Franchise! How Small, Local Business becomes Big Business

Alex porter

Location 3, is a digital marketing agency that “delivers enterprise-level strategy with local market activation. In its 20th year in business, the Google-Analytics Certified agency works primarily with franchisors to understand their business objectives and facilitate enterprise strategy alignment and with individual franchisees, to promote hyper-local-level marketing activation. Services include business listing management, SEO, data and analytics, and driving new revenue through paid search, paid social, local programmatic buys – and anything else that makes sense for boosting local level revenue.

How big is the franchise market? Alex notes that over 50% of all US retail locations are part of a franchise organization. Only about 30% of the approximately 750,000 franchise locations in this country are in fast food/casual dining. Almost anything, Alex explains, can use the franchise model. Location 3 focuses less on fast food and more on services or franchise systems with measurably higher customer lifetime values.

In this interview, Alex explains how Digital marketing at the local level is interesting, but also complicated. Unlike direct mail, where someone can walk into a store with a traceable coupon, programmatic vendors (e.g., Google and Facebook) can claim, based on their technology, that someone saw or engaged with your ad or website on their platform, and ended up in your location. When promotions are on multiple platforms, how does one tell which one actually drove the store visit? And how should the proportion of spend be tweaked to maximize revenue growth? To facilitate optimal decisions, Location 3 provides franchisees with full turnkey campaigns across a broad variety of platforms, tracks return on ad spend, and shares that information with it clients with full transparency.

Location 3 developed a franchisee-facing software platform, LOCALACT, which serves as a hub of local digital data. Franchisees can use this tool to see their local page analytics, how their local Google My Business is performing, and where their traffic is coming from; respond to reviews; and buy additional media.

Alex can be reached on his company’s website at: https://location3.com/, on YouTube, or at 820 16th St. Suite 300, Denver, CO 80202.

You can always check out our website. We’re very active. We have a pretty active YouTube account. We put up some video content. We go to pretty much every franchise tradeshow that’s out there, so if you’re in the franchise space and we haven’t met you, I’m sure we will soon. Very active in that community, the tradeshow community. If you’re ever in Denver, we’re right on 16th Street Mall right downtown.

ROB: Welcome to the Marketing Agency Leadership Podcast. I’m your host, Rob Kischuk, and I am excited to be joined today by Alex Porter, CEO of Location 3 based in Denver, Colorado. Welcome to the podcast, Alex.

ALEX: Thank you for having me. Looking forward to being on.

ROB: Fantastic to have you here and learn a little bit more about your journey and Location 3. Why don’t you tell us about Location 3 and what the company is great at?

ALEX: Awesome. We’re actually celebrating our 20th year in business last month, which in the internet world seems like practically forever. As you can imagine, over those 20 years we have changed many, many times as the digital marketing world has gone.

We started out, our founder was setting up sales offices at DoubleClick way, way, way back in the day. Started this company Location 3 with the idea that, just like real estate, your presence online, “location, location, location,” would be incredibly important for your digital marketing efforts. We went through email marketing, display marketing. At one point we were managing what we called the Tier 2 search engines like FindWhat and eSpotting and things like that along the way.

Over the years we’ve really gotten very involved in the local space. We’re currently really focused in the franchise market, so we work with both the franchisor to understand their business objectives and help align their enterprise strategy and then we bring that down to the local level with hyper-local market activation, where we’re working with each individual franchisee as well.

What we’re really good at is local digital marketing, whether that’s business listing management, SEO, obviously all the data and analytics that come with that, but then really driving new revenue through paid search, paid social, local programmatic buys – really anything and everything that makes sense to drive revenue at that local level is where we’re really focused. We’re very active in the franchise community, get involved in the IFA and their various events, and over the last 5 years that has really been our primary focus.

That Location 3 name really has come to life even more than we ever realized it 20 years ago.

ROB: Fantastic. When a lot of people hear “franchise,” “franchisor,” “franchisee,” they would think about fast food restaurants. But what are you talking about here? Help us see the picture of franchise that’s relevant to your world.

ALEX: I didn’t realize too much about this until we really started getting into it, but over 50% of all retail locations in the United States are part of a franchise organization. It’s around 750,000 franchise locations in the U.S. Only about 30% of those – and I’m somewhat making these numbers up; they’re on a piece of paper somewhere, so it’s probably not too far off from this – but only about 30% or so of these are the fast casual, so the fast foods, the Burger Kings, the McDonald’s of the world.

