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.
Related: Five Questions to Ask Franchisees Before You Become One
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.
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Comments:
Good advice! It's not just the way franchisors use your money to market...serious due diligence is necessary on virtually all new franchises that do NOT have a track record of profitability! Anyone can start a business and turn right around and start selling the dream to naive participants...and the only one making money is the franchisor whos is collecting his/her initial 65,000 and up of your retirement or savings! Be very careful! So on a cautionary note: I have been self employed for 30 years and looked into a franchise that pertained to what I had already been doing wondering if they had a better business plan, etc, etc and assumed that all franchises had eliminated the "learning curve." Because that is what actually sinks most new businesses. The "not really knowing what to expect" surprises. :-). But as always I heaviy research not only that francise but others within its field and talked to the franchisees. What I discovered was not only disconcerting, but alarming. Of 12 franchises that I called across the country, (in a kid related business,) only 1 was making any profit. And that individual was so successful that the parent company was buying her business plan to implement with their franchisees. At the time she was also relying heavily on grant money from her state...a scene that has changed dramatically in just the past two years so her business projections have in all likelihood, changed as well.No I did not touch the franchise. I did come away with a new appreciation of where I was in my own business however :-). I also know that not a single one of the "new breed" franchisors who are hyperventilating about their powerful new systems and opportunities, have a long enough track record of success for you to REALLY know if they have the staying power. And that is a serious flaw in the whole system...unless of course you opt to invest your life savings into a MacDonalds or any number of the more expensive yet time proven franchises that have endureed the test of time, the uncertainties of economies and have a virtually infallible system in place to keep their franchisees solvent. So asking whether the franchisor's marketing money is being spent successfully or not is just one in a serious of questions that anyone contemplating buying a franchise should ask. Self employment is not for the faint of heart. To make your own mistakes and discover success or failure on your own is one thing-to have bought into a dream and be left drifting by optimistic yet unproven franchisors is something else entirely. Research very carefully and remember that the one that can walk away is the one with all the power!