Continuing with our series of franchising terms and definitions, today we’re talking about the Advertising Fund.
The advertising fund is typically established to pay for the creation and placement of advertising, and is used to offset the franchisor’s administrative costs relating to “retail/brand” advertising. Payments are typically calculated as a percentage of gross sales.
Franchisees pay the franchise an ongoing payment that goes into a collective advertising fund, which is usually paid on a monthly basis. However, franchises can dictate their terms as they see fit. Some have a weekly payment option, and others have quarterly or annual payment options.
The franchisor pools all of the advertising funds together in order to create a national advertising campaign, as well as local campaigns, to drive new customers to the franchisees.
By combining their funds together, franchisors can typically negotiate better rates than the franchisee would be able to on their own. Moreover, franchisors often have access to franchising programs that franchisees would not on their own.
The franchisor also has already established which advertising programs work best. They have found proven methods that get results, which is an advantage to the franchisee. Most small business owners have to go through a large learning curve to find what works and what doesn’t.
While some franchises have a national advertising budget that each franchisee pays into, some franchises do not, and the franchisees make their own marketing purchases. In addition, some franchisors have a hybrid model, where franchisees pay into a national advertising fund, but are also able to purchase additional advertising on their own.
We specialize in helping franchisors grow to the next level. One area we specialize in is advertising, marketing and lead generation. If you have any questions about how we might be able to help your franchise better spend your advertising dollars, give us a call. We offer a free initial consultation.
