How Does Franchise Co-Op Advertising Work?

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If you run a franchise business, you’ve likely heard of franchise co-op advertising. Due to the nature of franchise businesses, their marketing requirements, and budgets, advertising can be complex. That is especially true for franchise owners with multiple locations.

While aiming to expand their audience reach and lower marketing spending, many franchise owners integrate co-op advertising or cooperative advertising into their marketing strategy. Regardless of the size or industry, franchise co-op advertising can be a game-changer to bring in more customers to your business locations.

But how exactly do you do franchise co-op advertising? Read on because we’ll dive into that and more. 

What is franchise co-op advertising?

Co-op advertising is usually an agreement between two or more partners that contribute to the cost of advertising. A partner could be a supplier, manufacturer, wholesaler, distributor, or retailer. 

When it comes to franchises, co-op advertising might look a little different. A franchise organization usually has a co-op fund for advertising and marketing. Franchisees may contribute a part of their gross sales towards this fund. In some cases, a national supplier may pay for part or all of the advertising costs. 

There are two common types of cooperative advertising: horizontal and vertical. 

  • Horizontal – In horizontal cooperative advertising, two or more parties collaborate on an advertisement that endorses the same product or brand. Franchise agreements usually include horizontal advertising with franchisors and franchisees promoting the same company. 
  • Vertical – In vertical cooperative advertising, two or more companies share the cost of advertising, but they may be promoting different products. For example, a local grocery store may advertise various food products from different companies. 

Who Uses Co-Op Advertising? 

National franchise organizations use co-op advertising to partner with local franchisees. A group of franchisees may also team up to do co-op advertising in a designated area around their business locations. 

The idea is that this will lower advertising costs while increasing brand visibility. In other words, it saves money on advertising when you can combine your overall ad spend or buying power, which can give you lower costs per ad. 

It also increases foot traffic because you can serve targeted, personalized ads to individuals nearby your store. A co-op advertising model can be used by just about any type of business or organization, but these are the most common. 

  • Franchises – Local auto dealers pull their funds together when doing regional marketing. Co-ops may also include quick-service restaurants, gyms, spas, or any other organization with a franchise model. 
  • Retailers and manufacturers – To support their retailers and increase in-store sales, manufacturers often cover a part of the retailer’s advertising costs. 
  • Local businesses – Small local businesses or groups of franchisees may use a co-op ad model to lower costs and increase foot traffic. 

Generally, co-op advertising saves you money by combining forces with others for mutual benefit. 

Why Do Franchises Use Co-Op Advertising? 

Every business owner wants to increase brand awareness, make more sales, and ultimately grow their business. Co-op advertising helps franchises accomplish these goals by providing a way for franchisees to share the cost of advertising campaigns and lower their marketing expenses. Let’s examine the relationship between co-op advertising and franchising in more detail. 

Co-op advertising allows franchises to launch more effective marketing campaigns, leading to increased sales and revenue. This benefits the franchisee, the franchisor, and the overall brand since it reduces costs while expanding operations and reach. 

What Is an Advertising Co-Op Fund? 

An advertising co-op fund is an account that co-op partners can use to pay for advertising. Where does that money come from? Each co-op is different. 

Some franchises set aside a dollar amount for each location or require owners to contribute a percentage of their sales to the fund. The franchise advertising fee for many businesses is around 2-4% of gross sales each month. Instead of taking a percentage of sales, some franchises may set a monthly flat rate.

If you create a co-op with other local businesses, you may have more flexibility. You can set a contribution structure that works for all parties involved. 

If your funds come from taking a percentage of sales, the available co-op funds may vary from time to time. Your business may experience fluctuations in sales volume throughout the year (as some do). Planning for seasonality will be helpful to create a year-round budget.

How Does Co-Op Advertising Work? 

As a franchisee, co-op funding is a great way to help grow your business. If you don’t know whether there’s a co-op advertising program or where to find it, check with your franchisor. Most franchisees will have a co-op agreement in place or will contribute a set amount to ad fees. 

While it’s important that franchisees are able to use the funding to promote their local business, franchisors may also use a portion of co-op funds for national ad campaigns.

First, you need to set your budget and determine your advertising channels, from print media and commercials to social media. Before rolling out your advertisements, it’s important to note that you have to get pre-approval for advertising. 

Ultimately, you will have to track your marketing spend and confirm if you need any reimbursement. Remember, everyone in the co-op has a say on how the funds are spent and is involved in other decision-making processes. 

Wrap Up 

Franchise co-op advertising is a powerful marketing strategy that not only lowers your ad costs but also increases brand visibility. With co-op advertising, you can expand your brand reach, make more sales, hence more revenue, and ultimately grow your franchise business. 

And as they say, there is strength in numbers. So, whether you’re a franchisee or a franchisor, co-op advertising is a great way to promote your business. But it’s even better when both sides work closely together. When you’re all on the same page, you can create, approve, and execute marketing strategies that are more accurate and effective.

In general, check your franchising agreement for rules and requirements regarding co-op advertising before you start working. At Goodway Group, we take pride in helping many brands and franchise partners run and manage their co-op advertising programs successfully. Do you need any help developing a successful co-op advertising strategy for your franchise? We can help! Get in touch with us today and see the difference.