The right franchise territory structure can optimize your brand's potential.
KEY TAKEAWAYS:
- Properly defined franchise territories are critical for the growth and success of any franchise system.
- Franchisors can improve their franchise territory structure and support franchisees by using mapping software and following industry best practices.
- By staying flexible and updating their franchise territory maps regularly, franchisors can optimize their brand’s future market potential.
As a franchisor, how you define your franchise territories can make or break the growth of your business.
From establishing flexible geographical boundaries and tracking demographic data to choosing the right software and keeping maps up-to-date, your approach to franchise territory management can make the difference between building a healthy, thriving franchise system or owning a brand that misses the mark. Because of that, it’s important for new and emerging franchisors to learn how to map franchise territories properly early on.
To learn about best practices for franchise territory mapping, The Internicola Law Firm sat down with Tracey Matchett, former sales director of Gbbis, a mapping software company that offers territory management solutions for franchisors, to discuss strategies for optimizing franchise territories for sustainable growth.
What is a franchise territory?
A franchise territory is a geographically designated area within which a franchisee is authorized by a franchisor to establish and operate a franchised business under the terms of a franchise agreement and Item 12 of the Franchise Disclosure Document (FDD). The scope, size and levels of protection provided to franchisees within their designated territory often vary between franchisors.
Why are franchise territories important?
Franchise territories define the market, scope and geographic boundaries within which a franchisee’s business is permitted to operate. For franchisors, well-defined franchise territories are critical for enhancing their brand’s growth potential and attracting qualified franchisee candidates to their offering.
Common Mistakes Franchisors Make When Mapping Franchise Territories
For new and emerging franchisors, it can sometimes be tempting to offer large territories to new franchisees or even make up territories as they go. However, it’s best to take a strategic approach to franchise territory mapping to avoid missteps.
“When some of the franchise brands come to us, they have either not done mapping before and they want to understand the best practices, or they've done mapping and they've given away way too much territory to their initial franchisees, or they've worked with other systems that are difficult and cumbersome,” says Matchett.
To position your brand for success, it’s important to avoid common mistakes when mapping your franchise territories, including the following:
- Not using mapping software
Mapping your own franchise territories can waste valuable time, energy and resources. By choosing the right software to meet your brand’s needs, you can save time while helping franchisee candidates understand their franchise territory options during the sales process. - Relying on outdated data
Using incomplete or out-of-date data to map franchise territories can cause inaccurate projections of market potential. They can also prevent franchisors from getting a clear picture of who their competitors are. Instead, make sure you’re working with data that is current and specific to your brand’s needs. - Giving away too much territory too soon
It’s not uncommon for new franchisors to give away too much territory to their first franchisees. Still, those missteps can negatively impact franchisee success and limit future sales and growth potential, so it’s important to establish proper territories before offering your first franchises.
Best Practices for Mapping Franchise Territories
As a franchisor, it’s important to get clear about your goals and vision for your brand before mapping its franchise territories. For new and emerging franchisors, it can also be helpful to create a five-year success plan.
“The first thing I do is really understand the client – their needs, their goals, what their expansion plans are and the data that they currently have. If they have any member data, if they have any patient data, if they have any customer data, and really what their vision is in the next year, two years, five years,” says Matchett.
Next, it’s critical to follow industry best practices for mapping your franchise territories. By choosing the right software and leveraging data and analytics to boost your brand’s growth potential, you can set your franchisees up for success while scaling your business.
1. Use mapping software to create and manage franchise territories
The right software is critical for creating and managing franchise territories. To make sure you have everything you need to get started, look for the following features:
- Ease of use. Mapping software should be easy to use and easy for franchisee candidates to follow along with.
- Variables. Look for software that allows you to map territories based on variables like ZIP codes, geographical boundaries and more.
- Flexibility. As markets expand, your software should show you where to grow next.
By choosing simple, flexible mapping software to manage your franchise territories, you can save time during the sales process and streamline your brand’s marketing efforts.
2. Strive for balance and equity
As a franchisor, creating fair and balanced franchise territories is important. Although it might seem like a good idea to base your territory map solely on geography, prioritizing market opportunity can create more equitable sales revenue potential across your franchise system.
3. Leverage advanced demographic analytics
Because people move, grow older and experience shifts in budgets and lifestyles, consumer demographics change frequently. To keep up with those changes, it’s important to update territory maps regularly using fresh data.
In addition to basic information about population, foot traffic, crime, visitors and location, consider the following data when mapping your franchise territories:
- Competitor data
- Local demographics
- Member, patient or client data
- Visitor cell phone tracking data
- Other data tailored to your brand or industry
By regularly performing advanced data analytics and predictive modeling using up-to-date data, you can ensure that your franchise territory maps reflect recent changes in different markets.
4. Collaborate with your marketing team
Before opening a new franchised location, it’s important to work with your brand’s marketing team to identify “hot spots” within its designated territory to focus marketing efforts on. By assessing heat maps and honing in on target demographics, you can ensure that your brand’s marketing initiatives will be effective in every territory.
5. Pay attention to territory size and structure
Because giving away too much territory to individual franchisees can have a negative impact on franchisee performance and limit your brand’s growth potential, remember to pay close attention to the size and structure of the territories you offer to franchisees.
To avoid giving away too much territory, evaluate the following data:
- Key demographics. Assess basic demographics for each territory, like population and household income.
Sales and expenses. How are existing franchisees performing and spending in different markets?
Competitors. How are your competitors positioned in the market? - Visitors. Use cell phone data to track visitors and traffic within different territories.
Complementary brands. Which local businesses will drive traffic to your brand? - Territory type. Assess the radius of travel to other businesses, and whether the territory is an urban or suburban market.
- Other relevant data. Think of unique factors that might influence market performance and opportunities in specific territories.
Keep in mind that territory sizes may differ depending on how many locations already exist within your franchise system. Still, by carefully mapping the size of your franchise territories, you can promote future growth and prevent territory cannibalization.
Final Thoughts
Franchise territory mapping is an important part of building a successful, thriving franchise system. Still, territory maps require time, effort and attention to detail. To properly map a franchise territory, it’s critical to consider size, geography, demographics, revenue potential, market opportunities and nearby businesses – including competitors and complementary brands that could drive traffic to your location.
Because demographics change frequently, it’s also important for franchisors to update franchise territory maps regularly using current demographic data. By choosing flexible, easy-to-use mapping software, leveraging advanced data analytics and following industry best practices, franchisors can create franchise territory maps that are optimized for growth and support franchisees in their success.
Frequently Asked Questions About Franchise Territory Mapping
The foundational elements of mapping franchise territories include easy-to-use software, current demographic data and flexible territory structures. It’s also important for franchisors to update franchise territory maps and demographic data regularly.
Common variables used to map franchise territories include population density, household median income, spending, crime, visitors, foot traffic and more. Franchisors might also look at specific data related to their industry.
There is no one-size-fits-all solution for franchise territory mapping. Because a food truck company would likely need a different territory structure than a restaurant chain or wellness brand, understanding your target demographics, competitors, market, location and expansion goals can help you tailor your franchise territory map to your business.
About Gbbis
Gbbis is a software company that offers franchise territory mapping solutions. Learn more about Gbbis at Gbbis.com.
About The Internicola Law Firm
Powered by a team of experienced franchise attorneys and experts, The Internicola Law Firm is a national law firm that specializes in helping entrepreneurs build winning franchise brands. From legal support and franchise development to state and federal regulatory compliance, The Internicola Law Firm is dedicated to empowering franchisors at every stage of their journey.
