(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?”
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.
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.