A marketing fee is a type of ongoing fee that a franchisee pays to the franchisor for marketing and advertising services provided by the franchisor.
The purpose of the marketing fee is to fund the franchisor’s efforts to promote and advertise the franchise system as a whole, which benefits all franchisees in the system by generating brand awareness and driving traffic to franchise locations.
The marketing fee is typically calculated as a percentage of the franchisee’s gross sales, and is paid on a regular basis (usually quarterly). The franchisor may use the marketing fee to fund a variety of marketing and advertising activities, including television and radio commercials, print and online ads, direct mail campaigns, and promotions and events.
It’s important to note that the marketing fee is separate from the initial franchise fee and ongoing royalty fees that a franchisee pays to the franchisor.
In the franchise disclosure document (FDD), the franchisor must disclose the amount of the marketing fee, how it is calculated, and how the funds are used.
As such, it’s very important to review what the marketing fee entails, what it includes and what it does not, as any marketing efforts not included would typically have to be covered by the franchisor separately.
Most often, local marketing costs (for example local print media, offline marketing campaigns and paid ads) shall be paid in addition to the marketing fee by the franchisee to promote her/his business.