The majority of franchise businesses operate on the basis of territories. This is a successful model to use, as in theory it ring-fences a fertile market for a franchisee to develop his or her business, while avoiding market saturation. Therefore, for a franchise business, deciding how to establish your territories is one of the most important business decisions you can make.
Establishing a viable franchise territory
Getting it right involves striking a careful balance. There needs to be enough potential customers within the territory to make it a worthwhile business proposition for a franchisee. It also needs to be large enough so that an overlapping customer base doesn’t become a problem. If a territory is too large you risk the franchisee being unable to service the market effectively, and therefore losing out to competitors. If a territory is too small, they may not be able to establish a viable business at all.
Spacing between territories makes the proposition even more complex. If territories are concentrated too intensely within a certain area, then the market may become saturated. For instance, how many dog grooming parlours or accountants can one London borough realistically support before market demand is outstripped? Saturation is disastrous for both franchisees and the franchise business as a whole.
Competition between franchisees
Even more damaging to franchise businesses is competition between individual franchisees, whereby one franchisee encroaches on the territory of another, or lures customers away into their own territory. Never has the saying “a house divided against itself cannot stand” been so true as in these circumstances. Unfortunately, EU competition laws mean there are often no legal grounds to prevent one franchisee stealing business from the territory of a ‘colleague.'
This is why many franchises specify exclusive territories as part of their franchise agreement contracts.
Using Mapping Software to Increase Productivity
Franchise Territory Mapping Software can help improve the performance of exclusive territories by establishing suitable boundaries that allow for a thriving business. These platforms can also be used to optimise failing territories, by getting at the root cause of underperformance and allowing you to take practical measures to improve the situation.
Mapping Software can help you create high performing territories by:
- Helping you understand market demand for your brand within the territory
- Setting the right value for your exclusive territories based on ROI
- Helping you identify target customers and suitable catchment areas
- Avoiding unproductive areas or regions with intense competition
- Helping you achieve the right balance of territories across your franchise, so that franchisees don’t come into conflict.
The results of using location mapping and analysis are significant in terms of increased productivity, higher franchisee performance and growth in value across the business. Making use of Mapping Software means you go into defining territories with your eyes open, empowered to establish exclusive territories based on rational market analysis and realistic expectations.
Download our FREE e-book
For more information, we have written a free e-book “The Franchise Territory Optimisation Guide” which explains strategic territory planning in greater depth. Please click here to download the e-book directly from our website.