As the old saying goes, ‘The best time to plant a tree was 20 years ago. The second best time is now.’ Many emerging and startup franchisors hold off on collecting their brand fund fees because they don’t have a plan for the money, and they are still getting used to being franchisors. Brands that put off collecting it when they start, struggle with the implementation of the brand fund on franchisees who have been in the system for years and have grown accustomed to not paying into the fund. It can become a very difficult and politically sensitive issue to start charging after years of never charging.
Franchisors should also understand and recognize the essence of the brand fund, and that they are probably expending money out of their general funds now that really could be funded by the brand fund. The purpose of the brand fund, which we intentionally do not call a national advertising fund, is to create the creative. It’s money spent to tell the story of the brand and to create an image and series of collateral material that the franchisees can then deploy in their local markets. There is a big difference between what advertising is and what branding is. Advertising is a direct push for sales, while branding is creating the overall image of what the company stands for.
It is also ok and very common for a new franchisor to run a brand fund “deficit” as they front-end load the investment. This is a good story to tell your franchisees, that you are spending all this money on the brand in advance, and they get access to it all for their small contribution every month. Over time, as the system sales grow, the brand fund can “pay back” the franchisor for that initial investment.
Great branding comes from a steady investment over years. Collective investment in the brand over time is one of the pillars of a successful franchise system. If you are one of the many brands that hasn’t started collecting your brand fund, talk to the franchisee leaders in your system and get them to understand the importance of it, and start collecting it right away! You may have a fight on your hands and upset some of your franchisees; however, it’s a fight worth having. You lead your brand, and sometimes leaders have to make unpopular and difficult decisions that are in the organization’s best interest.
Tom Spadea
Tom Spadea is a franchise attorney and founding partner of Spadea Lignana, one of the nation’s premier franchise law firms, representing over 300 brands worldwide, from emerging concepts to elite brands that are household names. Spadea is a Certified Franchise Executive, speaker, author and key adviser to many high-level executives and entrepreneurs in franchising. spadealaw.com, tspadea@spadealaw.com