Joint marketing in a franchise: rules for spending and reporting

When an established business starts building a franchise network, advertising is no longer solely a decision for its owner. If franchisees contribute to joint campaigns, they need a clear answer: what is the money used for, and how can they check? Before signing the first agreement, put rules in place for how funds may be used, who makes decisions and how spending is reported. The contribution rate alone does not guarantee a transparent working relationship.

1. Separate joint marketing from the franchisor’s own costs

Start by listing the activities you will fund through joint contributions. These might include advertising campaigns, product photography, maintaining a shared brand website or producing materials for individual outlets. For each item, explain how it benefits the franchise network.

Then identify separately the costs that the franchisor would normally bear itself. Recruiting new franchisees, for example, is not the same as attracting customers to existing outlets. If joint contributions are also intended to cover this activity, that must be explicitly agreed in clear terms, rather than buried within general advertising costs.

Draw up a simple classification:

• Permitted costs: campaigns, materials and services agreed in advance.
• Costs requiring approval: expenditure that needs additional authorisation.
• Excluded costs: expenditure that cannot be funded through joint contributions.

Set specific rules for work carried out by your in-house marketing team. If contributions will cover their time, define how it will be charged and what supporting records are required. The same applies to administrative costs. This prevents the joint budget from becoming an opaque source of funding for the franchisor’s day-to-day operations.

2. Put the rules in the agreement, not just in the presentation

Slovenia has no dedicated franchising law, and franchise agreements are not specifically regulated as a distinct type of contract. Contractual relationships are governed primarily by the Slovenian Obligations Code (OZ), including the principle of good faith and fair dealing and the rules on fulfilling obligations. Slovenian and EU competition rules also matter. An agreement therefore cannot validly authorise conduct prohibited by mandatory law.

Nor is there a general, specific statutory requirement to register a franchise offering or provide a standardised franchise disclosure document. This is no reason to be less transparent: explain the joint marketing terms to prospective franchisees before they sign, so they can factor them into their business plans.

In the agreement, or an appendix clearly incorporated into it, define the purpose of contributions, who manages the budget, permitted costs, reporting requirements and the procedure for raising objections. Also specify whether the franchisor contributes for its own outlets and on what basis.

The term ‘marketing fund’ does not, in itself, create a separate legal entity or assets protected from creditors. If you use the term, explain what it means in practice. Work with an accountant to establish separate accounting records for income and expenditure; a separate bank account may be useful in practice, but it does not automatically provide legal protection.

3. Establish who decides and how benefits are distributed

Joint marketing does not mean that every outlet must gain the same number of customers from every campaign. It does mean that the decision-making criteria must be clear. National brand awareness, seasonal campaigns and promotions for individual locations serve different purposes.

Before signing your first franchisee, establish:

• who prepares and approves the annual plan;
• how franchisees can propose activities;
• which local campaigns are eligible for joint funding;
• who approves significant departures from the plan;
• how dealings with related-party suppliers are handled.

In a smaller network, a written draft plan and a set deadline for comments may be enough. However, consultation must not give franchisees the mistaken impression that they have a right of veto if the agreement leaves the final decision to the franchisor.

Draw a clear distinction between joint advertising and mandatory local advertising. If an outlet must fund its own activities as well as paying the joint contribution, that distinction must be clear. Also prevent the same service from being charged twice under different provisions of the agreement.

4. Report separately on spending and results

A good report answers two different questions: where did the money go, and what did the advertising achieve? A campaign’s high reach is no substitute for cost information, while a detailed list of invoices does not, on its own, demonstrate effectiveness.

Agree the reporting frequency in advance. The financial section should show the opening balance, contributions received, spending by category, commitments already made and the remaining balance. The activity section should describe what was delivered and include measures suited to its objectives, such as website visits or enquiries received. Do not present sales effects as certain where they cannot reliably be attributed to the campaign.

Also establish access to supporting records, a deadline for questions and a process for correcting any errors identified. The agreement should state what happens to unspent funds at the end of the year and when an individual agreement ends; do not assume that refunds will be made unless this has been agreed.

Practical takeaway: before bringing your first franchisee on board, prepare a sample annual plan and a sample report. If they do not make clear who pays, who decides and where the money goes, your joint marketing rules are not yet clear enough.