The importance of correctly designed territories

When franchising your business or buying into a franchise, you need to determine if territories are protected to avoid a conflict among franchise owners’ interests.

If protected territories are part of your franchise business model and your territories are not defined in a systematic, fair and consistent way, legal implications and issues could follow.

From a financial perspective, having the right number of right sized territories, each optimised to maximise sales potential for the franchise owner, will help ensure your franchise business has the greatest chance of success.

So where do you start?

First you need to establish the profile of the end customer of your products or services. A profile is the set of characteristics that differentiates one group of people from another and that define the kind of individuals more likely to acquire your offering.

Once you understand your customer profile, or perhaps multiple profiles if you have several products that each appeal to a different audience, the next step is to conduct market research and acquire a demographic breakdown of the wider geographical area you wish to franchise. This information can be used to identify ‘hot spots’ – areas where there are high concentrations of the kind of people you need to target.

You must also understand your competitors – who they are, where they operate, their strengths and their weaknesses and how your products or services will be positioned against theirs.

Another important consideration is to understand the sales process your franchise owners will adopt to sell your product or services. This will help determine the required size of the franchise owner’s sales force, the time needed to close each sale and, in essence, how many opportunities the franchise and each sales person within it will be able to manage.

The territory planning process

Armed with the aforementioned information, the challenge is to now create a territory infrastructure that is not only the right size for your business, but one where territories are appealing and straightforward to sell.

Demographic data, perhaps business counts, location data, and any other information needed to undertake the design and balancing of territories needs to be sourced and matched against the appropriate level of postal geography to define the territory boundaries. Choosing the appropriate postcode ‘building block’ approach is crucial as otherwise it will be impossible to generate properly balanced territories.

Next comes the tricky part, applying the data, the selling rules, the competition, etc., with the geography and drive times to produce a set of equal – in terms of opportunities – and accessible territories that can form the basis of an agreement with your new franchise owner. This requires specialist data, analysis and mapping skills and having available technologies of the right kind. The balancing process is more of an art rather than a science, and while technology plays a large part, a considerable amount of manual intervention is needed to keep each individual territory free from obstacles such as lakes, rivers with no crossings, and from having an unfair amount of driving to reach potential customers.

In conclusion, if your franchise operates a territorial model then getting your territory design right will be crucial if you want to maximise the value from your business.

Reported by Graham Barlow

Graham Barlow, is Managing Director, Tech4T, which specialises in data, targeting and franchise territory design and optimisation.