It is crucial for franchisees to understand the importance of territory pre-planning when working with franchisors before they head into a new market. It is an easy-to-avoid mistake for a franchisor to divide up a city by districts or even blocks with little regard for the socio-economic composition of an area. This can often lead to less success for the franchisee down the line.
Important issues to address
Potential franchisees need to discuss the details of territory pre-planning before they sign a franchise agreement. Any prospective business owner, whether it is a franchise or an independent operation, needs to understand their territory’s customer base if they are to give themselves the best chance for success. Essential questions to answer when doing this include:
- Who is their target customer?
- Where does this target customer live or work?
- Do potential customers in this territory fit the target?
- Is there a large enough target base of customers within the territory sold?
The franchisor should have answers to these fundamental questions. If they do not, the franchisee should think twice before going into business with an organization unwilling to do its homework.
Avoid a lose-lose outcome
Good territory pre-planning is a prime example of what a franchisor can offer. They should provide the knowledge and experience based on past successes and failures, and other necessary skills for running a successful business. Those who do not embrace this kind of research and application of the data may find themselves in a lose-lose situation. It can damage the franchisor’s reputation and it can cause the franchisee’s business to underperform or fail.