This is a companion piece to Three Legal Tips to Consider Before Franchising Your Business and Three Financial Considerations for Emerging Franchise Systems.
There’s a ton of information out there for emerging franchises about the process of franchising. Articles and blog posts giving advice about franchise attorneys and consultants and operations manuals, telling you when to bring them in and what to look for in a provider.
But what we don’t see a lot of is those consultants and attorneys and writers and marketers giving advice about how to speed your time to market. What things should you have nailed down – or at least outlined – before you contact specific advisors?
A little up-front knowledge can save you some consulting fees, speed your development time so you can begin selling franchises sooner, and make the whole process smoother and better. So here are my recommendations, as a franchise marketing advisor who doubles as a manual writer.
5 Marketing Things You Should Know Before You Franchise
I Gotta Guy
You don’t know it yet, but every one of your early franchisees will have a guy. You have a uniform vendor? They gotta guy who can do it cheaper. Working on getting volume discounts for insurance rates? They gotta guy who will give them a deal.
Is this a problem? Yes. And No. Early-stage franchise systems don’t offer franchisees much in the way of economies of scale. You can’t get a good contract price on diced chicken with only two locations, so getting everyone to work together benefits the system in the long-term. But in some cases, you might prefer to let them source a service locally. And you can’t really mandate their use of a specific vendor anyway (although you can devise very narrow specifications).
In either event, here are some considerations:
- Decide which products and services are strategically important, so you know which battles to fight.
- Narrowly define specifications and quality standards.
- Make using a preferred vendor easier for them than setting up a new vendor – turn-key service is important.
- Reinforce to franchise partners the value of a system. Large brands have national contracts and account managers and backup vendors, but as an emerging brand, you will need to sell that vision – you’re all in this together.
Every franchisee has a guy who can save them $2. You need to offer $2 of value in a different way, like service.
How to Spend the National Marketing Fund
There are actually quite a few things to know about your NMF before you get started, and some seem like (and are) pretty simple decisions.
- What percentage will you charge for the NMF, when will it be due, and how will you receive it? (2% drawn weekly via ACH, for example)
- Who will administer the account? (Will the Franchise Advisory Council have a say?)
- Will the percentage be different (less) for the first 5 or 10 franchisees, since they won’t see as much value in the early days?
Your franchise attorney or consultant can help you decide those things based on your goals and vision for the brand. One thing you can do now that will help you move forward is to determine what things will be eligible for payment from this fund.
Typically the NMF pays for things that are foundational to marketing for all units: website, brochure design, or creative advertising, for example. You can also include strategic advice from ad or digital agencies, PR firms, and customer research firms. Set-up fees for online ordering portals – where franchisees purchase uniforms or logo merchandise, for instance – are usually also considered NMF expenses.
Defining what will and what will not be paid by the NMF has a couple of advantages. First, it sets expectations with new franchise partners as to what they need to do in order to promote their businesses. Second, the National Marketing Fund can be a little contentious early in a brand’s life cycle. As I mentioned earlier, the first franchisees don’t see much in the way of tangible returns. Two percent of two stores’ worth of sales is far less than 2% of 32 units’ sales. A robust menu of tools goes a long way toward value perception, which is important when you’re taking 2% off the top.
How to Launch
Everyone loves a Grand Opening, especially your new franchisees. They’ll talk about it, ask questions about it, plan for it, and have ideas about it long before it’s productive to do so, but you can’t really blame them now, can you?
It isn’t a stretch to say that the feelings generated by a Grand Opening, and the subsequent two or three weeks, can set the tone for an entire franchisor/franchisee relationship. Open big, trust is built. But a poor opening can put a bad taste in one side or the other’s mouth, and the relationship might not recover.
To that end, here are some considerations to help you outline your Grand Opening strategy and package:
- You should have first-hand experience with the tools. Know which things definitely work, even if you don’t have enough data to say to what extent they contribute.
