How to Tell If a Franchisor's Marketing Will Make or Break You
Learn how to invest your IRA or 401k into a franchise penalty-free. ($50k min)
Marketing can make or break you if you become a franchisee. Asking existing franchisees about their system's marketing can provide you with a clear indication of how they feel about the stewardship of their marketing dollars. This research can pay dividends in making sure the franchise you buy into has its marketing act together.
Of all the factors you’ll want to check out when evaluating a franchise opportunity, none is more important than the franchisor’s marketing. Few subjects hit closer to home with franchisees than the basic question of how well their marketing is helping them succeed in the business.
This is also a topic that can help you separate the great franchise opportunities from the marginal ones. If you ask the right questions you’ll have no problem learning exactly what the existing franchisees are thinking on this critical topic. The four best questions to ask are:
1. How does the marketing program work?
Most franchisors have a marketing program with mandatory participation, significant fees and many rules. If you begin with this kind of open-ended question, you’ll usually receive the basic details you already know from the FDD, but you're also likely to get an earful about their satisfaction with the program. Your goal is to get them talking and then listen carefully to their tone as well as the actual words they say.
Related: Sizing Up a Franchise in Six Steps
2. What do you receive for the fees you pay?
Franchise marketing programs usually have a required contribution from the franchisee that’s either a fixed amount or a percentage of the gross sales of the unit. Marketing programs can range from just phone assistance or ad slicks (preapproved ad templates on slick, camera-ready paper) to full multimedia advertising campaigns. You'll want to find out whether franchisees feel they're getting their money's worth.
3. Do you have any say in where the money is spent?
Once franchisees pay their marketing fees, the contract usually says that the franchisor has total control over how the dollars are spent. But successful marketing funds typically provide a number of formal or casual input opportunities for franchise owners. This often includes local co-op groups or national or regional franchisee advisory groups (elected or appointed) that meet with the corporate marketing staff to review ideas. Find out whether franchisees feel that their marketing program is well run and that someone will listen to them if they have input.
4. Does the marketing program do a good job driving customers into your business?
This is really the bottom line for every franchisee. You want to have a very clear idea of the answer because if you become a franchisee, you’ll be dependent on this marketing program for your success. Take some time to explore this question and you’ll learn whether to be confident or concerned. Hedging is a red flag signaling the need for extra effort to find out why your direct question isn’t getting a direct and positive answer.
For reprints and licensing questions, click here.