Local Marketing Blind Spot: New AFMR Reveals Surprising Spending Trends

This year’s Annual Franchise Marketing Report (AFMR) from Franchise Update Media features some surprising survey results.

Several stats were expected and followed recent trends. But one thing that stood out to many of us was the large percentage of franchise brands reporting that their franchisees were not required to report on their local marketing spend. 

I asked several members of the International Franchise Association’s Marketing & Innovation Committee to share a few thoughts on this year’s report, specifically the local marketing requirement numbers.

Traditional marketing wisdom says a franchisor should monitor franchisees’ local marketing to maintain brand consistency, ensure compliance with guidelines, and enhance marketing effectiveness. This also allows a brand’s marketing team to step in if issues are seen and help fix a franchisee’s marketing problems.

The AFMR found that 85% of franchise brands surveyed require or recommend marketing dollars to be spent locally by franchisees. That’s the good news. And many brands agree that the requirements at startup for new locations are even more critical.

Kristina Munoz, senior brand marketing manager at Eggs Up Grill, shares, “At Eggs Up Grill, we take a uniquely supportive approach to local marketing, where a 0.4% local spend is required with most franchise partners spending beyond the minimum. However, for new restaurants, a $10,000 to $15,000 grand opening deposit empowers our marketing team to handle the heavy lifting. This hands-on partnership provides a taste of our exceptional brand support, inspiring franchisees to continue investing in local marketing efforts.”

Surprising numbers

The big surprise came from the stats about those brands that do require/recommend local spend:

• 46% require the franchisee to submit the spend to the franchisor.
• 48% use the honor system with no required reporting by franchisees.
• 6% require franchisees to submit via a third party.

Brandi Kloostra, VP of digital marketing at Franworth, says, “Remarkably, 48% of franchisors trust an honor system for local marketing requirements. Monitoring LMR intentionally is vital for brand growth. Neglecting local investment impacts sales and brand stability. For emerging franchisors, local marketing is key to brand awareness and where most marketing dollars are spent absent a robust national marketing fund. Franchisors should monitor P&L or preferred vendors to report on local marketing spend.”

Kristen Pechacek, president & CEO of MassageLuXe, sees a problem not only for those franchisees not reporting, but also for the system as a whole. She says, “One of the greatest marketing advantages of a franchise system is cross-learning among locations. When 48% of brands are relying on the honor system for local spend tracking, they’re missing the opportunity to connect the dots between investment and impact. Without visibility into actual spend, franchisors are not able to apply learnings to other markets, shortcutting the learnings that need to take place.”

Getting on track

How does your franchise system stack up when it comes to local marketing requirements? See page 32 for the AMFR Topline Results, or get a copy of the report by visiting afmr.franchiseupdate.com.

Jack Monson is the chief growth officer of franchise development marketing agency Thunderly and has been working with franchise brands in marketing for more than 15 years. He is also the chair of the IFA’s Marketing & Innovation Committee and the host of Social Geek, the number one podcast in franchising.