Cutting the pie

By Sarah Stowe | 29 Oct 2015 View comments

Many franchisees live or die by their territories. How can you be sure the territory you are given has been appropriately prepared? Peter Buckingham investigates.

When your franchise opportunity comes with an exclusive territory that should provide you with a fair go at making the business work, enough business or residential contacts and the right demographics. In truth though, not all territory mapping is equal.

Most territory planning began with the beer and pizza approach, and in many cases has evolved at people’s discretion. The beer and pizza method is when management and some interested franchisees converge around a map on a boardroom table with a black crayon, and some good ideas. Inevitably the plan is built around existing stores or an area a franchisee wants to have as his territory.

The downside to this ad hoc planning is uneven opportunity in territories, overlaps and spaces in between, which we call no-man’s-land. While the areas may look similar in square kilometres, the content in terms of businesses, numbers of households or people, and how they suit the product being sold, is normally extremely uneven.

Territories for a service business

Most service businesses are not reliant on a central store, or where the franchisee lives. What they rely on is sufficient business in the defined area for the franchisee to make a living. Planning the territories early in the franchise system’s development makes sense as the physical location of a store or the franchisee’s residence should not be an issue.

For example when working with two of the major banks we did the territory design for their mobile lending arms, and that has been stuck to religiously for quite a few years. Each territory was made to offer similar sales potential and then when franchisees applied to take on an area, it was already mapped, measured, locked and loaded.

Planning for a delivery operation

We do the territory planning for many franchise systems where we have to ask what comes first, the chicken or the egg? In our view this becomes progressive territory planning, where there may be a two stage process, the second continually evolving as the network is rolled out.

The first stage normally begins with the questions of how many territories should the franchise have and where? Having a map at the concept stage available for franchise expos allows potential franchisees to visualise the territories. Call this draft one.

The second stage kicks in as sites are found, and delivery areas defined; the franchisor naturally needs to build the territories around the stores, ensuring an outlet is not in a corner of the designated area with the next store delivering nearby, because that was the shape of the territory.

One pizza franchise system we are working with is expanding rapidly, and it is only when the franchise moves into an area that a small shopping strip that suits it is defined. If the franchise then secures a site in the strip, we have to define the territory around the proposed new store. In most draft territories, there may be one or two major strips and up to 15 or 20 small strips.

The franchisor’s basic parameters for selecting a strip then are a small strip for lower rental, a vacant shop available, good parking for customers and delivery vehicles to work with, and no other pizza supplier in the strip or immediate area.

We work at draft mapping to look at the ideal situation, identify all the strips in the area, down to small strips of just six to 10 stores, allow the franchise to select and negotiate a suitable store, build the territory centred around the proposed store and include the new territory in the agreement. Keeping a master map prevents overlapping territories or no-man’s-land zones as the network develops.

For potential franchisees to know that a process like this is in place helps create understanding of, and confidence in, territories and to minimise potential conflicts.

Mapping a territory

Is the franchise territory map included in the agreement? We always recommend territories be mapped and the map included in the franchise agreement for future clarity in preference to a list of postcodes or suburb names, as these do change with time.

Summary

Progressive territory planning is required for some business types, especially if they have delivery areas and these need to be built around the central location (store). If your franchisor cannot deliver you a proper map of your area, with some logic or explanation on how your territory was developed, then you must seriously question their competency for the future.

Peter Buckingham is the managing director of Spectrum Analysis Australia Pty Ltd, a geo-demographic and sales prediction modelling company in Australia. Visit www.spectrumanalysis.com.au