- Determine – and mandate – a Grand Opening budget (but don’t just pull a number out of a hat) that will help them put their best foot forward. More money is wasted by underspending than on overspending, so be sure to set expectations.
- Mandate some tactics. A direct mail piece sent to 10,000 residences three times, for example.
- Provide options for discretionary spending. A mall location won’t be able to put a giant gorilla outside their unit, but they could partner with a retail store to create an event.
- Your actual Grand Opening package should be a mix of required tactics and optional tactics that add up to the desired spend. This gives franchise partners confidence of “known” tactics, along with freedom and creativity for other tactics. (Plus, they probably gotta guy for some of those things.)
- Make ordering from the different vendors as simple as possible, whether because you do it for them or because you pay one of your vendors a “management” fee for coordinating it for you.
What Counts as Local?
The other side of the National Marketing Fund coin is the Local Marketing Fund (LMF). The LMF is how franchisees implement your national items. Media buys – print, out of home (OOH), digital – are the purview of local expenditure. NMF creates ads, LMF purchases the media to distribute them.
There is usually a very wide latitude as to what constitutes an “allowable” local marketing fund expenditure. You don’t want to be in the business of telling a franchisee which publications are worthy of dollars, and you certainly don’t want to get into measuring the ROI based on impressions and leads generated. For this reason, LMF expenditures can range from sponsoring a Little League Baseball team to buying Girl Scout cookies from a local troop. Car wraps, billboards, Instagram ads, local trade shows… Any and all might have a place in your arsenal.
There are two times when you’ll need to audit local marketing spends: when a unit is struggling and when they sue you because sales don’t meet their expectations.
So what do you need to decide? How to audit that spend. Checking in on every unit, every month will require a lot of resources. Is the budget mandated monthly? Quarterly? Yearly? Do you ask for receipts? Should they send them electronically?
Here’s what we, as process documentation experts, want to see: that you have clearly laid out the expectations, described methods in which you could audit each unit, and defined the possible causes of action should expectations not be met.
The truth here is that you’ll audit units that are struggling. Not as a punitive measure, but because struggling units aren’t always spending enough on local marketing, or they’re not spending in the right ways. The audit, in this case, becomes a troubleshooting tool to help a unit right itself financially.
The other time you’ll audit a unit is when they sue you.
Create a Style Guide
The term “retrofit” probably doesn’t make new brands shudder, but it should. Retrofitting a unit is a costly endeavor. Sometimes the need to replace an existing item, piece of equipment, or process is avoidable, sometimes it isn’t.
On the one hand, it’s vital that your brand identity be consistent across all units, in all channels, at all times. On the other hand, it’s one of the easiest things to get off track early. And once that happens – once the wrong logo is out there, or it doesn’t have a TM on it, or the colors are “pretty close” to matching – you’ll have a hard time putting things back in the tube, so to speak.
Retrofitting unit signage for logo, color, or fonts is an unforced error that having a style guide can prevent.
First thing, before you call me or a consultant or a franchise attorney – create a style guide that governs the use of your logo (in all its various forms), fonts, colors, and taglines.
It will change. It will grow. But if you want to keep franchisees who “gotta guy,” vendors in multiple media, and store development teams singing out of the same hymnal, you have to create the hymnal.
Your Mileage May Vary
No two startup stories are the same, and neither are their paths. It’s important to remember that, in the early stages, you’ll be trying to sell a brand that may not even have any brand recognition yet. Your goal is to protect it, promote it, and get buy-in to build it. Right now, your brand isn’t the main draw to your concept, but a bad brand can be a disqualifier.
Right now, potential franchisees are buying two things: a system to open a business faster than on their own and you (your leadership team, your experience). The more you’ve thought through some of these things, the better quality franchisee you’ll attract from the start.
But also, if you’ve thought through and outlined these five things, you’ll save time and money with your early-stage advisors, and begin selling franchises sooner than you would have otherwise.