Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Use Cooperative Advertising Funds More Effectively
Transcript
- Lucas: So we get a lot of questions from franchisees about co-op advertising funds — basically the pool of money that franchisors collect from royalties or require franchisees to contribute to, and then make available for local marketing. Luna: Right — and there's a pretty consistent pattern: most franchisees either don't use the full amount or use it inefficiently because they don't understand the rules. Lucas: Exactly. I was looking at a case from a multi-unit franchisee in the Midwest who ran about 15 locations of a national fast-casual chain. Each store contributed roughly $2,500 per year into the co-op fund, so that's about $37,500 total across his units. And the franchisor would match a portion of that — but only if he submitted claims for specific approved activities. Luna: And he wasn't claiming it. Classic. So what changed? Lucas: He hired a part-time marketing coordinator who spent a month auditing what the co-op fund actually allowed. Turns out the franchisor had a list of approved vendors, but also allowed franchisees to submit their own vendor contracts for pre-approval. He'd always assumed he had to use the franchisor's expensive agency. But he could bring his own local media buyer — as long as they met certain criteria. Luna: So the co-op was more flexible than he thought. That's a big unlock. What did he do with it? Lucas: He redirected the full $37,500 into a local campaign with a digital agency that specialized in geofencing — targeting mobile users within a mile of each store. The franchisor matched 50 percent on digital ads, so that added another $18,750. And then he realized he could pool his co-op dollars across all 15 stores into one campaign, which the franchisor allowed as long as each store's contribution was tracked. Luna: Wait — so he got the match on the whole pool? That's unusual. Most franchisors cap the match per store. Lucas: He negotiated that. He went to the franchisor's field rep and said, 'Look, if I consolidate my entire local spend with one vendor, can you treat it as one single request and match the full amount?' And the rep said yes because it made their job easier — one invoice, one approval, one report. Luna: That's the kind of negotiation that most franchisees don't even attempt. They just accept the default rules. Lucas: Right. The default is written for the lowest common denominator. But if you have a track record and a decent relationship with your field rep, you can often get exceptions. So his total campaign budget went from $37,500 to over $56,000 with the match. Then he added his own incremental money — another $20,000 — and the results were a 22 percent lift in store traffic over the eight-week campaign. Luna: That's a huge return. But let's be real — the typical franchisee isn't hiring a part-time marketing coordinator. What's the minimum viable move for someone with fewer units? Lucas: I'd say three things. First, get a copy of your co-op fund's current year marketing calendar and eligibility guidelines. Most franchisees never read them. Second, identify one or two approved activities that align with local opportunities — maybe a back to school promotion or a partnership with a nearby sports team. Third, submit claims early in the quarter. The funds are often first-come, first-served. Luna: First-come, first-served? That's a detail that gets buried. So if you submit in the last week of the quarter, the money might already be gone? Lucas: Exactly. And some franchisors use a 'use it or lose it' structure where unused funds get redistributed to other franchisees or absorbed back into the corporate marketing pool. So timing matters as much as the activity itself. Luna: I've also heard that some franchisees are wary of using co-op funds because they don't want to give up creative control. The franchisor might require pre-approval on ads, and that can slow things down. Lucas: That's a real friction point. In the case I mentioned, the franchisee set up a template system — he created a few ad formats with the franchisor's pre-approved brand elements, so each new campaign only needed a quick copy swap rather than full review. He cut the approval cycle from two weeks to two days. Luna: That's smart. So it's about building a workflow that respects the franchisor's need for brand consistency but doesn't gum up local agility. Lucas: Exactly. And here's another angle — some co-op funds allow franchisees to pool dollars with other franchisees in the same market for joint campaigns. That's especially powerful in metro areas where multiple franchisees share a trade area but don't coordinate. Luna: Yeah, I've seen a group of franchisees from the same brand in a city do a joint radio buy that none of them could have afforded individually. The franchisor actually encouraged it because it created a single cohesive message across the market. Lucas: That's the ideal. But the data says most co-op dollars go unclaimed. According to a survey from the International Franchise Association, about 30 percent of available co-op funds are never used by franchisees. That's billions across the industry annually. Luna: That's staggering. And it's not just small franchisees — larger operators leave money on the table too, probably because they're busy running operations and marketing falls through the cracks. Lucas: Right. So one thing we recommend is setting a quarterly calendar reminder to review co-op fund balances and deadlines. Even fifteen minutes a quarter can recover thousands. Luna: And if a franchisee wants to go deeper — like auditing past claims or negotiating a higher match — what's the approach? Lucas: Start with a simple request to your field rep: 'Can you provide a report of my co-op contributions and claims history for the last two years?' If the franchisor is transparent, you'll see patterns — maybe you contributed $5,000 per store but only claimed $2,000. Then you can propose a plan to claim more, and ask for a higher match rate based on your volume. Luna: So it's almost like a mini-audit. And if the franchisor pushes back, you can reference other brands that offer 75 percent matches or allow digital spend. Lucas: Exactly. Benchmarking against competitors in the same space is powerful. And it's not confrontational — it's just, 'Hey, I noticed Brand X offers a 75 percent match on social media ads. Is that something we could pilot in my market?' Luna: Quick honest thing — a lot of the research we do for these episodes comes from conversations with franchisees who share their playbooks. And that kind of insight is exactly what keeps this show ad-free. A handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that literally funds making this many episodes. Lucas: Yeah, it's a small group that keeps the lights on. If these conversations have moved your work forward in some small way, it's worth knowing that listener support is what makes it possible to do deep dives like this without any sponsor noise. Luna: Right. And it's not a big ask — just that if you find value, you can help keep it going. Okay, back to co-op funds: we talked about digital campaigns, but what about traditional media? Billboards, radio, print — are those still worth using co-op dollars on? Lucas: Depends on the market. In smaller towns, radio and local newspaper ads still deliver solid ROI because the audience isn't fragmented. I know a franchisee in a rural market who used co-op funds to sponsor the local high school sports broadcast — cost him $1,500 per season, and he saw a 15 percent traffic increase on game days. Luna: That's a great example of local relevance. The franchisor's national brand campaign can't replicate that kind of community connection. Lucas: Exactly. And some co-op funds explicitly allow sponsorships of local events, school programs, or charity runs. Those often get approved faster because they're clearly local and generate goodwill. Luna: So the common thread here is: know the rules, plan ahead, and don't assume the default is the only option. Franchisees who treat co-op funds as a strategic resource rather than a passive credit are the ones who get the most out of it. Lucas: And the numbers back it up. That Midwest franchisee I mentioned — he now runs an annual co-op strategy session every January where he maps out the full year of campaigns. His average co-op claim rate went from 40 percent to 95 percent over three years. That's an extra $30,000 a year in free marketing money. Luna: That's a real return on fifteen minutes a month. Good incentive to dig into that co-op manual sitting in the drawer.