Research Roundup: Comparing Franchisees and Independent Professionals

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As background research in support of Street Fight’s forthcoming Local Merchant report, I came across some good surveys focused at opposite ends of the local small business spectrum: franchise operators and self-employed professionals. Comparing the results, it feels like, though the industry is selling these groups the same marketing and commerce technology and services, the two segments are more different than similar.

Franchisees are bigger media spenders than other small businesses, and although they follow their franchisor’s lead, they have strong DIY tendencies. So do Independent professionals, but they rely much more on personal referrals than on advertising. Still, like franchisees and other small businesses, they’re fond of social media marketing, especially the Millennials in the bunch.

Franchises spend across media channels
The long-time local media watchers at Borrell Associates just released a franchise advertising report, based in part on a survey of 500 franchisees. Some highlights from Borrell’s analysis include:

  • Franchisees’ ad budgets are two-thirds more than the average local advertiser. They spend twice as much on digital as the average, and the amount makes up 30% of their budget. TV is their next biggest channel, followed by direct mail.
  • They spend half their digital budget on search, and roughly equal amounts for advertising on social media and local media sites.
  • They rate their own website as their best source of new customers, with social media not far behind. That’s similar to other local advertisers, says Borrell, while the franchisees are more bullish on TV, direct mail, email and online ads.
  • They’re increasing their spending on digital and mobile at the expense of print (newspapers, yellow pages, magazines).

Similarly, marketing resource management tool provider Vya is promoting a recent BIA/Kelsey survey report on franchisees. Kelsey confirmed franchisee focus on direct mail and Facebook ads, and saw a roughly similar digital share of total spending. Although only two-thirds of franchises use available co-op money, the ones that do follow the corporate lead. For example, 70% of the franchisees surveyed said the brand franchisor was involved in their social media marketing.

According to Kelsey, a third of franchisees want more training in digital advertising from the corporate brand, and nearly as many would like a better CRM system. Despite the influence of the corporate brand, the report says most franchisees use their own marketing and advertising tools. Street Fight research on how big brands market locally showed a mix of centralized and decentralized operations. This doesn’t make life easy for would-be providers, who likely have to sell to both headquarters and local distributors.

Independent professionals rely less on advertising
Freshbooks, that offers cloud accounting software for service-based small businesses and independent professionals, ran a survey of 1,700 of them, asking about a broad range of issues ranging from work/life balance to politics to finances to marketing. The sociological and anthropological responses of these entrepreneurs – many of whom are in the gig economy by choice and want to stay there – are interesting enough, but I’ll focus on marketing and sales. Here are some findings from the study:

  • Overall, 40% to 50% of self-employed professionals said they’re spending the right amount of time selling, with the rest pretty equally split among those that want to do more and those that want to do less. The professions that would really rather spend less time selling and more time working – and thus might be open to more advertising and marketing programs – are IT, creatives, and marketing and advertising professionals.
  • Twice as many solicit personal or client referrals as use paid advertising, and only a quarter use email marketing. Under half say they use social media marketing.
  • Attitudes toward the effectiveness of content marketing and social media vary by age. While nearly twice as many Baby Boomers rate client referrals as effective compared with content marketing or social media, Millennials rate content marketing more effective than client referrals, and social media on par with it.
  • Only 29% said they outsource digital marketing, a figure that is similar to accounting or IT. Even fewer outsource social media. Street Fight analysis of ProspectWise data shows a correlation between using a marketing agency and digital marketing effectiveness.

Freshbooks Strategy VP Matthew Baker walked me through his key takeaways from the survey. He outlined similar points to, but I was particularly intrigued by his observations on DIY and outsourcing. Not unexpectedly, he saw correlation between financial expertise and business success, so Freshbooks tries to build in financial best practices in its offerings. Yet he wants to balance that automation with education, so that the DIYers can learn just what those best practices are. He thinks a dashboard view helps that process.

Baker also pointed out that when they do outsource, these entrepreneurs prefer to outsource to other small businesses or independents. He thinks there are barter deals going on. So far, though, Freshbooks hasn’t developed any community or referral programs – Baker thinks that’s an opportunity for partners.

So what should marketing suppliers take away from these surveys? Brands should shift co-op dollars away from traditional media towards digital, particularly social media, unless they can prove traditional media effectiveness to their franchisees. Vendors that can’t vertical-ize or optimize their products for service professionals due to scale issues should cultivate agencies to help with that. Unfortunately, cloud product margins inhibit the equivalent of the old small business IT VAR ecosystem, and the industry hasn’t come up with its replacement. Publishers and online communities might play a role.

David Card is Street Fight’s director of research.