CHAPTER 6 + ANCNSING AND THE ENTREPRENEg suffer imeparable damage; therefore, franchisers normally demand compli compli i romney thet eoreet pen engender chiser conducts periodic inspections of local faites toast in maintaining sccepabe | be dyes ning acceptable John Schnatter, founder of Papa John’s, a fast-growing paaza franchise with nearly 3,000 outlets in 49 states and 20 global markets, makes personal visits to some of his {ranchisees' stores four to five times each week to make sure they are Performing up to the company high qual ity standards Franchisees say that Schnatter, known for his attention to detail, often checks pizzas fo air bubbles Boe oui tomato sauce for freshness. "Pizza is matte ‘ a e arid he takes it very serous.” says one Popa John's Pizza Jot eater, ae thy, bP i gly ang his con francine Seta ag seven shies exh net to make wre ht hey we etrnig 19% the mp ‘gui Sande nl Maing uality is so important that most franchisers retain the right to terminate anchise contract and to repurchase the outlet if the franchisee fails to comply with ‘established standards. Y- National Advertising Programs An effective advertising program is essential to the success of virtually all franchise oper~ i ¢ é g i 4 i i § i 5 i far-reaching advertising campaign. A regional or national advertising program franchisees, and most franchiscrs have one. Typically, these advert ‘organized and controlled by the franchiser, but franchisees actually pay for the In fact, they are financed by each franchisee's ‘cqatnibuuoa of a percentage of monthly sales, usually 1 to 5 percent, or a flat monthly fee For ‘example, Subway franchisees pay 3.5 percent of gross revenues 1o the Subway national advertising program. These funds are pooled and used fora cooperative advertising program, which has more impact than if the franchisees spent the sume amount of money separtely (CManytranchisers also require franchises wo spend minimum aount os acl ave tising)\To supplement ther national adverising efforts, both Wendy's and Burger King requiff franchisees to spend atleast 3 percent of gross sales on lal advertising Some franchisers assist each franchise in designing and producing its local as. Many comp nies help franchisees create promotional plans and provide press releases atid avert ‘meats for grand openings. S~ Financial Assistance ‘Because they rely on their franchisees’ money lo grow their businesses, frauchisers ypically do not provide any extedsive financial help for franchisees In (act, one study yg reports that one-third of franchisers offer financing to their franchisees 1° Pranchisers rarely make loans to enable franchises to psy the initial franchise fee. However, on 1 franchiser locates a suitable prospective franchisee, it may offer the qualified cani- date direct financial assistance in specific areas, such as purchasing equipment, inven tory, or even the franchise fee (Because the start-up costs of some franchises are already at = Tevels, some franchisets find that they must offer direct finan- cial assistance. For example, US Franchise Systems, fanchiser of Mcrotel inn and Hawthorn Stes nots has set up a subsiday US Funding Corporation, which makes avaable tts Kranchaees $200 milion in construction and mortgage financing, Hot only has the nfo financing franchise, but it also has accelerated program cut the time required to open anew hotel the franchise's growth rate.” | US Franchise syters