In most franchise systems, you will be required to contribute to an advertising fund, which the franchisor uses for larger, nationwide marketing campaigns (e.g. TV and radio advertisements). In addition to this, you will also be required to invest in local marketing efforts to build brand awareness in your community.
The amount of local marketing you will have to do to promote your business will vary depending on the popularity of your franchise brand. For instance, if you decide to purchase a very well known quick-service restaurant (QSR) concept, your local advertising campaigns will likely be less involved. You won’t have to convince the public to come; they’ll come to you. Your responsibility will be to convince them that your location is the best one to frequent.
That said, even well known brands can benefit from local marketing efforts. Local car washes, newspaper ads, and billboards are all very useful marketing tools. While this is especially important in the early stages of your business, it should not be ignored once you are established. Your competition will be marketing itself—don’t let them steal your customers away as you rest on your laurels. As new products and/or services are launched, communicate these developments to your community; it will encourage new customers to try you out for the first time (and may also bring old clients back).
Reporting and royalty payments
You should expect to complete at least monthly reporting on your franchise’s performance and revenue for your franchisor. This reporting is intended to ensure the franchisor can step in and help when problems arise. When you first open your doors, you will likely be reporting to your franchisor on a more frequent basis then move to regular reporting over time. Each franchise system is different and will have different reporting procedures that will be clearly laid out for you.
Franchisors must make revenues in order to continue to provide you with support. This revenue usually comes in the form of royalties. You should expect to pay royalties monthly, unless your franchisor indicates otherwise. There are several variations of royalty fees. Some franchisors charge increasing or declining percentages based on fluctuations in your sales; others franchisors charge a flat fee instead of a percentage.
Your franchisor’s role
In some cases, the franchisor will be willing to help with business tasks, like accounting, as well as ongoing training and support to act as a guide while you learn the ropes of being a new franchise owner. However, you should never go into a franchise purchase assuming there will be training available to you over the long term. Franchise ownership is like any other type of business and there will be different terms and conditions depending on the contract that was initially signed.
Owning a franchise offers one of the best opportunities to run your own business. There is an endless earning potential once you get started—you can stick to operating a single store or branch out and start a franchise empire. Your success is only limited by the amount of time and dedication that you put into developing and reinvesting in your business once it is up and running.
Rob Lancit is president of CANAM Franchise Development Group Inc., a firm dedicated to helping franchisors expand throughout Canada. He can be reached at (866) 730-5553 or www.canamfranchise.com, or via e-mail at email@example.com.