan out, but it is still money from your budget. 
    
2. You need to think long-term: Determine the deal value. 
   So is that $25K a good allocation of resources or not? Here’s one way to find out: You can calculate the amount of revenue you’ll get from royalties in the first year and beyond. Subtract the initial $25,000 budget from the deal value, and you’ll have your answer as to whether it was money well spent. In other words, don’t think about the immediate expense — think about the long-term revenue. Also, if you’re prospecting the right way, you’ll be able to work with those interested in multi-unit ownership, which gives you a bigger bang for that initial $25K.  

Study Last Year’s Budget

While that $25,000 is a generic, rule-of-thumb budget, another way you can determine your specific marketing budget needs is by simply looking at what you spent last year divided by how many deals came. That gives you a number to start with. The goal, however, should be to improve on that number and shave expenses by utilizing the leads and data you developed last year. 

Good News: You Don’t Need All the Marketing Cash at Once

One way to budget for franchise development is to create a rolling budget. That means every time you sell a franchise, you put a portion back into the development budgets, allowing you to build on that sale’s momentum. It’s also possible to extend the timeline of your budgeting by planning 18 months out, rather than a single year. Doing so provides a bit more wiggle room for your budget because the marketing you do today may not pay off for another three, six or even nine months.

Look at Target Markets & Data

It’s important to examine your target markets very carefully to see where you need a lift. You may have to shift how you deploy those dollars. Also, study the traffic to your franchise development website. Where is the interest coming from? Where are the actual applications coming from? You can track those data points to understand where and how to deploy your budget.

Checklist:

• Create a blind budget as a starting place.
• Consider the long-term deal value and how much you’re willing to spend for the right candidate.
• Create a rolling budget so every time you sell a franchise, you put some of the funds back into your development budget.
• Leverage your past data to get to a new budget.
• Look at your target markets carefully. 

Discover more about how to win at franchise development marketing by downloading our free white paper here.