IT GOES WITH THE TERRITORY

Five ways to spot a right-sized territory.

Right sizing the territories is a must for both the franchisee and the franchisor to gain the most from the brand. Franchisors need to have a vision, based on some logic, as to where they want to see the brand in 10 years’ time, and set up their territories accordingly.

Territory planning is not about evolving (code for halving a territory each time it becomes unworkable) but rather right sizing from the start.

While territories can be too small and restrict the franchisee’s growth, the reality is that many territories are far too large. This creates a situation where the brand does not reach critical mass and so never reaches its original goals.

Here are the five most important things in getting the territories right.

1. CONSISTENCY FOR CONSUMER-FACING BUSINESSES

Knowing that each territory offers similar business potential is a must for the franchisee. In a consumer business it’s important to look at population figures with some adjustments for various socio economics. This can be done using data from the last Census.

2. CONSISTENCY FOR A BUSINESS-SERVICE FRANCHISE

If the franchise operates a business-tobusiness service then the number of firms in the area is a good starting point, with some adjustment for business type (white collar, grey or blue).

Demographic mapping and franchise territory planning firms like Spectrum Analysis can weight the businesses in any area using data released annually by the Australian Bureau of Statistics.

Business weighting is based on what type and size of businesses are in the area. This shows whether or not the local firms will be the target market for the franchise.

3. NATIONAL NUMBERS

Consistency across the network means the franchisor should have a plan for the number of territories in each major capital city and in each State.

4. PRIORITY ORDER FOR THE ROLL OUT

A strategic network plan shows how the franchise will open the territories evenly across a market. It does not make sense to open 10 territories up in the Northern Beaches of Sydney before opening a territory in the Shire or the Eastern Suburbs.

Franchisors should be aim to map the whole market early and appoint franchisees to nominated territories to get a good spread of business before filling in the neighbouring territories.

5. RIGHT-SIZING THE TERRITORY

There is no point making a territory too big. It will never be possible for 100 per cent of the local demographic to be your target customer.

Instead the rough rule we try and establish when we map the customers is the logical trade area (which may also be the territory). This is the area which has between 60 per cent and 80 per cent of the target customers.

In some sectors like a homemaker business (beds, whitegoods etc), this is probably about a 6–8 km radius from the store. In some other businesses like a 24/7 gym or a lotteries outlet, it is more likely to be a 2 km radius.

Territories in service-based businesses, which are often mobile, will be mapped from the franchisee’s home or office base.

There is no point asking for a huge territory if most of it will sit un-serviced for years. Critical mass comes when potential customers see your business regularly enough to want to contact you.

How do I know my territory will be good enough to support my business? Here are 5 ways to spot a right-sized territory.

GETTING IT RIGHT

Whatever is granted as a reasonable territory should be sufficient to support the business, and gains and leakage will always occur. The good franchisee just makes sure they have more net gains due to the great service they provide. Peter Buckingham is managing director of Spectrum Analysis, a demographic mapping, franchise territory planning and statistical analysis company. Peter is a Certified Franchise Executive.