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The fors and againsts of ad-hoc franchise territory design

The fors and againsts of ad-hoc franchise territory design

If you’re thinking of growing your business through franchising, you’ll want to ensure that your franchise territories are optimised for future success.

This starts by ensuring that they are designed in the right way and offer the same opportunities to every franchisee that joins your franchise network. After all, you don’t want some of them to really struggle to make sales whilst others have more demand than they can deal with!

But franchise territories can be designed in a number of different ways, although some methods can prove to be less effective and actually cause damage to your business in the years to come.

In this article, we’re going to look at the pros and cons of designing territories on an ad-hoc basis, one at a time whenever you receive interest from a potential franchisee.

This approach may seem the easiest and most cost-effective way to build a franchise network across regions or the country, but is it really the best way to go? As experts in location intelligence and optimisation, we’ll share our impartial expertise on the subject.

For ad-hoc ‘do-it-yourself’ territory design

  • If you are tailoring a territory to meet the needs of just one potential franchisee, you can design it exactly how they want (often based on their home location).
  • Concentrating on franchise territories one at a time can feel easier, less time-consuming, and less overwhelming than trying to create a cohesive network covering a large region or a whole country.
  • You may also feel it is easier to feed vital information into the territory planning process and to take into account insight from the potential franchise holder, who may have more experience of the selected area than you do.
  • In addition, you can feed in information about your business because you know it best (although the better professional franchise mapping companies do this too).
  • You may think that working very closely with a potential franchisee on designing their territory is more likely to lead to them coming onboard and ‘buying’ the franchise area from you.
  • If you do decide to work with a professional mapping company such as Tech4T on an ad-hoc basis, the initial investment will be lower as you will only be paying for one or two territories at a time, whenever a potential franchisee shows interest.

Against ad-hoc ‘do-it-yourself’ territory design

  • Oversized territories are the most common problem Tech4T sees when businesses have already designed ad-hoc territories themselves and then turn to us for help. It’s tempting when designing franchise territories individually and without a strategic plan to think that bigger is always better. But if territories are based on the wrong information – for example in the UK on counties instead of postcodes, or on postcode districts instead of the more granular postcode sectors – territories can end up being far too big for your franchisees to cover effectively, stretching their resources and meaning they are missing sales opportunities. This can also allow a competitor to gain a foothold in the part of the area which has been neglected, posing a threat for the future. Creating larger territories at the start could also restrict the number of franchise holders you can take on in the future, limiting your future revenue.
  • When you design territories at different times, they are unlikely to end up being equal in terms of sales opportunities. Potential customer numbers will vary widely, or staff or customers may have to travel much further in some locations, meaning the chances of success are far from equal.
  • You could find yourself spending much of your own time helping struggling franchisees at the expense of your other work, with some of them becoming frustrated and regretting their decision to become a franchise owner in the first place.
  • As well as comparing their performance against that of more successful franchise owners, franchisees’ unhappiness can negatively impact the reputation of your brand.
  • Franchise territories can be designed based on the wrong criteria or without proper analysis of the market opportunity. For example, whilst a territory may seem attractive because it has a large population, it may contain very few people or businesses who are part of your target audience and likely to become customers. And despite your and your franchisees’ experiences, without current, relevant data on target markets, logistics, and geography, you may find it difficult to decide who your target market actually is and where there are high concentrations of them.
  • Even if you are clear on your target audience, you may find it extremely difficult to know how many territories to have to maximise the success of your franchise network.
  • If your franchise territories are designed one by one, you are likely to end up with a very disjointed overall franchise structure. And over time you may end up with parcels of land too small to make into new territories, which can lead to competitors gaining a toehold in these areas, threatening the success of your franchisees.
  • If you are working with a professional mapping company, adding territories over time will likely cost more than mapping out a whole region or country in one go.
  • Working on an ad-hoc basis on your own, you may find it difficult to share territory and demographic information with potential franchisees, or print digital or paper maps for them or other stakeholders.
  • You may also have difficulty explaining to potential candidates the commercial basis of your territory mapping decisions and their potential income. 

Franchising mapping experts such as Tech4T work with the latest, most robust demographic and business data to help business owners make the right location intelligence decisions. To understand more about planning your franchise network, talk to us today.

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