You'll have many chances to ask a Canadian franchisor...
Advertising fees are an important part of setting up any new business. When it comes to a franchise, the franchiser often handles the main bulk of the advertising and requires each franchisee to pay a certain amount of money to help cover these expenses. Instead of each franchise spending a separate amount of money to advertise independently, it makes sense to pool all of the funds and get the brand name out there in an effective way. With larger amounts, things like televisions ads can be purchased that benefit everyone. Name recognition is an important part of bringing in new customers.
Each franchise is different in how much money is collected as advertising fees. While most are collected monthly, some companies choose to have a set fee that each franchise pays. Others tend to require a certain percentage of a company's gross sales as payment. Because each franchise does things differently, there may be a minimum or even a maximum amount required from each franchisee, while others don't collect any advertising fees. Before starting a franchise, it is important to understand how the company calculates advertising fees, when they will be collected and how they are going to be used.
These fees do not go directly into the pocket of the franchiser. Instead, the money is put together into an account that is used for various advertising activities. A franchisee can request a report showing the amount of money collected and how it was distributed. This ensures that the company is accountable for how the money was used. In some cases, a brand will set up a board of individuals that make advertising decisions for the company. This group gets input into how the money is spent and also has the ability to check and make sure that the investment into marketing created a return for the brand as well as the individual franchises.
While advertising fees are usually consistent, there are instances when companies need to increase those fees to make a positive adjustment in the brand and its name recognition. This often happens when a brand starts to expand and more marketing is required to keep up with growth. In order to continue growth at the local level, a franchisee should plan to spend money outside of the required advertising fees to focus on the immediate area surrounding the company. This money is spent at the discretion of the franchisee and may be pooled with other local franchise owners to create larger scale promotions.
For everyone involved in the business, it makes sense to set up advertising fees and allow for large-scale marketing. It benefits each and every part of the franchise and allows for things like radio and television ads that the smaller franchisees would not be able to afford alone.