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Chapter 6. The Service Delivery System and Marketing

Chapter 6. The Service Delivery System and Marketing

Three of the top six companies in United States in terms of marketing expenditures are auto giants—General Motors, Ford and DaimlerChrysler—and their franchised dealers. Total annual advertising budgets of the combined companies were $7.7 billion dollars in 2002. During the same year Yum Brands (Pizza Hut, KFC, and Taco Bell) spent almost $1 billion in advertising. One of the reasons entrepreneurs use franchising to grow rapidly is to generate the marketing dollars that these companies use to create a national brand and to build a barrier to entry that keeps would-be competitors out of the market.

The scope of marketing within franchised organizations is vast, and a full understanding of the potential benefits and pitfalls can make the difference between a company remaining a moderate success or growing into a national or even global firm. There are over 600,000 franchised outlets in the United States, with revenues estimated at more than $1 trillion.[1] The central production of marketing materials by the franchisor allows local units to concentrate their activities predominantly on media purchases—specifically radio, television, newspaper, and direct mail. The marketing expenditures for franchised organizations across the United States are estimated to be $60 billion for 2002. On what is all of this money spent? Approximately $8 billion is spent on creative and production-related activities, $20-plus billion on national advertising, $22 billion on regional efforts, and $6 billion on local activities. Collateral material such as point-of-sale signage and flyers is a smaller yet equally important component.


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