Franchise marketing funds: agree how they are used and monitored

When you turn your existing business into a franchise network, your marketing budget becomes a shared responsibility. Marketing contributions collected from franchisees should not be treated as simply another fee: their purpose, permitted uses and monitoring arrangements must be clear before the first agreement is signed. In this guide, a marketing fund means money collected for joint marketing, not necessarily a separate legal entity or a legally protected fund.

1. Separate joint marketing from your own business growth

Your existing marketing expenditure may include consumer advertising, website maintenance, franchisee recruitment and building awareness in new locations. Once independent franchisees join the network, you need to agree separately who will pay for these costs. Not everything that helps the network grow automatically belongs in the franchisees’ shared marketing budget.

Start by reviewing your current marketing invoices. Categorise each expense according to whether it supports joint customer acquisition, an individual outlet or the franchisor’s recruitment of new franchisees. This will also help you identify costs for which the basis of allocation is still unclear.

Use this review to draw up a written statement of what the fund is for. Subject to agreement, shared funds might pay for joint campaigns, an image library, marketing materials and development of the customer-facing website. Local launch advertising, meanwhile, could remain the franchisee’s responsibility or receive an agreed contribution from the shared budget.

Set particularly clear boundaries around franchisee recruitment. Recruiting new franchisees grows the franchisor’s business, but does not necessarily bring customers to existing franchisees. A practical starting point is to keep recruitment advertising separate from joint customer marketing. If you agree otherwise, that use of the funds must be clearly stated.

Also define whether your company-owned outlets contribute to the shared budget, and on what basis. Transparent treatment builds trust before the network expands.

2. Put the fund’s ground rules in the agreement

Finland has no specific franchise legislation, statutory franchise register or prescribed franchise disclosure document. Franchise agreements are governed by legislation including the Contracts Act, the Act on the Regulation of Contract Terms between Businesses, the Competition Act and the Unfair Business Practices Act. Under the Contracts Act, an unreasonable contractual term may be adjusted.

The Finnish Franchising Association’s Code of Ethics is a form of self-regulation, not law. It supports transparent and proper conduct within franchise networks, but does not replace precise contractual terms. Nor does the absence of specific disclosure legislation justify giving a misleading impression of what joint marketing includes or the benefits it offers.

Set out at least the following in the franchise agreement or a clearly identified schedule:

• what marketing funds may be used for and what is excluded;
• who approves the budget and authorises purchases;
• how contributions are calculated and invoiced, and how any changes are determined;
• whether the funds may cover in-house staff time or administrative costs;
• how unspent funds and budget overruns are handled;
• what information franchisees receive and when.

Also explain what happens to contributions already paid when a franchisee’s agreement ends. Do not leave any right to a refund, or the absence of one, to assumption. Give prospective franchisees an opportunity to review the arrangements before committing.

A passing reference to joint advertising in the operations manual is not a sound basis for an open-ended payment obligation. Ask a lawyer to check that the agreement, budget model and information presented to prospective franchisees are consistent.

3. Establish decision-making arrangements without making promises you cannot keep

Joint marketing does not mean that every franchisee receives a number of advertising impressions or customers exactly proportionate to their contribution each month. National brand awareness, websites and shared materials benefit outlets in different ways. Be open about this and define the criteria used to target campaigns.

Prepare a budget that distinguishes between ongoing core costs, campaigns and any contingency allowance. Set an objective for each area, such as raising awareness, generating requests for quotations or introducing a new service. Do not promise a particular sales result that you cannot guarantee.

Consulting franchisees and giving them final decision-making authority are different things. You can invite campaign suggestions and feedback while the franchisor remains responsible for implementing the budget. Make clear where feedback informs planning and where franchisees have an agreed right of approval.

Also agree how joint and local campaigns will be co-ordinated. Franchisees need sufficient notice of the materials they will receive, what they are expected to do and whether delivery will involve additional local costs. A joint campaign must not turn into an unexpected bill.

If you buy services from another business you own, or from a business owned by someone closely connected to you, disclose the reasons for choosing it and the cost. Comparable quotations and documented approval help demonstrate that the arrangement serves the interests of joint marketing.

4. Make the use of funds easy to check

Track marketing funds through a dedicated cost centre in your accounts or another clearly identifiable accounting arrangement. A separate bank account can make monitoring easier, but does not in itself give franchisees ownership of the money or protect it from the franchisor’s creditors. Avoid presenting the arrangement as a legally separate fund unless one has actually been established.

Agree with your accountant how contributions, expenses and VAT should be treated, based on the substance of the arrangement. Calling it a fund does not, by itself, determine its accounting or tax treatment.

Provide franchisees with a concise report at agreed intervals. Show contributions collected, actual expenditure, commitments to future purchases and differences between budgeted and actual figures. Keep financial reporting distinct from campaign results: advertising impressions do not tell you how much money remains, and an account balance does not tell you whether the marketing has worked.

Address failures too. If a campaign did not generate the expected interest, explain what will change next time. This makes reporting a tool for learning rather than merely an exercise in defending expenditure.

Practical checklist: before invoicing the first marketing contribution, make sure you have a written statement of the fund’s purpose, agreed decision-making authority and a workable reporting template. Shared money needs rules that everyone understands.