Where we actually focus is more in the services or franchise systems that have a higher customer lifetime value that’s really measurable. What we found is that the fast casual folks are certainly invested in local digital marketing, but they’re still doing a lot in general awareness campaigns and those big dollar buys to get people to go in and buy the Big Mac or the all-day breakfast.

We’re working with clients that it might be some sort of a membership or real estate or financial advice or business-to-business services. That’s where we’ve been finding a really good foothold. Everything from a gym to a real estate company to a homebuilder and things like that is our focus, even a subset inside the franchise space.

ROB: I did not know there were franchised homebuilders. Is that normal?

ALEX: No, but anything can be a franchise concept, if you think about it. That’s what’s been really interesting, getting involved in the franchise world. They have a conference specifically for emerging franchise concepts. It’s actually in Nashville in a week or so. These are where brands come – they might have one location and they’re trying to figure out how to franchise, or five or six and they’re like, “What needs to happen to get to this next step?”

It’s a really pretty fascinating business to be involved in and comes with its own unique set of issues. When you’re really dealing with an SMB – an individual franchise owner is essentially a small business owner that is the CEO, CMO, and operations person all rolled into one, typically. But they have this relationship with the corporate entity from branding and guidelines and things like that. So, it’s a pretty unique space to play in.

ROB: For sure. How much of the marketing spend comes from the franchisor, and how much of the marketing spend comes from the franchisee? How do they decide where that money goes?

ALEX: Every franchise system has to have what’s called an FDD, which is a Federal Disclosure Document, and in that they outline all these operational elements. One of them is typically an ad fund. Now, to be a franchisor, you don’t have to have an ad fund, and a lot of times these emerging folks that I talked about won’t have one to try to attract new franchises. But, typically you have to pay a percentage of your revenue back to corporate for a national ad fund. That ad fund is spent, typically, at the franchisor’s marketing team’s discretion. But that could also be covering salaries and other marketing expenses and things like that.

Then, at the local level, sometimes they’re required to spend a certain amount per month, but oftentimes it’s kind of impossible to track. In many cases, they’re kind of on their own at the local level. So, let’s just say hypothetically you have a franchise that has 100 locations. Their ad fund is, for easy math, $10,000 a month. They might be buying brand terms on Google and some remarketing campaigns and base level, foundational type stuff. They might be managing the listings management for them.

Then they say, “Hey, local person, you need to market,” and that’s really where we come into play. We come in and say, “Hey, we have a full-turnkey solution for your franchisees to be able to buy Google, Bing, Facebook, Instagram, Yelp, GDN, local programmatic, local video, and have all that data in one place.” That’s where we’re really fulfilling that need at that franchisee level.

ROB: You mentioned that along the way, when we were talking beforehand, you’ve actually built some technology to help in this process. What kind of technology do you have in place as an agency? Because that’s a little bit unique, to actually have technology that’s in action and useful and helping the business in that way.

ALEX: The technology is called LOCALACT. It’s a franchisee-facing software platform for the franchisees to first and foremost have an account and see all of this data. If you’re a franchisee, you own a single location, you can go into LOCALACT and see how your Google My Business is performing, your local page analytics, where you’re getting your traffic from. You can respond to reviews, those sorts of things. It’s very much a hub of all local digital data, and then they’re able to buy up that additional media.

It’s not a SaaS where they go in and pick the campaigns and the keywords and the ad copy and those sorts of things, because we’re the experts there and we don’t expect them to do that. But they work with our team directly to understand the opportunities. We might come back and say, “You should be spending $500 a month. We’re going to put $300 into Google, $100 into paid social, and the rest across a couple of different properties.”

We run the campaigns on their behalf; they have full transparency into what it’s doing for them. We’re tracking phone calls and we’re tracking store visits through the various partners’ technology. We’re tracking website actions they might be taking. Maybe they are doing online ordering, but at a local level. We’ll track return on ad spend if they’re getting delivery orders, those sorts of things. We want to track just about anything and everything that we’re doing on their behalf and show that to them with full transparency.

ROB: That’s fantastic to have that sort of transparency. I imagine one problem you’re even solving – when you’re a local business but you’re working with this franchisor, there’s this whole mess of approved promotions, approved creative, approved copy. There’s all the creative assets. Are you helping make sure that you know where those things are for each of your franchisees so they don’t have to try and juggle this as well as running their business and everything else?

