Creating Profitable Franchises:  Exclusive Territory Mapping – Best Practices

Creating an exclusive franchise territory strategy can be challenging.  Many different factors play a role in the success, or demise of a territory.  Doing your homework ahead of time, laying the proper groundwork for a successful AND profitable territory is a major factor.  You want to build your brand, and instill confidence in your franchisees, so below are some best practices for simplifying the process.

Be Proactive:

Have you ever been in a situation where you sold a territory in a new metro market just to get the deal?  After the territory was in place, did you realize that the new franchisee took the best of the best target neighborhoods, leaving surrounding areas are not sellable?  How do you prevent this?  Be proactive.  By proactively mapping out undeveloped areas you can ensure that you maximize the number of profitable territories that a market can support.  Take Pittsburgh, PA for example, a mid-sized metropolitan area with 2.3 million in population.   Your franchise defines territories by groups of ZIP codes of at least a population of 500,000.  Pittsburgh should then be able to support 4 territories without any problems…if you map them out correctly.  Once you have a prospect interested in Pittsburgh and you have already mapped out the optimal 4 territory scenario, they can simply select one of the four areas.  Generally, minor adjustments can still be made without negatively impacting the whole area.

Use Fresh Data:

Data sources change frequently and for good reason, people move, businesses expand and contract and the demographic landscape is in constant flux.  Most of the major data providers update their business and consumer demographics at least one a year.  Some even update quarterly.  If your territories are valued at a key demographic figure, i.e. population, then it is in your company’s best interest to have the most up-to-date data available.  Take the Dallas/Fort Worth Metro, whose population saw a significant increase by approximately 25% according to the U.S. Census Bureau from 2000 to 2010.  The population grew by more than a whopping 1.2 million over ten years!  If your territory pricing is dependent on population you could stand to leave thousands of dollars on the table.  If you charge a $0.25 per person in a territory and your population is off by 100,000 you just lost $25,000.  Moral of the story?  Keep your data current, and use sources you trust for mapping and demographics.

Consider Using Geographies that Rarely Change:

This one won’t be easy.  In my experience, the majority of Franchisors selling exclusive territories are using ZIP codes.  ZIP codes are safe, easy to identify with and highly recognizable.  Everybody knows what ZIP they live in.  The problem with ZIP codes is that they are very dynamic, more than most people know and this can cause the potential for unnecessary conflict.  ZIP codes are postal geographies and they are managed and maintained by U.S. Postal Service.  The post office changes ZIP codes MONTHLY.  Consider using Census geographies, such as Census Tracts or Census Block Groups.  These usually don’t change and it’s about once a decade when they do.  Census Tracts and Census Block Groups are also more granular than ZIP codes and you can often get much more precise with your franchise territory definition.  Regardless of how you choose to define your territories, make sure you reference the geographic building blocks you use as well as the source and the vintage of the boundaries used.

Build Greater Value for your Franchisee:

Would you like someone to hand you a highly targeted list of prospects for your concept?  So would your prospective and existing franchisee’s.  There are many tools out there that would enable you to create highly targeted lists of businesses and consumers that you can provide to your franchisees.  This can give them the ability to hit the ground running and start driving revenue for themselves and royalties for the franchisor.  This shouldn’t be one time event either, you can easily provide updates regularly and foster a strong relationship with your franchisee.

Utilize Technology to Win Business:

So the phone rings, you answer, and on the other end you have a prospect interested in investing in your franchise.  They are 2000 miles away in an unfamiliar market and they want to know what’s available, now.  Web-meeting software can instantly show them, using your franchise mapping software, what’s available in their market.  A service called www.Join.me is an excellent option, and its easy and free!* (*At the time of writing)   A franchise territory mapping software, such as GeoMetrx is crucial and can tie all these points together for you.  Be sure to select one that can perform all of the above and you will find yourself in a position for success.

A consistent and calculated territory strategy is important in ensuring the success of a franchise, for both the franchisor and the franchisees.  There are tools out there to help you get the outcome you desire.  Be proactive with your territory development.  Always maintain access to current data.  Eliminate unnecessary conflict by using stable territory geographies.  Give your franchisee’s prospecting lists to help them drive more revenue and higher royalties.  Finally, utilize technology to help you win more business.  These are just a few strategies to help new and established franchises succeed.  For more information please feel free to contact me by email:   rich@geo-e.com

Stay grounded,

Rich Mithoff