The U.S. franchise industry had a banner year in 2006. It was a year that not only saw great new franchise concepts and continued growth of past ones, but also many more franchises fully embracing the benefits of online marketing in reaching their key customers.

Currently, there are more than 2,500 U.S. franchise brands and concepts (The 2006 IFA Educational Foundation-FRAN data study). Franchises also have shown an impressive success rate, with 86 percent still in business five years after they launch (U.S. Chamber of Commerce).

As we look ahead in 2007 and beyond, online marketing strategies will continue to play an increasingly important role in helping franchises maintain a competitive edge and give new concepts the momentum they need to thrive in the marketplace.

To help franchises achieve their business goals and differentiate their brands at the local and national level, many franchises are turning to email marketing to help them not only build brand awareness and loyalty, but to also reach out to and stay connected with local customers.

A quick look at the impact email marketing can have on the bottom line builds a strong case for why more franchises today are using this method. Email marketing has proven to be the one of most effective (and affordable) ways to build relationships with customers resulting in increased customer loyalty and profitability.

Consider these facts: Repeat customers spend 67 percent more than new customers, while a five percent increase in customer retention will yield profit increases of 25 to 100 percent (Bain and Company).

Unlike traditional marketing methods like direct mail or print advertising, email marketing enables franchises to proactively communicate with current customers, providing the opportunity to quickly close sales, increase website traffic, promote an event, or even introduce a new product or service.

In addition, contacts who find what your franchise does interesting or valuable may also forward your email newsletter to friends or colleagues, helping generate awareness and buzz in your area. Lastly, email marketing allows franchisors to protect and control branding and core messages, while also enabling franchisees to customize sections with local trends, news, and content specifically targeting their geographic area.

Without a solution or recommendation from the franchisor, some franchisees may attempt to implement their own email marketing program. Typically, they begin with Microsoft¨ Outlook¨ or another email service (also known as an email client), building lists in Outlook and sending out emails from their own computers.

There are a number of serious problems with this approach. First, Outlook and other email clients are not designed for email marketing, so the email messages will lack the professional look and branding of an HTML message sent with an email marketing service.

Second, a reputable email marketing service will offer automated list management and compliance tools as well as an automated unsubscribe link, nullifying the risk of breaking email compliance, anti-spam regulations and, most importantly, the permission of your contacts to be on your list. The last thing a franchise wants or needs is for customers to look at their organization as a spammer.

Third, email clients do not provide tracking of reporting for sent emails, whereas an email marketing service will actually track all the results from your emails for you, so you'll immediately know who opened it, when, and whether they clicked through to your website.

Once a franchise determines that it needs to offer an email marketing solution to its franchisees, one approach is for the franchise to build, or buy, and host an in-house solution.

This can be done, but it takes a significant amount of time and money invested into software development, maintenance and, perhaps most important of all, ongoing operational resources to develop relationships with ISPs, which may not be the core competency for most franchises.

The third option is for franchises to find an email marketing service provider that will work closely with them to craft a solution that allows franchisees to connect with their local customers while protecting the franchise brand, image, and messaging.

For many franchises, this approach has proven to be the most cost-effective way for them to accomplish this important balancing act between controlling the brand image and providing flexibility for targeted local campaigns. Partnering with an email marketing service gives franchises the tools and expert help they need in order to:

The Little Gym provides an excellent example of the evolution of an email marketing program and the impact it has had on a global franchise organization. With more than 230 locations in 16 countries, the Little Gym, whose franchisees provide a children's motor skill development program, has been helping children and their parents for more than 30 years.

According to Karen Gray, director of marketing for The Little Gym International, the company began searching for an email service provider (ESP) in July 2005. The Little Gym required an ESP that would allow them to provide their franchisees with an email marketing template that had some "locked" content - meaning that gym owners could customize the majority of their e-newsletters, but couldn't make any changes to the company masthead and the first article.

After looking at a number of options, The Little Gym chose an email marketing service called Constant Contact.

The company announced its initiative to introduce an email marketing program throughout the organization at a conference.

"We ended up signing on 60 franchises that week," says Gray. "Many of our franchise owners couldn't wait to get started."

To date, nearly 50 percent of The Little Gym owners have signed up for Constant Contact. To further educate those gym owners who haven't signed on - and to remind them they have Constant Contact - Gray sends out an email blast each month promoting the email service.

"Gym owners naturally want to focus on selling versus educating members," Gray says. "In order to help members see the benefits of our program, we require owners to use the main article we provide each month-that article is an education/information piece for the entire company and helps us position ourselves and promote our brand."

Gray's goal is to have 75 percent of gym owners using Constant Contact by the end of 2007. In addition to promotions and education provided by Gray and her marketing team, individual franchise owners have been passing on Constant Contact virally.

One gym owner in Southern California called an owner in Northern California about her success with the program. Another owner signed up 22 members for a program using one email campaign - a success story Gray used in her monthly e-newsletter.

Like The Little Gym, an increasing number of franchises are implementing email marketing programs across their organizations. With the right email marketing service provider and at the right price point, the benefits are a win-win for helping franchisors and franchisees drive sales and awareness within local communities while enhancing brand image.