ALEX: That is something that we have not delved into yet, but you’re absolutely right. There is a lot of stuff all over the place. Typically the franchisor will have some kind of intranet where they are letting people grab this type of stuff, especially as it relates to social media posts or if you want to put an ad up in your location, what’s the approved content or design. We do not get into that, but it definitely is an opportunity that we’re evaluating.

ROB: That’s interesting, because I’ve heard of technology solutions, SaaS companies, trying to work in that space. But it’s interesting to hear you say the intranet and these asset libraries within the brand are prevalent. I think people are going to realize that there are sometimes tools for businesses to make signs with approved creative and actually print them out.

ALEX: Yep, absolutely.

ROB: [laughs] Something we don’t always think about in our digital world.

ALEX: Right? It’s funny because that’s one of the things that – when we first talk to a new brand, we obviously want to know what you’re currently doing, what’s working. A lot of these guys still do direct mail, and I’m often very reticent to push back on that because direct mail still works really well. If you have your own audience – if I get my coupon to Jersey Mike’s – and they’re not a client of ours, so I can use that as an example – I use that coupon probably that weekend because I love their cheesesteaks, and sometimes you forget. [laughs]

We’re also in this interesting space where the franchise world might be a little bit behind other companies in terms of adopting digital and spending money on digital. We’re still navigating that, “Hey, let’s take some of your TV budget, let’s take some of your direct mail, let’s take some of these other things that you’ve been doing and let’s test it against digital and then let’s evaluate it.” That’s really where the enterprise engagement comes into play. We need to understand their KPIs and what their source of truth is.

I think so many companies have a lot of data, and it’s typically a little bit all over the place. You have the marketing person – we just had a nice summit with Google in their Partner Plex out in Redwood City, where we had about 20 different franchise brands out there, talking and networking. I led a roundtable on data and I asked each one of them, “Where’s your source of truth for data, and do you trust it?” 95% of the people said, “I don’t really have a great one and I don’t really trust it.”

So, there’s a big problem, I think, in the space of as we’re evaluating marketing spend, what are we evaluating it against, and is it reliable, and are people buying into it? That’s definitely a trend that I see in the space that fits not at the franchisee level, because the data’s too small, but really at that franchise grid level and helping them really understand what they care about and how the marketing impacts that.

ROB: Yeah, it’s a big opportunity, especially as all this stuff gets more trackable. One thing I noticed, Alex, looking at your background, is that it appears you are currently in charge of Location 3, but you did not start off in charge of Location 3. A lot of times we’re talking to founders. What was that journey like from joining the company? Did you know the people involved beforehand? How did you rise to the captain’s chair?

ALEX: The rise to power? [laughs] Andrew back then founded the company. As I mentioned before, he was at DoubleClick and that’s how he got his feet wet in the digital world. He moved out to Denver just for the lifestyle. We had both gone to the University of Maryland. I ran into him on the streets of Denver. I was being a snowboard bum; he was like, “Hey, I’ve got this thing. The internet’s going to be big.” I was like, “All right, I don’t have anything better to do right now.” So, we started working together.

I started out sending email spam, basically. This is before spam was illegal, so it was totally legal at the time. It was really a two-person operation. I was involved in a little bit of everything. In any kind of small business, you’re hunting for new revenue, so it was a lot around business development and finding new ways to make money. Then we had a few clients that we were doing basically cost-per-acquisition arbitrage email.

It started playing out with GoTo and the precursor to Yahoo and all that kind of good stuff. I was moving bids up by a penny or a nickel every 5 minutes on certain keywords, and we were driving leads and making money and said, “Okay, maybe we need to be a search shop.” That continued on for probably the next 10 years or so, where I was really in charge of business development and client relations and understanding the marketplace and what we needed to offer to meet that need.

I don’t even remember the time exactly when I got moved into the president/CEO role. I think it was about 3, 4, 5 years ago. Andrew’s still involved in the business, but from a day to day perspective, I was leading the charge and just made it official, really. It was a slow and steady climb, but it’s a fun space to be in. I get a lot of energy back from the day to day.

ROB: For sure. It seems to be changing a lot. If you weren’t changing a lot, you would still be doing email spam or SEO. The tools just keep on coming. Email tools get better and cheaper. The tools for paid are getting better and maybe more expensive, but targeting’s better. It may be cheaper to get what you want done. And now even some of the older stuff like billboards are going digital.

What are some of the things that have changed recently that have come into scope for your clients, and what are some things you think are on the horizon that could be making digital for local even more interesting, but also complicated?

