What are the general principals of Territory Mapping
A large proportion of franchisors have little idea of how important the allocation of territories is to the success of their business. The franchisors that have embraced this technology regard it as a fundamental building block in the creation of a successful operation. In some cases it could be argued it is important as the franchise manual itself. The main aim for most franchises is to create an equal opportunity network. The actual sizing of the territories is an extremely important factor as the franchisor is looking to maximise their potential of selling as many viable areas as possible. In essence this is a careful balancing act between the franchisor and franchisee. Too big an area and the franchisee will hit the ‘comfort zone’ allowing them to cherry pick customers in his designated area. This often results in some of the area designated as the franchise territory not being fully utilised, therefore the franchisor is not maximising their potential. Too small an area and the franchisee will not have enough opportunity to operate, therefore the franchisor will not benefit in the long term either.
All is not lost for the franchisors who do not appreciate the importance that territory mapping can bring at the outset. Mature networks can be examined and rationalised but in an ideal world franchisors should adopt good working practices with regards to territory mapping before the first franchise area is sold, in fact they should even think about it before marketing the franchise itself!
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The temptation to give the initial recruits what they want rather than what they need is very appealing, especially for a newly formed franchise company. This is something that I would ask franchisors to seriously think about before they allow to happen. I have spoken to a large number of franchisors who initially allocated huge territories in order to get people on board, and in nearly all cases they have lived to regret doing so. There are three main reasons for this. Firstly as a network matures new franchisees will take exception to the fact their neighbour will have a much better potential territory than they sign up for. Secondly it will prove impossible to do any kind of franchise performance comparison which could prove important further down the line. Thirdly and most importantly you are not maximising your potential as a franchisor. For example if you allocate all of Derby and Nottingham to one franchisee and between them they could support two franchisees, when a future prospect is interested in one of the areas the franchisor will not be able to offer the area even though it could clearly support another territory. In the long run it is much better to get the territory sizing done at the inception of the franchise. Speak to other established franchisors with regard to this, from my experience a large majority of them would love to go back and start with a clean slate and undertake good methodology and practices to ensure equal opportunity development.
Problems with traditional territory mapping
Digital mapping allows franchisors to maximise their potential by using full geography coverage usually utilising postal boundaries. Going down this route avoids what tends to be termed the ‘pastry cutter’ analogy. Without using digital techniques it is very difficult to allocate areas and future proof territory development. The cherry picking of areas tends to happen especially if the development of the franchise brand is occurring on a national basis. The three most common methods of allocating territories traditionally are as follows – one, the drawing of areas on a series of maps at varying scales, two, allocating Yellow page areas and three, giving towns and city names as a basis for the territory. All three have inherent problems that don’t tend to cause an issue until the network grows or two areas are sold that are near to another. This is usually the point where franchisors start pulling their hair out and start talking to the likes of us. Route one, the drawing on maps at varying scales can look extremely unprofessional. This is especially true if a franchisor wishes to use these maps as a sales aid when sitting down with a potential franchisee. As franchise lawyers will tell you, based on cases between franchisees and franchisors that have occurred in the past 10 or 20 years the thickness of this line has caused huge debate. The marrying up of areas from one map to another is also a huge issue. Through my experience I became privy to an allocation of one village within 3 franchisee agreements within the same franchise. It sounds unbelievable but it can so easily happen if the process isn’t managed properly. Using Yellow Page areas for territories is also fraught with problems. Areas next to each other can be massively different in terms of their potential and some postal sectors that make up the actual Yellow Page areas actually appear in more than one directory. The other traditional method of allocating by place names means there are no definitive lines between areas. In this case the defining of a customer being in one territory or another could be become a major headache when two areas next to each other are allocated.
Causes & Reasons for Re-evaluating existing territories
There are a whole host of reasons why a franchisor may wish to assess their network. One of the key questions that franchisors really need to answer is “Are we using the correct business drivers?”. Territory models tend to be created based on what is termed the ‘business drivers’. Essentially this refers to the elements that provide the demand base for the business. For example a B2B franchise will typically look at the numbers and possibly the type of business to build up their network. A domestically marketed franchise is more likely to use demographics such as population, socio-economic statistics and housing related information. Confirmation that the drivers used for division are still valid for the creation of the network moving forwards is vital. Customer habits change and franchises services and products can change, and some cases have to over time, to keep their foot hold in the market and remain competitive. Therefore external forces and market changes can affect the potential of a franchise; this can of course be in both a positive and negative way. Another thing to consider is the increasing brand awareness of the franchise and the products and services that are offered. As a franchise matures and in some cases gains national accounts the exposure to the target market is likely to occur. Can this change justify areas being smaller now that the market penetration has increased as a result of these factors? The other thing to consider is whether there are any reasons for some franchisees to be performing better than others. Analysis of this particular factor can throw up the question “Do all franchisees have an equal opportunity to succeed?”
Identifying gaps and opportunities
In order for a franchise to ensure that they have created, and importantly, are maintaining a fair and equal opportunity network analysis, an in-depth analysis is vital. Without the use of digital mapping it would be extremely difficult to visualise this. They say that “A picture paints a thousand words” and in this case the representation of data on a map can quickly show geographical patterns and correlations that a spreadsheet could never demonstrate. The analysis can take the form of very top level analysis right down to evaluations of sections of territories down to street level. The key component of this analysis is the quality of the client data. Capturing information such as the postcodes of customers can be used to form the analysis to identify potential gaps and opportunities. Franchisors can also do this type of analysis to see where franchisees are gaining the majority of their work, if they are working outside of their allocated territory and by cross referencing this with their ‘business drivers’ variables it can be possible to see if the territory network is based upon sound principals. This usually takes the form of a regression analysis exercise where variables are modelled together to evaluate if there is a relationship between them. All these techniques can help facilitate the need for the change, or not as the case may be. Putting them into practice is a potential minefield but long term the benefits can far outweigh the initial hassle factor.