From the January 2011 issue of Entrepreneur

Whoever said there's no such thing as a free lunch obviously never visited the Facebook page of Einstein Bros. Bagels. Last year, Einstein Bros. launched its Bagel Bonanza promotion, giving away a bagel and cream cheese to anyone willing to sign up as the franchise's fan on Facebook. At the time, Einstein Bros. had only 4,700 fans across the social network, but when the digital coupon campaign wrapped up a week later, that number had skyrocketed to more than 300,000.

Einstein Bros. revived Bagel Bonanza during the spring, and it continues rewarding its online followers with discounts, menu previews and nutritional information. By the end of October, it had more than 600,000 Facebook fans.

"Social media is a place where consumers want to be," says James O'Reilly, chief concept officer for Einstein Noah Restaurant Group, the Lakewood, Colo.-based parent company and franchisor. "We're not a national advertiser, so we decided to make social media a pillar of our marketing efforts. It's a whole new channel for businesses to engage their customers in a two-way dialogue."

Einstein Bros. is far from the only company embracing social networking as a marketing platform: Nearly 75 percent of franchise businesses are now leveraging social media, according to a 2010 survey published by market research firm Franchise Business Review. And consumers are responding--69 percent say they're more likely to patronize a local business if it offers information on a social networking site, per a recent comScore research study.

"We've never been a big mass-media advertiser, and we've never been able to compete on a level with the larger casual dining restaurants that own the airwaves. We can't out-shout them with our marketing budget," says Jen Gulvik, vice president of marketing and creative director for Houlihan's Restaurants in Leawood, Kansas. "But it's still essentially free to play in social media. We can be in this space and do as well, if not better, than our larger competitors. It levels the playing field."

Houlihan's has been aggressive and creative in building out its social media footprint. In early 2008, the company introduced HQ, an invitation-only online community of more than 10,000 regular customers (or "HouliFans") across the United States. The HQ site is a direct channel for Houlihan's to solicit patron feedback on ideas and product plans, encourage word-of-mouth viral campaigns and invite insiders to members-only tastings and events. In addition, Houlihan's boasts a Facebook page and a separate page spotlighting Coaster McGee, its sassy in-store mascot. In September, Houlihan's began giving away orders of french fries to diners who check in at participating locations via mobile social network Foursquare.

Houlihan's also encourages its 94 U.S. franchise locations to nurture their own social media presence, and Gulvik says, 19 franchisees now maintain their own Facebook pages.

"We're not a traditional, conventional company. We're very cognizant of not acting chain-like," she says. "We know that consumers automatically give you a lower mark if you're a chain. There's a perception that chains equal ‘bad' and ‘cutting corners.' We want to communicate the flavor and personality of each restaurant and the community it serves."

That doesn't mean every franchisee--or every franchise, for that matter--is a good fit with social networking. Social media efforts demand the same care and attention as any other segment of your business.

"Unlike TV and radio, social media is a two-way medium, and it needs to be treated that way," O'Reilly says. "You have to have your Facebook page staffed with full-time people to help answer questions or handle issues in real time."

Gulvik agrees. "It's inexpensive to play in these channels, but it's time-intensive. You've got to make sure you have people dedicated to it," she says. "We tell our franchisees you can't just put up a Facebook page and ignore it. Putting up content is the easy part--engaging with the guests is another thing. You've got to be in there every day."

Among franchises active in social media, 45 percent tell Franchise Business Review they've leveraged tools like Facebook, Foursquare and Twitter to boost brand awareness, and 24 percent are pursuing new customers. But 11 percent are looking at social networking as a way to recruit franchisees.

"Social media is a part of every marketing campaign we have. We have a presence on various social networking sites, and many franchisees have their own sites as well," says Christie Wells, customer experience and communications manager for Häagen-Dazs Shoppe Co., a gourmet ice cream business in Minneapolis. "These are awareness opportunities for us, and we're using them to get the word out there that we're looking for franchisees."

In mid-October, Häagen-Dazs launched Ice Cream Boss, an interactive Facebook game designed to offer potential investors the scoop on owning and operating a store. Each week, Ice Cream Boss features a new story or situation unfolding in the virtual Häagen-Dazs Shop, challenging Facebook fans to offer suggestions and feedback on how best to resolve the issue.

"Our goal is to encourage people who are interested in Häagen-Dazs to play the game, then move into the franchise world," Wells says. At press time, Ice Cream Boss had only been online about a week, and Häagen-Dazs had yet to bring aboard any new franchisees as a result of it. "But we already have people playing the game and actively learning about the brand," she says. "That's great from a lead generation and contact standpoint."

"Social media is here to stay," Wells says. "The different sites and formats may change, but we're definitely keeping our focus on the medium. We want to make it a major part of our plans for expansion and shop marketing."

O'Reilly of Einstein Bros. shares Wells' enthusiasm for the platform. "The heart of the social media opportunity is that we're continuing to get better at building a dialogue with our fans. We can understand what they want and what they don't want, and respond in ways consistent with our brand equity," he says. "Consumers are smart and they're savvy, with opinions that need to be respected. Social media is the best way to keep them engaged."

The New Social Etiquette

How to stand out--and what to watch out for--when using social media to promote your franchise

Few companies have embraced Twitter as avidly as Denny's. The always-open casual dining franchise based in Spartanburg, S.C., maintains two Twitter accounts: DennysGrandSlam caters to early-bird, breakfast-time diners, and DennysAllnightr targets the after-hours demographic. Both spotlight new dishes, promotional discounts and giveaways. In the fall of 2009, Denny's started touting its Twitter efforts on its restaurant menus, encouraging patrons to "Join the conversation!" at twitter.com/dennys. One problem: That account actually belongs to one Dennys Hsieh, a Taiwanese citizen with no affiliation to the Denny's organization. Talk about egg on your face.

Not all the companies populating Entrepreneur's annual Top 10 Franchise countdown have suffered such embarrassing social media gaffes. McDonald's, based in Oak Brook, Ill., recently became the first company to integrate a branded farm into the social game FarmVille, rewarding players with virtual goods. The website of McLean, Va.-based Hampton Hotels encourages hotel guests to "stay in touch between stays" via Facebook, Twitter and YouTube. And Subway of Milford, Conn., offers High School Heroes, a social competition that recognizes inspirational students and teachers via Facebook.

Here are some other examples of social media success strategies:

Give customers a voice. Casual dining franchise Houlihan's offers HQ, an invitation-only online network for "brand fanatics." "We ask them to do word-of-mouth campaigns: ‘In exchange for coming in and trying new menu items, will you write a positive review on Yelp?,'" says Jen Gulvik, vice president of marketing and creative director. "Make people insiders and they'll market on your behalf."

Listen. "Sometimes a consumer will walk into one of our restaurants, and the experience is not so great," says Einstein Noah Restaurant Group chief concept officer James O'Reilly. "Our fans jump onto Facebook and tell us when that happens. We follow up with that location, react quickly and make it right."

Stay ahead of the curve. Franchises like Houlihan's are testing the waters on location-based mobile social networking upstarts such as Foursquare, Gowalla and Loopt. "When people are already checking in at our restaurants [via Foursquare], then we need to be on there," Gulvik says. "It might be a way to get new guests into the restaurant."

Get creative. "Social media will be whatever you want it to be as a business owner--you just have to understand it," says Eric Casaburi, founder and CEO of fitness franchise RetroFitness. "It's a medium for communication and it's a medium for advertising. It's like a Swiss army knife that does a whole lot of things." --J.A.