Strong Franchise Development Brings Inherent Value:
Multiple Layers of Brand Development In Franchising
1. The National Ad Fund
A franchise brand expands through a national ad fund. This would be the most obvious of brand development channels associated with franchising. Most franchisors require that all franchised units contribute a percentage of Gross Revenues to an Ad Fund which is reinvested each year into the development of the franchise brand. These funds could be allocated to larger scale marketing efforts typically only considered by well funded organizations, but with the equal contribution from every franchise unit, big picture marketing initiatives become a reality. Television, Celebrity Sponsorships, Superbowl commercials become possible. An individual sandwich shop owner would never consider these types of marketing and branding, the cost would be prohibitive. That same sandwhich shop owner could join a large franchise system though such as the Subway Franchise or the Blimpie Franchise network and now these branding initiatives become a possibility which will benefit everyone in the franchise network.
2. Duplication of an Effective Business Model
Franchise systems provide consistency and through good systems allow for the duplication of an effective and successful business model. There is no better marketing on the planet than word of mouth and good, solid customer service. The reason we all continue to patronize McDonald’s locations is because we know what to expect. The food quality would never be rated highly by a culinary expert, but we know what the French Fries taste like whether visiting a Philadelphia based restaurant or a location in San Francisco. The same can be said for other successful franchise brands such as H and R Block, Century 21 Real Estate or Jantize America Commercial Cleaning. The scale of this local brand awareness created with each new location is what is underestimated. If a ten unit franchise system opens five new franchises, that brand has increased its brand awareness by 50%, when considering rapidly expanding franchise systems, this brand growth is unmatched by other marketing mediums.
3. Local Advertising Requirments
Local Advertising requirements which are standard in most franchise relationships will also build the brand awareness of a franchise system. This type of marketing is typically characterized by guerilla marketing mediums such as door hangers, local pay per click campaigns, direct mail, local radio campaigns, regional print marketing mediums and any other effective localized advertising channel. Restoration 1, a national water and fire restoration franchise markets primarily through relationships with plumbers and industry professionals related to the field, with each new franchisee comes a requirement to spend a minimum amount in advertising in their local market which in turn creates more brand awareness and a stronger brand name for the franchise.
4. Developing Co-ops in Metro/Regional Areas
Cooperative Advertising embodies the power of franchising and what has in turn created a more successful unit economics for franchised businesses and also expanded the brand reach for many regional franchise systems. Cooperative franchise advertising is also typically mandated through the franchise agreement and requires that franchisees work with one another in regional advertising cooperatives providing more leverage and scale in only regional markets. This in turn provides the franchisees with a lower advertising expense per unit, increases regional awareness for the brand and allows for franchisees to work with one another in a market they have more familiarity with than the Franchisor might. This lowers the unit advertising expenses as a percentage of sales by sharing in the cost of advertising. If one unit has to burden the entire cost of a TV ad in their market, the expense will be much greater for that business than compared to four units splitting the cost of the TV ad and all benefiting from the exposure. For example, East of Chicago Pizza, an Ohio based Franchisor has units located in four states, Kentucky being the farthest reaching of the units. Kentucky based franchisees were tasked with working between the units to develop a regionalized ad campaign which they all could leverage. Because the Kentucky based franchisees knew the market, they understood how to transition the franchisor’s ad campaigns to their market and lowered each of their unit ad expenses while increasing the franchise brand awareness in Kentucky.