How big should a Franchise Territory be?

In the early days for any Franchisor, it can be really tricky to define and decide upon just how big a territory you are going to grant for your new Franchisees.

Too small and you risk giving them an area that cannot fuel their growth to a level that both you and they will be happy with, and conversely too big and you risk giving them an area that is never fully utilised and you end up with swathes of the country that don’t have access to your service or products. On the balance of things, in the early days it’s probably better to err on the side of caution and give a slightly larger territory. You really want your first guys to be succesful, and that probably trumps other concerns.

When you have the chance though, take the time to figure out what defines the demographics of a succesfull territory and use that as the basis going forward. Do you need a certain size of population, is it a specific subset of that population, does age and/or relative wealth come into it? There are mapping companies that can help you define and refine this process to get it right - you may end up with territories of unique sizes. Postage stamps in/around London vs. large rural terrtiroies that look geographically imbalanced but have the right breakdown of client base.

Perhaps too it is worth exploring other ways of defining them instead? I'm not suggesting this works for everyone, and in fact it absolutely wouldn't work for most. Perhaps if you want to go overseas though, and have a clean slate on which to build your business - you can start to think a bit differently about how you approach it.

Here is why I think it's worth a discussion...
 
Franchising sometimes falls into the trap (definitely falls into the trap) of sticking to what we know - and that includes some absolutes that we can be blind to looking at tweaking.

Many of us have experienced during Covid, the challenges of shifting to an online product that can be purchased anywhere but where sales are still governed by geographical boundaries. We've been working with a couple of new Franchisors and have been looking at whether a geographical territory split makes sense for them, or whether giving exclusivity in other ways would work better.
 
This is a franchise that provides training services but that delivers them almost entirely online. A geographical model is prohibitive as a good franchisee will want clients that they can service nationally – so why not consider looking for license or franchise partners and giving them territories based on expertise, skill set or background? So in this example they can have a range of partners that exclusively deal with sectors such as government contracts, or pharmaceutical clients or education. Territories are limited to these sectors, but are not restricted in terms of location.
 
Worth thinking about your end customers, and whether all of your franchisees are equally able to deliver to them all – or whether your model has evolved in such a way that franchisees have found their own niche but that this means opportunities are going unexploited.
 
Just a thought…