Location, Location, Location - what to consider when deciding where to open a franchise


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As a franchisor, one of your most important business considerations will be the specific territories or catchment areas that might maximise your potential.

Most franchises offer geographically defined areas which their franchisees will have exclusive rights to. `

This means each franchisee can market and develop their own business within those boundaries, without worrying about competition from any fellow franchise holders and/or other similar enterprises.

Whilst this sounds like a simple process, many franchisors are allocating territories without full consideration of the complex factors that will lead to the success of their franchisees, and ultimately themselves. 

Don’t trust your gut

Considering that the nature of franchising is based on systematic business processes, it’s surprising how many franchisors depend on paper maps, vague statistical data and a ‘gut feel’.

Every decision on territory will ultimately impact a franchisor’s future marketing opportunities.

It is a common mistake to allocate too large an area to a franchisee – especially in the early days of the business. This will lead to an area that is under-serviced and simply mark out a missed opportunity for the franchisor.

Similarly, if the area is not scrutinised for significant competition, a franchisee might find themselves struggling for survival from the offset.

Franchisors and franchisees alike, need to consider whether a hastily drawn up directory map, stapled to a franchise agreement is going to be enough for a sustainable business.

Get digital

There are a wide range of digital territory mapping tools available now to ensure a more scientific approach to area allocation and the good news is that there are packages to suit nearly every budget.

Geographic Information Systems (GIS) can vary from simple post-code based systems to complex packages which offer detailed business and demographic data at a micro-geographical level.

Of course, as a franchisor, once you have bought the technology, you have to allocate time to learning how to use and maintain it. For some, an easier and more cost-effective option than installing in-house technology, is to employ a territory mapping consultant on an ad-hoc basis.

Whichever option you go for, you will now be equipped to identify the specific criteria you need to allocate territories.

Define your criteria

Territory mapping services will work out the best use of statistical data for your particular business’s area allocation. 
In terms of spatial information, you may want to focus on particular suburbs, postcodes or census output areas (areas of similar inhabitants where specific statistical information has been gathered).

Demographic data can also be tailored to your needs. Instead of straight population figures, a mapping service can base territories on the figures for a particular market segment.

For example, a mortgage broking franchise can dictate the number of homeowners they require in any given territory and the mapping service can incorporate this in its calculations.

Business counts can be made and classified by sector (useful for B2B franchises) as can the number of direct and secondary competitors there might be in the area.

Geographic data can also be scrutinised. Without digital mapping, you may not have considered how transport routes, general accessibility and actual physical barriers might affect the day to day workings of your franchisees.

Similarly service level issues can be ironed out within your tailored plan. A van based franchise, for example, may need a territory that allows for a maximum of one hour’s driving per franchisee job.

Footfall should also be factored in when defining your criteria. Passing trade is not essential for every type of franchise, but is important for those such as retail and fast food. 

Map it

Once all the factors relevant to your franchise have been identified, territories can be mapped out using software which accumulates your chosen spatial units and any other attributable data into optimum catchment areas.

The results of this process will present the franchisor with a series of balanced areas which will offer the best market coverage possible as well as providing sufficient potential for franchisees.

Reap the benefits

As a franchisor, the rewards from digital territory mapping are both instant and far-reaching.

From the outset, you will be able to offer potential franchisees a fair distribution of prospects and potential revenue.With your tailored mapping strategy at hand, any future management of territories will be easier, as well as comparative performance analysis.

Having made the most of this technology, you can use it as a marketing tool, adding serious value to your franchise package. In turn this will enable you to establish the initial franchise fee, and justify it to potential franchisees. A fee can be procured through an assessment of the franchise’s potential ROI and expenses associated with the franchise acquisition. 

Don’t look back

If you are thinking of becoming a franchisor, don’t think of digital territory mapping as a luxury extra, but rather a necessary tool you can’t afford not to invest in.

Grab the technology with both hands and start harvesting your franchise gold.

About The Author

Nicky Tatley Writer
Nicky contributes articles to all titles in the Dynamis stable, primarily BusinessesForSale.com, FranchiseSales.com and PropertySales.com and is a regular contributor to other business publications including Talk Business, Bdaily.co.uk and NuWire Investor.