ALEX: I think at the local level over the past year, really – and this is across all of our partners – is the ability to track the online activity to in-store. Google and Facebook and others, a lot of the programmatic vendors, they can say based on their technology that someone saw or engaged with your ad or your website from our media activities and ended up in your location. In a lot of our franchise systems we work with, that is still a big trigger for success.

The problem with that is attribution for in-store visits is a whole other ball of wax. If I’m like everyone else, I’m touching Facebook and Gmail and display ads and all this other stuff on a day to day basis on my phone, on my desktop. Which of those actually drove a store visit? That is a problem that I don’t even know if anyone’s trying to address right now, trying to combine all those data sources. I think just basic web/online attribution is difficult enough.

So, translating all of that to the franchisee is definitely a challenge. You spent $1000 bucks; you spent it across these four different media platforms. They’re all claiming they drove 100 visitors, but you only got 150 total. That’s going to make them not trust the data, so that’s a big challenge for us. How do we leverage the store visit data, because we know it works and is driving the revenue, but how do we feed it back into the machine and tweak the spends appropriately so we’re getting the most out of that money?

And then how do we educate the SMB, the franchise owner, that what we’re doing is not smoke and mirrors, it’s real, and it all does work together? To me, that’s going to be a big undertaking for the industry in general, but for us specifically over the next 6 to 12 months.

ROB: For sure. This is why direct mail still happens, because when you have that coupon, the attribution is there.

ALEX: Absolutely. Because who doesn’t want that cheesesteak?

ROB: I want it right now.

ALEX: [laughs] I’m trying to cut back on bread, so I have like an Unwich from Jimmy John’s, which is so unsatisfying.

ROB: Well, now I know. Now I won’t try it. I thought about it. They were offering me a free one.

ALEX: It’s good for you.

ROB: [laughs] Alex, what are some things you’ve learned from building Location 3 that you might do differently if you were starting over?

ALEX: I would say the number one thing that I learned and I think I learned, but I’ve continued to make mistakes, is that if someone is not right for your culture as an organization, no matter how many pros they have on their pro list, if it’s hurting the culture, if it’s hurting morale, then the faster you get rid of that part of your organization the better.

The people part of the agency business is the hardest part, because at the end of the day we live in a very competitive market. We do something that is a great skill to be learned. We’re very proud of the people that have worked here and gone on to do amazing things. After 20 years, we have a pretty amazing family tree of people that I’m proud to call my colleagues.

But what I learned is that people management should be your number two priority or number one priority, really. We get better at it, but looking back in time, there’s certainly things that I would’ve done that would’ve let me sleep better at night, I guess. [laughs]

ROB: Do you think the challenge is how long it takes to figure out whether or not they’re a fit, or how long it takes to maybe actually act on that versus trying to put a Band-Aid on it?

ALEX: Looking back on it, you know in your gut what the right answer is, and sometimes it just takes you longer to act on that instinct because of a variety of reasons – the timing’s not right or this, that, and the other. But any advice to someone – and I’ve given this advice to some folks that have gone out and started their own things – the cultural fit is so incredibly important. Making that a priority is worth your investment. And having a good culture in the first place.

ROB: Having a good culture in the first place? Is that what you said?

ALEX: Yeah, having a good culture in the first place is obviously predicated to wanting somebody to fit into that culture. If you have a crappy culture, then you can have crappy people.

ROB: They fit in, but it’s still a problem. And then you want to leave as the person in charge. It’s interesting there – I think when you’re talking about keeping good people around, one of the challenges can be – it’s easy when you’re growing to give people who are ready for it more responsibility. It’s a little bit harder when there’s not enough new roles to keep upskilling people. Have you found any interesting strategies to keep people interested and engaged even if there’s not a promotion sitting right in front of them?

ALEX: Yeah. I brought it up earlier about how fast this world changes. If there’s a paid search account manager that has a senior in front of him and a director in front of him and that sort of thing and they’re trying to say, “What can I do more here?”, there’s always new avenues to test out and understand.

The amount of betas that come out of Google on a monthly basis is obscene. Facebook has just made search a possibility within their platform. Amazon is growing rapidly as a search player. Just in those examples, a lot of it is around the changes and the updates and the fast-moving paced environment that we’re in. There’s no shortage of projects to put people on.

Really what we try to do over here is this teams of teams concept. We’re working really hard to not be a hierarchical organization, but more so “You three people are really smart and have an interest in this area; here’s what we want to do. You guys go off for a month and then come back with a plan of action or a business use case.” We have a lot of these projects happening all the time that are really R&D focused that empower people to go out and flex their muscles and produce some tangible results that they can then see actually implemented into what we do on a day to day basis. It’s been a great opportunity for us to keep people engaged.

