How Much Money is Required For Your Franchisees to Spend Locally?

You know I’ve come up with a system that took me over 10 years to figure out and I’ve done it already with 29 companies.

I want to take local marketing dollars required by franchisees to spend and allocate it to a national fund and have the local dollars spent proportionally back every month in all your franchisee locations.  When I first tell this to the CEOs’ I have them say, “well the franchisees will never go for that.”

I pitched this whole system to a company called East Coast Wings with a 100% participation.  I received a letter from their CEO, Sam Ballas.  This is what he said:

We are going to sit down in about three months and write the 12-month marketing plan that will begin in September.  Franchisees will see where every nickel will be spent.  And, we will have three to four key franchisees, loyalists that will say “I’ve got to be a part of this.”  We only ask them to sign a one-year pledge card that says “If this doesn’t produce the results that we plan, then we will go back to the old way.  There is no change in the franchise agreement.  All we are asking for is a one-year commitment.”

A friend of mine, Salsarita CEO Paul said, “I want a two-year agreement.”  I said to him, “Paul, it’s going to be tough, but I’ll go for it.”  I was able to sell it because he wanted all the local dollars to go to the national marketing fund budget.

If 93% of the current locally spent money is wasted and the majority of franchisees are not even spending it, this way you control it.  But the eyes really open when they see that the dollars they send in are proportionally spent back at their location.  That’s the beauty of it.

What I would say is that you are going to need a half a percent for the national budget for creative production.  The other portion goes back into their 4 Walls and Neighborhood.

As an example:  What are your average unit sales?  Let’s say that you have some stores that are doing $700K and another doing $400K.  The store that is doing $700K will contribute 4% of $700K and the one that’s doing $400K will contribute 4% of $400K.  In other words, whatever they send in will come back to them.

All of a sudden they say, “Are you serious?”  Then they see the economy of scale for everything that is put out.  It becomes really cool because they have things they could never do themselves.  Now it’s done for everybody.  From direct mail to whatever the marketing programs might be.

And this whole social media thing… we have five new tactics that are really strategic.  They have been HUGE!  About a third of them are all about inside the four walls.  You know every time I ask a franchisee what is the #1 responsibility of running your business, what do you think their answer is?

If you were the general manager of the Dallas Cowboys, what would it be?  It’s really one word – RECRUITING!  Business is no different than sports.  The team with the best players win!  And so there’s the whole concept, a whole system, inside the four walls that can get from 3% to 5% same store sales.

One thing we almost never do when a franchisee goes to training school is teach them how to recruit people.  I spend a lot of time on that because I believe it’s more important than anything else.

I don’t want a franchisee to ever leave their store unless they are running an “A” operation.  The system is turnkey, the Four Walls and Neighborhood Marketing programs are turnkey.  Where a franchisee is spending no more than 2% of his time on marketing for his store; and is spending it on recruiting, training and operation.  That’s the punch line.

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