• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL
Help

Chapter 6. The Service Delivery System a... > Marketing and the Free Riding Risk

Marketing and the Free Riding Risk

Free riding can be pervasive throughout the franchise relationship, but it is most evident in marketing. Local marketing expenditures are fertile ground for the franchisee abuse of free riding to occur. Because a little less money spent by any individual franchisee will not likely affect the brand or revenue of the entire system, franchisees may be tempted to restrict their share of the spending. By holding back local dollars, the individual franchise gets a free ride on the system’s brand. This problem is vexing because the expenditures in the area of local marketing are difficult to monitor. As initially discussed in Chapter 2 regarding unethical franchisee behaviors, the franchisor has limited knowledge of the use of dollars spent on local marketing. For example, a franchisee could take his or her family out to dinner and charge it to the local marketing account. The franchisor would have no way of knowing. Remember, local advertising is typically a contractual requirement. The franchise system uses this requirement to increase marketing impressions and create brand equity for all outlets. Anytime the allocations of marketing funds are withheld or misused, the marketing impact is diminished for the entire franchise system. Imagine if McDonald’s did not monitor contractual requirements. If each franchise misallocated only a small amount of the required local advertising expenditure (e.g., $100/month) the systemwide impact would be over $30 million annually in reduced advertising.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint