Most franchisors require franchisees to give a certain amount of money each year to the franchisor for national advertising campaigns. This is a perk of being part of a franchise, since most local businesses cannot afford to advertise on the national or even the regional level.

The national advertising fee is usually determined based on some percentage of sales, although it is occasionally a flat rate. You may be asked or required to join a local or regional group, putting money into a fund for advertising in the area. Pooling money in this fashion is usually beneficial because it allows for more ads to be produced and for each one to be shown more often.

Like every other aspect of the franchise agreement, however, the advertising fee section requires cautious review before signing the contract. Where does the money go exactly? What happens to any extra funds at the end of the year? Is the franchisor permitted to change the requirements at any point? Do the franchisees have any input in the matter? Who creates the ads? Do all stores contribute at the same rate?

Source: New York State Office of Attorney General

Labels: Franchise Opportunity