Advertising funds for franchises

by Jack Burris

As part of many franchise agreements, franchisors require franchisees to contribute to an advertising fund. Sometimes these funds are national (i.e. McDonald's) and others are regional ... the deciding factor 99% of the time is the number of units a franchise has and if it makes sense for a national reach vs. a more targeted local marketing campaign.

The advertising fund is usually the most controversial parts of a franchise agreement, too. An example of the arguement:

Franchisee: Why should I, the franchisee, pay my money to the franchisor to manage the advertising? It's my money and I should be able to dictate how much I spend and how that money is allocated.

Franchisor: We require a franchisee to contribute to an advertising fund for several reasons:
1) Brand consistency
2) Collective buying power
3) A bigger voice

Who's right? What system works best. I for one am a big believer in brand consistency and know that if a single entity is ultimately managing the advertising fund, the work should be better ... and more effective. But I also believe that the group managing the fund should have at least a 75% representation of franchisees. It is, after all, their gross revenue that is funding the account.