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Is a Franchisor Required to Advertise for Franchisees?

True or False?

Advertising is a marketing tool that is essential to any business’s success and can range from networking strategies to million dollar media campaigns. Within a franchise system, advertising is equally important. In fact when talking about franchising and advertising, there are specific obligations that the franchisee must follow in terms of advertising their business. At first glance, this myth may seem to be true, but it is NOT (learn more about franchisor responsibilities by reading “What is My Role as a Franchisor”).

Within a franchise system, each franchisee owns their business and is required to operate their business a certain way and aggressively advertise and market for their own customers or clients. To better understand franchisor responsibilities when it comes to advertising, let’s discuss two types of advertising in the franchise world:

·Local advertising
·System or National Advertising

Local Advertising

In the spirit of setting up franchisees for success, most franchise systems require that each franchisee spend a minimum dollar amount each month to locally advertise their business. This requirement can either be a monthly flat amount or a percentage of the franchisee’s monthly gross revenue. Bottom line, this is the minimum advertising requirement that the franchisee must spend in their market. These monies do NOT go to the franchisor.

In support of this effort, the franchisor provides franchisees with different marketing strategies, techniques and methods that the franchisor has used to attract customers. The franchisor provides these materials to franchisees at no cost. It is up to each franchisee to put these materials to good use and implement the different advertising strategies in their market, at their own expense.

System Advertising

In addition to the local advertising requirement, it is very common for franchisors to create a System Advertising fund (also known as a National Advertising fund). Every franchisee is required to contribute to this fund. The franchisor collects these funds and puts them into a separate account. These funds are used to create different pieces, enhance or create various marketing initiatives that brand the entire system. ALL of this is distributed to franchisees (at no cost) for them to use.

With newer franchise systems, these funds may be used for such things as: research & development for new products and/or services, enhancing technologies, or creating additional marketing pieces. All of these items are given to franchisees to implement, at their own expense, in their market. As the franchise system grows, these funds can be used, for example, to purchase large radio or television media buys, which are intended to further brand the entire system. When we work with you to franchise your business, we identify what you will require from your franchisees when it comes to local and system advertising requirements in addition to defining all the other fine details of your franchise program (read more about how we work with you to franchise your business).

There you have it. It is not the franchisor’s obligation to advertise for its franchisees. Don’t let the fear of thinking you have to advertise for franchisees stop you from exploring the possibility of franchising your business. Call us directly at 1-877-615-5177 or send us your information and we will answer ALL of your questions about franchisor responsibilities and franchising your business.