As Franchises Bounce Back, A Golden Market for Local Tech Surfaces

Franchises have finally started to bounce back in the U.S. after a painful recession. And, that’s good news for the hyperlocal industry. A booming franchise sector presents a unique opportunity for hyperlocal firms to blend the scale and reach implicit in the digital marketplace with the granularity and flexibility afforded by mobile, social, and other locally-driven platforms.

What’s more, the franchise industry — with its unique combination of scale and fragmentation — could help provide a critical stepping stone for vendors to reach the still-untapped small business market. The budgets will likely remain national, but new technologies are working to bring the local franchisees deeper into the marketing fold than ever before

After a slow-down in the wake of the 2008 crash, the franchise industry has seen saw its third consecutive year of growth in 2013, according to a study released by the International Franchise Association earlier this year. The roughly 770 million franchise establishments in the US generated a little over $839 billion in output last year. That’s roughly half a billion above its pre-recession high in 2007 and a 4% jump from a year earlier.

Franchises account for a huge portion of marketing spending each year, with the the bulk of the budgets spent by the franchisee at the national level. Kip Cassino, executive vice president at Borrell Associates, told me that while franchise spending accounts for more than a third of national advertising dollars, it makes up less than 10% of total local media spending in the U.S.

Companies like Balihoo, a marketing automation company based in Idaho, believe they can help large franchise organization bridge that gap. During a panel at LeadsCon, a lead generation conference, in New York on Thursday, Susan Tormollen, vice president of marketing at Balihoo, argued that the growth of local tech would likely come in step with changes in the franchise sector.

“One of the big reasons that local has remained untapped is that up until recently most brands had to rely on a network of franchisees or resellers to understand the nuances of local markets,” she told an audience. “They had to take what they knew about their store locations to represent the national brands.”

The company helps large franchises localize search and email campaigns by creating landing pages, messaging and other content specific to a consumer’s market.

With social media, franchisors face a slightly riskier proposition in allowing their owners to represent the brand publicly. Technology companies such as the San Francisco-based Hearsay Social have built big businesses developing systems to help large brands distribute their social media presences, allowing franchisees and other employees to tweet or post in a regulated environment.

But Tormollen is unconvinced that these systems will lead national brands to hand over their social media presences to franchisees in a meaningful way. “There are definitely benefits, and in every franchise network, you will have some superstars. But the damages from the non-superstars can outweigh the benefits. It’s a risk-reward. It’s all about putting the right processes in place.”

The growing demand for local commerce capabilities by consumers might also help drive a change in the way national marketers relate to their local affiliates. The adoption of online ordering and mobile payments systems will begin to allow marketers to tie campaigns to orders, purchases and a number of other in-store actions. That shift could put the franchisee at the center of the attribution process for digital advertising, forcing big franchises to rethink, or at least adapt, the current marketing model.

Steven Jacobs is Street Fight’s deputy editor.