In order for your franchise business to become more profitable, you need to establish a network of franchises in optimum locations and maximise your market share within your territories. This involves setting up franchisees in areas where they won’t impinge upon each other’s customer base, ensuring there are sufficient customers within a reasonable travelling distance, and understanding where best to market and distribute your brand.
What is Territory Intelligence?
Territory intelligence consists of a number of interlocking disciplines – location analysis, data visualisation and business planning. By applying territory intelligence to your franchise, you can understand the drivers that make your market work and use them to your advantage to grow your business.
Goals to be considered include:
1) Understanding the overall potential and size of your market and your current share of it.
2) Understanding the criteria on which to base franchise territories, such as number and type of customers needed in each and where concentrations are located
3) Understanding how many territories will be able to thrive and grow whilst also ensuring the whole country is exploited to maximise franchise income.
4) Understanding other important business drivers that need to be present
5) Understanding the locations of your competitors, their impact on your business and where they have little coverage but there is ample market opportunity.
By understanding your business more intimately you’re able to reduce the risk you take in defining suitable territories and identifying the factors necessary for your franchisees to be successful.
Asking the right questions
Territory intelligence begins by asking certain questions of your business location or area, as a basis for further targeted action. Bear in mind that the type of business you operate will affect how you analyse a location. Different considerations apply depending on the nature of your business. For example, is your business a location-based franchise (such as a fast food business, clothes shop or mobile phone outlet) or a territory-based franchise (such as an accountancy, business coach or childrens’ education or sports service)?
The following questions will help you make the most of your territories, and are universally applicable to any kind of franchise:
What is the capacity of your market: How many businesses of your type can realistically be supported in your trading area, typically a country such as the UK? How large is the total market potential for this area? Of this potential, how much is being exploited:
A) by your own franchisees, and
B) by your competitors.
Market share currently occupied by your competitors can be targeted, although this will need a well thought out marketing campaign. Competition between your own franchisees – euphemistically described as cannibalism – should be discouraged at all costs.
What is the optimum size of your territories? You will need to take into account the demographics of your customers, where there are concentrations of them, surrounding businesses, distance to your customers and public transport access (important for retail franchises), types of residential areas and property/lease costs.
Where are your competitors located? Try and find out where your competitors are based and where their catchment areas are. Special attention should be paid to any overlapping areas between yourself and competitors, as these will be zones where you will not necessarily have a competitive advantage.
Of your potential locations, which of them offer realistic trading opportunities? Are some locations better than others?
What potential does the territory have to yield turnover and profit? What sort of figures are you talking about? This will be an important factor in deciding how to price a franchise, as on it will depend the franchisee’s ability to make a good return on their investment. You need to strike a balance between affordability and a realistic reflection of the area’s market potential.
What makes one territory perform better than another? Two areas, even with the same demographic make-up, could perform very differently. Why? Territory intelligence will give you the answer.
Paying due attention to these factors, and applying territory intelligence to your territory planning process will pave the way for more successful, more profitable franchises. Our location analysis service includes in-depth marketing and territory analysis software, as well as a hands-on approach to helping you achieve practical results from your franchise business expansion. For more information, please download our free e-book ‘The Franchise Territory Optimisation Guide’.