Plan a Franchise Marketing Fund in New Zealand

A successful business may already have a marketing budget, but collecting contributions from franchisees creates different expectations. Before franchising your New Zealand business, decide how any shared marketing fund will operate, who will control it and what contributors can reasonably expect. The aim is not simply to fund advertising: it is to establish clear rules for spending money intended to benefit your franchise community.

1. Decide what the fund is for

Start with a written purpose rather than a contribution rate. A shared fund might support brand awareness, national campaigns, website development or reusable promotional materials. It should not become a convenient way to cover unspecified head-office expenses.

Separate three types of expenditure:

• Shared brand marketing: activity designed to benefit the franchise network, although benefits may differ between locations.
• Local marketing: activity commissioned for an individual franchisee’s trading area.
• Franchise recruitment: activity intended to attract buyers of new franchises.

These activities can share suppliers and digital platforms, which makes boundaries important. For example, a website might contain both customer booking pages and a franchise recruitment section. Decide how the associated costs will be allocated rather than charging everything to the shared fund.

Use your existing business as a pilot. Classify recent marketing expenditure against these categories and identify costs that would be difficult to explain to a contributing franchisee. Resolve those ambiguities before collecting money.

2. Understand the New Zealand legal position

New Zealand has no franchise-specific legislation regulating the ongoing franchise relationship and no government franchise registration requirement. There is also no statutory franchise disclosure regime. General commercial and contract law still applies.

The Fair Trading Act 1986 is particularly relevant to descriptions of a marketing fund. It prohibits misleading or deceptive conduct, unsubstantiated representations and unconscionable conduct in trade. Promising that every contribution goes directly into advertising could be misleading if the fund also pays administration charges or staff costs.

The Commerce Act 1986 applies to competition issues. Obtain legal advice where shared promotions involve requirements about franchisees’ selling prices. The Privacy Act 2020 is relevant where campaigns collect or use customers’ personal information.

Membership of the Franchise Association of New Zealand (FANZ) is voluntary, but its Code of Practice and Ethics binds members. Its disclosure requirements include providing the disclosure document at least 14 days before signing a franchise agreement, or before a prospective franchisee becomes bound by a preliminary agreement to proceed. The document must be updated at least annually.

Ask a specialist franchise lawyer to align fund descriptions, disclosure and contractual terms. Do not present your chosen governance arrangements as legal requirements applying to every New Zealand franchise.

3. Set spending and decision-making boundaries

Create a schedule of permitted expenditure. Be explicit about creative work, media placement, digital subscriptions, agency fees, promotional production and administration. If staff time can be charged, establish which work qualifies and how the charge will be calculated.

Then document:

• Who prepares and approves the marketing plan.
• Who can authorise spending and commit to supplier contracts.
• How related-party suppliers and potential conflicts are handled.
• Whether franchisees are consulted or have any voting rights.
• How urgent or unbudgeted expenditure is approved.

Consultation is not the same as control. An advisory group can offer local knowledge while the franchisor retains final responsibility, provided that distinction is clear.

Also decide whether company-owned outlets contribute and on what basis. Explain the treatment consistently. Avoid arrangements that quietly shift the cost of supporting company-owned locations onto franchisees.

4. Plan for uneven benefits and changing circumstances

A national campaign will not necessarily generate equal results for every location. Some franchisees may serve areas outside the campaign’s reach; others may lack the capacity to fulfil the promoted offer.

Explain how campaign selection will take account of coverage, seasonal demand and operational readiness. Do not promise equal sales leads or a guaranteed return unless you have a sound basis for doing so.

Before launch, settle what happens to unspent balances, overspending and long-term supplier commitments. Address whether money can be carried forward, whether the franchisor can advance funds, and what happens when a franchisee leaves or the network closes. These matters need contractual clarity, not assumptions about ownership or refunds.

5. Test accountability before collecting contributions

Run a trial using your own business’s marketing activity. Produce a simple summary showing money allocated, expenditure by category, outstanding commitments and the remaining balance. Check whether invoices support each category and whether mixed-purpose costs are allocated consistently.

Agree how often franchisees will receive updates and whether accounts will receive independent review. Distinguish campaign measures, such as enquiries, from actual sales: neither automatically proves that advertising caused a purchase.

Practical takeaway: Before collecting the first marketing contribution, have a defined purpose, spending rules, approval responsibilities and clear treatment of leftover funds. Test those arrangements with real expenditure, then ensure your agreement and recruitment information describe the same system.