Understanding Franchise Advertising Fees

| 28.04.2023

When entrepreneurs acquire a franchise, they typically come across some fees and royalties that they would have to cover monthly. A franchise advertising fee is one of them. This kind of payment ensures that the whole franchise network has enough funds to promote brand and goods on regional and national levels. Brand recognition is important for both the parent company and its franchisees, as it helps to increase sales, and, therefore, make good profits. So, what is a franchise advertising fee and what exactly does it cover? In this article, we will answer those questions, so you can have a clear understanding of what it is and how it works.

Understanding The Basics of The Franchise Advertising Fee

Most parent companies require franchisees to pay an advertising fee. It is a certain percentage of money deducted from the monthly or annual gross sales of a franchise. Usually, it is under 5%. Naturally, these payments benefit all participants of the franchise system. The promotion is important for any business. It helps to attract target audiences, and reach new demographics and markets, as well as widen the awareness of the brand, and, therefore, its franchises.

What is the average franchise advertising fee?

The amount of ad fees differ from one brand to another. Typically, it is about 1-4%. Every brand is different, and the percentage varies. There are parent companies that have fixed franchise advertising fees, others offer ongoing fees based on sales, and there are also brands that do not require an ad fee. Collection of advertising fees allows businesses to grow and expand their influence, attract new customers and retain existing ones.

What does the franchise advertising fee pay for?

Every company has its own advertising programs and campaigns that are directed towards promotion of its goods, services, and branches. Marketing programs are usually drawn up considering the specifics of the industry, business model, target audience, and trends. The most common types of advertising that are covered by ad fees are national, regional, and local ones. Every parent company offers individual marketing support, so it's better to look into the brand carefully and extensively in order to understand what you’ll be getting. New franchisees especially need marketing efforts before and during the grand opening. A right and promptly crafted advertising campaign will put your franchise on the map and ensure its success.

How can I compare franchise advertising fees?

There are several sources that publish information about advertising fees of various franchise systems. For example, franchise portals, like ours, typically share the details on ad fees. Entrepreneurs can also get acquainted with this information by reading the FDD, which typically disclose the quantity of payment you’re expected to cover. Potential franchisees can also contact former or existing franchise owners to get a better idea of what to expect in terms of financial aspects, including the average sum of advertising fee they pay or paid.

As it was mentioned before, every brand has its own advertising support. So, make a thorough research, compare available franchise options, and determine what exactly you’ll be getting for your money.

Conclusion

Now you have a better understanding of what a franchise advertising fee is. This knowledge will allow you to know exactly what you are paying for and how much. This kind of payment is beneficial for both sides of a franchise partnership. It is expensive to promote a business on your own, that’s why franchising is more efficient and easier in terms of marketing for entrepreneurs than developing an independent business and spending huge sums of money on its promotion.

Franchisors use and try different channels of promotion, including radio, TV, social networks, to determine what’s best for the franchise system. National and local advertising can enhance the brand’s influence as well as the awareness of each franchised unit. It can bring a lot of customers and put your franchise on the map.