ROB: It also sounds like a great way for you to not have to have all the answers, to not think you have all the answers, and not even to be in a place to decide what the answer is, to really empower people to reach new conclusions.

ALEX: Absolutely. There are so many trends out there. The only way that we are successful is if we give people the autonomy to go learn these things. We’re like any other organization; we try to be really efficient, we try to automate whenever possible, and the time that we save, we want people to be using on critical thinking. Are there new ways to do things? Understanding the client’s data and the client’s performance, and what can we test and learn to do better?

I’ll give you a great example. Facebook, if you launch a campaign, your budget management has to be turned on on the first of the month. And unless you have an API connection into the Facebook marketing stack, that has to be manual. A year ago, if the 1st was January 1st and you were coming off of your New Year’s Eve party, that team had to go in and launch budgets and double-check things and spend 10-15 hours on that on the 1st of January.

Well, we automate that through the Facebook marketing API, and that’s 15 times 12, that’s 100 and some odd hours that now can be used on more higher-level functionality.

I just read an Ad Age article recently that predicted 70% of all existing agency jobs will be automated by 2030, which is only 11 years away. It’s kind of a joke, not really a joke, but if you don’t have “strategy” or something along those lines in your title and you’re moving stuff from one place to another, anything that can be automated, will. That’s where we are moving as much as we can as an agency not to necessarily cut people or hours, but to redeploy those hours in higher-level functions.

ROB: I think it probably helps you align to value for your clients rather than padding up the hour count.

ALEX: Exactly.

ROB: Sometimes lots of hours to bill seems good, except when those hours have automation targets on their back.

ALEX: Right. Or until the CFO takes a look and says, “Why are we spending all this money on this?” That gets red-flagged.

ROB: I think you mentioned you had a history as a ski bum? Is that what you said?

ALEX: Snowboard bum, but yes.

ROB: Given your background as a snowboarding bum, and you’re in Denver, does Location 3 have an official snow policy for people who want to bail on a day and go skiing or snowboarding?

ALEX: We have been proposed multiple times – they were trying to call it the 10 spot rule, that if it was 10 inches or more, it was a day off. Which I actually have no problem with. But we actually have a very liberal PTO policy – and by that, we don’t have one. We have theoretically unlimited PTO. If you are doing your job and getting it done and it has a big dump in the mountains, I fully expect to see you at first chair and be checking emails on the chairlift on the ride up. I have done that myself many a time. [laughs]

ROB: [laughs] That sounds like a good fun day, to go out to the slopes and see your coworkers.

ALEX: We have an annual ski day in May. We take advantage of the very long season and we take everyone out by bus to A-Basin and get a spot right on the beach there, which is right next to the slopes. Last year I think it was like May 25th or something along those lines. So, we try to have some fun along the way.

ROB: Sounds amazing, actually. I’m very jealous. Got to get that in Atlanta, but we don’t get much snow either.

ALEX: No. I get down to Atlanta quite a bit, actually.

ROB: Yeah, we have some business and I imagine some franchises and a big airport. It happens.

ALEX: Yep.

ROB: When people want to find you, Alex, and find Location 3, where should they go to find you?

ALEX: Meaning like physically?

ROB: Maybe. We already said you’re on the ski slopes. Additionally, when they want to go learn a little bit more?

ALEX: You can always check out our website. We’re very active. We have a pretty active YouTube account. We put up some video content. We go to pretty much every franchise tradeshow that’s out there, so if you’re in the franchise space and we haven’t met you, I’m sure we will soon. Very active in that community, the tradeshow community. If you’re ever in Denver, we’re right on 16th Street Mall right downtown.

I tweet mostly about sports teams I like, so that’s not a great place. Or I retweet our company information. [laughs]

ROB: Got it. We can get your favorite teams and the company feed all in one place.

ALEX: Exactly.

ROB: Fantastic. Alex, thank you for joining the podcast and sharing some knowledge, some experience, and some leadership. Much appreciated.

ALEX: Thank you. Appreciate being on.

ROB: Take care.

Thank you for listening. The Marketing Agency Leadership Podcast is presented by Converge. Converge helps digital marketing agencies and brands automate their reporting so they can be more profitable, accurate, and responsive. To learn more about how Converge can automate your marketing reporting, email info@convergehq.com, or visit us on the web at convergehq.com.

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