How can I compare franchise advertising fees?
I'm looking to compare the franchise advertising fees required by several different restaurant chains.
Join us at Entrepreneur magazine's Growth Conference, Dec. 15 in Long Beach, Calif. for a day of fresh ideas, business mentoring and networking. Register here for exclusive pricing, available only for a limited time.There are a number of good sources that publish comparative data on fees and other matters to assist you in making easy and fast comparisons of this type of data. My personal favorite is the annual Entrepreneur 500 study published each January (and also available online), which compares all major franchise companies with their direct competitors in an easy to read format.
As you compare this data, keep in mind that the raw facts don't necessarily give you the complete story. Researching a franchise opportunity needs to involve far more than comparing a single number like the advertising fee. As just one example, you might find that company A has an advertising fee of 2 percent of gross volume while company B has an advertising fee of 4 percent of gross volume. That begs the question: Which fee is better?
Before you assume the lower cost is better, you'll need to dig further and call a number of the existing franchisees. You might find that the franchisees of company A all complain that they are losing money and desperately need more customers while the franchisees of company B tell you that they are rolling in profits and couldn't be happier because they've got customers coming out of their ears. Based on that type of input, I'd suggest that the 4 percent fee certainly seems better than the 2 percent fee.
The bottom line is that you shouldn't focus exclusively on either the revenues or the costs of a franchise. Rather you should focus on the bottom line -- when you take the average revenue being produced and subtract the average costs for that franchise, what is left for you? That's the answer you'll be taking to the bank so make sure it is the right one to meet your needs.
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