Territories Planning – an essential investment

By Sarah Stowe | 29 Oct 2015 View comments

Could you imagine restoring a vintage car – maybe a T-Model Ford, and after a huge amount of effort and dedication to perfection, you decide to put a totally worn out set of old ill-fitting tyres on it. From the outside the paintwork is sensational, under the bonnet the engine ticks over like a dream, the upholstery smells of leather and yet it is now unsafe and very hard to drive!

Then why do similar to your Franchise System if you are granting territories to your Franchisees!

If you want to sell your franchises to the public, then being able to demonstrate that the territory planning has been done correctly, and not just a “beer and pizza map” should be what helps you stand out from the pack.

When do we need Territories?

If you have a service business where you are allocating jobs or leads, where your Franchisees are looking for security and exclusion zones so others cannot open in their area, or if you want to have territories to show people you respect what they are investing in your System, it all should come down to doing it correctly. This may be one of the best investments you ever make, especially if it means minimal unrest in your Franchise System and no legal arguments.

 Our view is territories need to be built:

  1. To make you confident and comfortable that each Franchise you are granting has similar opportunity for success for the Franchisees – based on logic facts and data.
  2. To give your Franchisees comfort that you have some process and system that should generate them sufficient business to make a good living.
  3. So that the territories are built using logic based on the customer profile (either known or expected).
  4. So you can confidently explain the process to potential Franchisees.
  5. So you can show the Franchisee what they are buying and have in the Agreement.

When do we need Territories?

If you have a service business where you are allocating jobs or leads, where your Franchisees are looking for security and exclusion zones so others cannot open in their area, or if you want to have territories to show people you respect what they are investing in your System, it all should come down to doing it correctly. This may be one of the best investments you ever make, especially if it means minimal unrest in your Franchise System and no legal arguments.

 Our view is territories need to be built:

  1. To make you confident and comfortable that each Franchise you are granting has similar opportunity for success for the Franchisees – based on logic facts and data.
  2. To give your Franchisees comfort that you have some process and system that should generate them sufficient business to make a good living.
  3. So that the territories are built using logic based on the customer profile (either known or expected).
  4. So you can confidently explain the process to potential Franchisees.
  5. So you can show the Franchisee what they are buying and have in the Agreement.

The Process

The first step we always recommend is establishing how many territories you want in each market based on fact. Whether it is a Business to Consumer (B2C) or a Business to Business (B2B) Franchise System, we can establish how many people, households, businesses and approx. employees are in each market, so the number of territories should be proportional to whatever the major ingredient selected is.

For example if establishing a home cleaning franchise, the logical starting point is probabaly the number of Households. If it is a child education franchise, then the logical starting point is probabaly children aged 5 – 15 etc. If it is a Test and Tag type business, then the logical starting point is Businesses that Employ Staff, or estimated number of employees in an area. Basically there is a logical starting point for whatever market we are looking at.

If we know how many people, households or businesses are in each market (Melbourne, Sydney, Brisbane, country NSW etc) we have a way of deciding the ratios of territories for each market.

Once we have that ratio, use your home market first to decide how many territories you will have at a “mature” point in the business. This is either done from the top down – The CEO designating a number, and we all have to live with that, or from the bottom up, where we construct a territory that the Franchisor is comfortable with (normally from past experience), measure this territory, and then use as a “cookie cutter” to divide the market. Once we know the number of territories for the home market, we can cut all of Australia up in a similar manner so each territory has similar potential.

The next step is deciding what adjustments to make based on favourable or unfavourable demographics or business types. Not much good selling Ferrari cars in a low socio economic area, or cheap and nasty items in Double Bay. Think of making adjustments to the basic variable we are using depending on whether the area is favourable or unfavourable for what we are selling.

Bring it all together

Once we have the number of territories agreed for each market, and an understanding of who our customer is, we create Units of Demand for each area, and then bring them together to make each territory of similar opportunity, leading to a map of the Market we are working on.

I hope this paper has been instructional, and I can only say think what you hope to sell each Franchise for, and spending some money getting it right is a small investment in the future success of your Franchise System.

If the house is built on poor foundations then it is at high risk for the future. If you have an existing Franchise System and you cannot be confident that your territory logic is sound, and that you do not have overlaps or small gaps between territories, then an investment in a proper Territory Planning system will be far less than what you sell 1 Franchise for!

Territory Planning is an essential investment in your future success.

Peter Buckingham is the Managing Director of Spectrum Analysis Australia Pty Ltd, the leading Geodemographic and Sales Prediction Modelling Company in Australia. He is also a Director and Vic / Tas President of the Institute of Management Consultants. Peter is contactable by email at:

peterb@spectrumanalysis.com.au or visit www.spectrumanalysis.com.au.