Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / Why Franchisees Are Using Co-Op Marketing Funds Differently in 2026
Transcript
- Lucas: Franchise marketing funds are one of those topics that sounds boring until you realize there's literally billions of dollars at stake and a massive power struggle playing out underneath the surface. Luna: Yeah, every franchisee pays into them — usually a percentage of gross sales — and then the brand decides how to spend it. But lately, franchisees are pushing back hard. Lucas: Right. And it's not just about wanting a bigger say — it's about wanting a different strategy altogether. The classic model was: you collect two percent from every location, you produce a national TV campaign, maybe some radio, you get some brand awareness. But in 2026, that model feels increasingly out of step with how customers actually find businesses. Luna: Customers are on TikTok, they're searching Google Maps, they're reading local reviews. A national TV spot doesn't drive foot traffic the way it used to. Lucas: Exactly. So franchisees are asking: why is my money going to a thirty-second commercial that airs during a cable news show nobody under fifty watches, when I could spend that same dollar on Instagram ads targeting people within three miles of my store? Luna: And the brands are caught in a bind. They want consistency — the same logo, the same messaging, the same look. But they also need franchisees to stay happy and profitable. Lucas: So a growing number of systems are experimenting with what I'll call the 'menu model.' Instead of one national campaign that every franchisee funds, the brand sets a list of approved tactics — local social media, search engine marketing, direct mail, community sponsorships — and franchisees can choose how to allocate their share of the fund. Luna: That sounds like a compromise. But how do you measure whether it works? I imagine the brand wants to see that the money is being spent effectively. Lucas: There's a great example from a quick-service brand in the Southeast — roughly 150 units. In 2025, they shifted about 40 percent of their national fund into what they called 'hyperlocal marketing grants.' Franchisees could apply for up to $10,000 per quarter for locally targeted digital campaigns, and they had to report results. Luna: And what happened? Lucas: Same-store sales for participating locations grew about 6 percent compared to the rest of the system. And the brand learned something important: the best-performing campaigns weren't the ones that looked the most polished. They were the ones that felt genuinely local — featuring the actual franchisee, talking about a local sports team, that kind of thing. Luna: That's the kind of authenticity a national ad can't replicate. But I wonder — does that create inconsistency? If one franchisee runs a campaign that feels completely different from another, doesn't that dilute the brand? Lucas: It's a real tension. Some brands have responded by creating very strict creative guidelines within the menu. So you can choose the channel, but the look and tone still have to fit within a certain framework. Others have gone further and created franchisee marketing committees that actually vote on how the national fund is spent. Luna: I've seen that — it's becoming more common. The committee might include five or six franchisees plus a couple of corporate marketing people, and they decide together. It gives franchisees a real voice. Lucas: And it changes the dynamic from 'corporate tells us what to do' to 'we collectively decide what's best for the system.' One franchisee I spoke to said it was the first time they felt like their money was being spent wisely. Luna: But not every brand is on board. Some see it as giving up control. And honestly, there are franchisees who don't want the extra responsibility — they just want to run their stores. Lucas: That's a fair point. The menu model works best for franchisees who are digitally savvy and want that control. Others prefer the old system where they write a check and forget about it. So some brands are offering a hybrid: a default national campaign, but with an opt-in for local customization. Luna: I think the bigger trend here is that franchisees are becoming more sophisticated about marketing ROI. They're not just trusting that the brand knows best. They're looking at the data and asking hard questions. Lucas: Absolutely. And that's a healthy shift. The best franchise systems are the ones where there's a real partnership — where both sides are pushing each other to be better. On a related note, if these conversations have moved your work forward in some small way, listener support is what keeps this show ad-free and independent. You can find us at buy me a coffee dot com slash fexingo. It's a simple way to help us keep digging into these topics. Luna: Yeah, and we really appreciate those who do. It makes a difference. Lucas: So back to that QSR brand — the one with the hyperlocal grants. One of the things they noticed was that the franchisees who participated became more engaged with the brand overall. They started attending more webinars, they shared their results with other franchisees, and some even became informal marketing mentors. Luna: That's an interesting secondary effect. It's not just about the sales lift; it's about building a more collaborative culture. Lucas: Exactly. And that's something that's hard to quantify but incredibly valuable. Another approach I've seen is brands creating a 'marketing playbook' that franchisees can pull from — pre-approved ad templates, social media copy, even video scripts. But the key is that franchisees can choose which ones to use and when. Luna: So it's like a toolkit rather than a mandate. Lucas: Precisely. And some of the more forward-thinking brands are even using AI to help franchisees optimize their local campaigns. They'll analyze which creative performs best in a given market and push that recommendation to the franchisee. Luna: But I imagine there's still resistance from some franchisees who feel like they're being told what to do, even if it's just a recommendation. Lucas: Sure, there's always some friction. But the brands that are winning on this front are the ones that frame it as empowering rather than controlling. They say, 'Here's the data, here's the tool, you decide.' And that resonates with franchisees. Luna: So what's the one concrete takeaway for a franchisee listening right now? If they want more control over their marketing fund, what should they do? Lucas: First, understand exactly how your fund works — read the franchise disclosure document, talk to other franchisees. Then, if you feel the current allocation isn't serving you, gather some data. Show your brand that local campaigns drive results. Come with a proposal, not just a complaint. Luna: And if you're a franchisor listening? Lucas: I'd say: don't wait for franchisees to revolt. Start experimenting with a menu model or a marketing committee now. The brands that proactively share control are the ones that build the strongest systems long-term. Luna: It's a shift from a top-down to a more collaborative model. And it seems like it's only going to accelerate. Lucas: Yeah, I think we'll look back in five years and see this as a turning point in how franchise marketing works. The brands that adapt will thrive. The ones that don't will face increasing friction from their own franchisees. Luna: And that's the kind of change that's good for everyone — better marketing, better results, better relationships. Lucas: Alright, that's our episode on franchise marketing funds in 2026. Next time, we're looking at another hot topic: how franchisees are using revenue-based financing to open more units without giving up equity. Luna: Looking forward to that one. Thanks for listening, everyone.