2022 AFDR, Part 2: Spend – Budget vs. Effectiveness

Highlights from the 2022 Annual Franchise Development Report (AFDR) were unveiled at the Franchise Leadership & Development Conference (FLDC) in October.

Participants consisted of franchisors that completed an in-depth online questionnaire. Responses were aggregated and analyzed to produce a detailed look into the recruitment and development practices, budgets, spending allocations, and strategies of a wide cross-section of franchisors. The data and accompanying commentary and analysis provided the basis of the 2022 AFDR.

Highlights from the report were presented in a general session by Franchise Update Media EVP and Chief Content Officer Diane Phibbs and Wild Birds Unlimited CDO Paul Pickett. Below are selected highlights. All conference attendees received a complimentary copy.

In the 2020 AFDR, respondents said they’d halted many lead generation activities at the beginning of the pandemic. Print and PR spending declined from the previous year, with trade shows taking a big hit as the country shut down. “When travel is canceled, transitioning budgeted dollars to other activities makes sense,” said Phibbs at the time.

In 2021, as the pandemic continued to restrict business as usual, and with so many essentially trapped or working from home well into the year, budget allocations for digital spending (the largest category by far) rose from 39% in 2019 to 42% in 2020, but fell slightly to 39% in 2021. Effectiveness in this category, at 26% in 2021, rose slightly from 23% in 2020. (See the next issue for a breakdown of digital spending categories.)

• Spending on referrals, easily the most cost-effective category, declined from 14% of brands’ budget mix in 2020 to 4% in 2021; effectiveness remained about the same, rising from 38% in 2020 to 40% in 2021.

• Budget allocations for brokers remained flat at 14% YOY, but effectiveness fell from 27% to 20% (more on brokers in future issues).

• PR spending remained level at 9%, but effectiveness rose from 1% to 5% YOY.

• Spending on print rose from 2% of the total budget mix in 2020 to 7% in this year’s AFDR; effectiveness remained steady at 1%.

• The budget mix for trade shows rose slightly from 2020 to 2021, from 3% to 4%, but effectiveness rose from 1% to 4% YOY as people began to return to live events. Barring a national “relapse” of the pandemic in 2022 from new variants, trade shows will continue to grow in attendance, thus effectiveness, as a lead generation and recruitment source.

Next time: 2021 Digital Spend: Budget vs. Effectiveness