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Compulsory Promotions for Franchisees and why they work

Written by: Elyse Cabral

Article Overview: Franchises are in a unique situation when it comes to planning their marketing campaigns; although each franchise has a different owner they are all using the intellectual property of the Franchise owner and therefore the Franchise owner must grant permission for the franchisee to use their brand name in any marketing. Compulsory promotions are one form of marketing that Franchises can effectively use. This article outlines what Compulsory Promotions, why they work as well as tips to improve your Compulsory Promotions.

Compulsory Promotions for Franchisees and why they work

At JEM Promotional Products we work with many franchises not only on their core merchandise range but also on their in-store promotions. Franchises are in different situation when it comes to planning their marketing campaigns; although each franchise has a different owner they are all using the intellectual property of the Franchise owner and therefore the Franchise owner must grant permission for the franchisee to use their brand name in any marketing.

Many franchises work where the franchisee pays a marketing and advertising levy which is normally a regular flat or percentage-based fee paid into a centralised advertising or marketing fund (Franchising Magazine, March/April 2009 Vol.22/NO.2). It is up to head office to determine how best to spend this money so that each franchisee benefits equally.

One of the most difficult decisions is picking which advertising medium will benefit everyone equally; putting a newspaper advertisement in a local paper in Queensland will not help a franchisee in Western Australia. Many franchises opt to use the money for an in-store promotion where the customer gets a free gift with purchase as this is a fair way of spending the marketing funds. Many franchises have what they call a Compulsory Promotion which is separate from the marketing and advertising levy.

We define a Compulsory Promotion as a promotion that the franchisee must participate in by purchasing the minimum number of promotional products required however the franchisee is not limited to the maximum number they can purchase. No franchisee is exempt from participating in the promotion without a valid reason.
A good example is a Free Gift with Purchase Promotion. Head Office may determine the promotion, franchisees pay a certain amount to be involved and this amount can be part of or on top of their marketing and advertising levy.

Why Compulsory Promotions work:

• They give consistency to your marketing message because everyone is pushing the same message
• It gives consistency to your customers as they can walk into any of the franchise locations and know they will be able to participate in the promotion
• A Compulsory Promotion encourages the franchisees to try a marketing strategy they may not have used before
• You gain group buying power by purchasing your promotional product together. Let’s take tote bags for an example, if you have 100 franchise locations across Australia and each Franchise individually bought 100 Non Woven Tote Bag with a V gusset (Approx Size: 38cm w, 42cm h, 10cm d) with a 1 Colour Print on one side you would pay approximately $3.50 each + GST. However, if the whole Franchise Chain got together and each bought 100 of the same bag you now have an order of 10,000 bags which brings the price down to approximately $1.50. That is a $2 saving per bag, a $20,000 saving overall and a saving of $200 per franchisee which adds up when you are running a small business.

Tips to improve your Compulsory Promotions

• Involve each of the franchisees when picking the product for the promotion. At JEM Promotional Products we create virtual mock-up’s, upload them onto the clients Online Merchandise Management System and then each of the franchisee’s can vote on the product they want. This gives them a sense of involvement and allows them the opportunity to voice their opinion.
• Communicate and give updates to all the franchisees. You should not organise a compulsory promotion, send out the products to the franchise without notifying them and expect them to be happy about it. If you give enough notice they can work the promotion into their budget and start telling their customers that they will have a promotion coming up.
• Provide marketing support in the form of Point of Sale posters and back up the promotion with other forms of advertising like Radio and TV.
• Set a minimum order quantity on the product but do not limit people to this amount.
• Help franchisee’s to measure their success from the campaign. If you are offering a free gift with purchase of a particular product you should measure the sales of that product before and during the promotion. By seeing the success of the campaign they will be more inclined to participate in the future and order more than the minimum quantity.

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  Things to Know When Marketing Your Franchise
  The Small Business Franchise Act
  Negotiating the Terms of Your Franchise Agreement
  Aid That Franchisors Provide to Franchisees

Article Tags: advertising medium, core merchandise, different situation, difficult decisions, franchise owner, franchisee, franchisees, franchises, franchising magazine, free gift, levy, marketing campaigns, maximum number, merchandise range, newspaper advertisement, promotional products, store promotion, store promotions, valid reason, western australia



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