Advertising Fee

An advertising fee (or marketing fees) are really a community bucket where all the franchisees put money into this bucket for the franchisor to provide some level of advertising support for the franchisees. These, range from 1 to 3%. 

It's one of those things where it's the same concept to me as a royalty in that they're going out and doing advertising and finding advertising opportunities for you as a franchisee that you may or may not even be able to get on your own. Lots of advertising opportunities are locked out to only larger corporations and companies, but when a larger or a good franchise approaches them with a hundred units, all of a sudden their ears perk up and they may be more willing to allow them to do some advertising that you couldn't possibly do on your own.

So, in general, the ad fee is more nationally based creating awareness and recognition for the brand. Now, some franchises may have an additional fee for co-op or local marketing and advertising fees. 

The co-op or local marketing fees, a lot of times, are voluntary, meaning that they highly encourage those that are in a locality that has multiple locations in that locality to basically co-op some funds to do some local for more local types of advertising at that area level, but it’s not mandatory. For some of them, you are required to put in a certain amount, sometimes it's just a dollar amount, $250 a month, 300, 500 a month, and that goes into a bucket and then has to be spent on local advertising.

You probably don't realize it as a consumer, but a lot of these larger franchise chains like quick-serve restaurants or automotive services have co-ops. So all of their local or regional franchisees put money into a pot and they do advertising. So when you hear an ad on the radio or you see something digitally on your computer or something on tv, those are most likely your co-op dollars. They may be running a special just in your area, but in another area of the country, that same ad wouldn't be running because it's more local or regionally oriented. That's the point of a co-op. You can take advantage of local or regional opportunities or events or holidays that may be happening.

Technology and Other Services Fees

We talked a little bit about advertising and marketing now we'll talk about technology and we'll call them service fees because it's not just technology. There are call center fees. Some of the franchises we work with offer accounting support, meaning that they do all your books and stuff for you on a turnkey level. 

Those are the types of franchises where the owner isn't going to so likely be an owner-operator per se. Maybe they want to be more hands-off and have a more turnkey system for them for some of the things they would have to do on an ongoing basis. For instance, a lot of the franchises we work with provide full call center support. They take all of the calls. Think about how much time that could cost you if you had to do that on your own.

Think about all of the crazy calls you might get, maybe even sales calls from people trying to sell you stuff that you can avoid just by having all those calls routed through this call center type of approach. Then you have your actual technology fees, which hopefully, provide the infrastructure and/or technology infrastructure such as a website that allows you to have a local presence and is templatized and looks very similar to the other ones and allows you to do some local marketing. 

We think the technology fees are just such a brilliant idea by pooling everybody's money because these franchises provide really incredible technology support, very difficult for you to do on your own. They may be doing call center work. They may be doing your quoting, your scheduling, managing your whole POS (Point-of-Sale) system, this CRM (Client Relationship Management), and the way you outreach and communicate with customers. I mean, that's pretty complex technology that all needs to integrate and talk to each other and the franchise has it covered. You just pay your fees and you get access to this amazing system.

Think about it this way, if you've ever considered running a business on your own, not a franchise, the reality of it is that you're going to pay all these. You're going to pay somebody for these ... from our experience of being in business for ourselves before we ever got into franchising we paid these and we paid handsomely for them because we didn’t have the economies of scale that a franchise does to be able to do certain things like purchasing power for buying stuff or to provide blanket technology for all their franchisees. As a non-franchised business owner you are buying everything one-off. 

There's also R&D, there's the territory protection you get that comes with not just a specific fee but is included in the overall fees. 

If you really step back and think about it you would pay them in any business. You're getting real services for those fees to help you be more focused on what you want to do with your business. We can certainly tell you we don't want to do bookkeeping. We can certainly tell you that we don't want to be in the call center business necessarily. I mean, if I can have somebody do that for me and I don't have to go out and hire and find people and manage those people and  deal with all those things, sometimes these fees probably provide far greater value than what you're paying for them. So we look at these fees as an ongoing investment. This is your investment in this overall business that you are combining with all the other franchisees to come up with this quote-unquote master system that is easily replicable. That's the whole point of a franchise is a proven system and these just help solidify some of that.

We will end off with that not all franchises are created equal, meaning that for some of them you may pay for these fees and not receive services in value to what you're paying for them. So, when you are evaluating franchises, don't look at these as necessarily being a bad thing. These franchisee fees may help you achieve your why in the right franchise? If your why is flexibility and freedom, and you don't want to be a call center, then obviously paying monthly fees for call center support is going to be a good thing. 

If you have questions or want help evaluating a franchise reach out to us and we would be happy to help serve you in any way we can.