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What About The Franchise Marketing Fees?

Questions?
(Courtesy of Valerie Everett, Flickr)

Only a small percentage of the people that I’ve worked with over the years ever asked me about the franchise marketing fees that are charged by franchisors for marketing.

I’ve found that most potential franchise owners are more concerned about the up-front franchise fee, and the royalties they’ll have to pay. Discussions about the marketing fees tend to happen later in the process.

But, they shouldn’t be.

 

It’s A Mandatory Franchise Fee

Paying a percentage of your sales into a marketing fund is not “optional.”

If you’re doing research on a franchise, one of the top 40 questions you should be asking current franchisees of the opportunity that you’re investigating-question #24 out of 40, as a matter of fact- is this one;

Do you pay into a marketing fund?

Followed up by this one;

How much do you pay into this fund every month?”

And this one;

Do you feel what you’re paying is worth it?”

 

Ongoing Costs

When you’re writing your business plan, the fees you’ll be paying to the franchisor for marketing must be added to your projections.

If you’d like some specifics, check out how much your fees would be for a Jamba Juice franchise. Notice the wording.

jamba juice locations

(From http://www.jambafranchise.com/faq.html)

FYI- it’s not unusual to see wording like that. I’ve found that, “up to” is very common terminology when it comes to franchise marketing fee disclosure.

But, paying just 2% of your net sales can add up, so don’t forget to include these fees in your franchise business plan.

Of course this money comes out of your income too.

 

If The Franchisees Are Happy

The current franchisees of the system your looking into must feel that the fees that they’re paying into the franchise marketing fund is money well spent. Period.

If you’re calling a lot of franchisees, like I suggest you do, you’re going to find the topic of marketing fees is a hotly-contested one. Some franchisees may tell you that it is money well-spent. Others may tell you that it’s a rip-off. It’s important to listen to both sides. After you’ve done that, it’s perfectly okay to share your findings with your franchise representative. Find out what he or she has to say.

If most of the franchisees you talk with are happy, and making money, it’s usually a good sign.

A great marketing system may be providing that happiness.

If that’s the case, paying for it sounds pretty reasonable to me.

 

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What About The Franchise Marketing Fees? by
About The Franchise King®

My name is Joel Libava, and I'm the author of Become a Franchise Owner! In addition, I'm a franchise ownership advisor. I teach people the best way to choose, research, and buy franchises.

  • http://www.bizsugar.com/ Heather Stone

    Hi Joel,
    What I wonder about some of these agreements is whether the details are subject to change after you invest. For example, can you find yourself two years in as a franchise owner suddenly being asked to fork over a marketing fee that is larger than the one required when you first came on board? That particular issue would worry me the most when thinking about investing in any opportunity.

    • http://thefranchiseking.com/about-joel-libava-the-franchise-king The Franchise King

      Hi Heather,

      I’ve found that things like that need to be approved by the franchisees before they could be implemented.

      However, some contracts may say that in the future a marketing fund may have to be established–if my memory serves me right.

      Good question.

      Just another reason to hire a good franchise attorney :)

      JL