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Franchise Site and Territory Selection
Written on the 8 September 2010 by Fiona Taylor
Franchise site and territory selection is a critical factor for franchise business success and with retail franchises in particular, consumes a large financial investment associated with buying a franchise business.
According to franchise site and territory selection expert, Spectrum Analysis Managing Director Peter Buckingham, effective franchise site and territory selection is the art of using information to make a good decision.
And it’s worth taking time and money to ensure you’re making the right decision as a poor decision could ultimately lead to franchise business failure.Here are some important aspects Peter recommends considering when making what could essentially be a ‘make or break’ decision for your franchise business.
Impulse or destination franchise site selection
When selecting a site for your franchise business it’s important to consider whether it’s an impulse type of business or a destination business.
According to Peter, typically the impulse type of business aims to have much higher exposure and will pay much more rent for that high-traffic location, such as a convenience store.
Alternatively your franchise business may be more of a destination business – the kind of business where people will come to you — so you don’t need to have a high traffic, high rent corner.
Peter gives the example of selling sports cars as a destination-type business, in our free pre-entry franchise education program module on franchise site and territory selection.
Variables for franchise territory selection
Most service franchises are more about having a territory than a franchise site, and one that gives enough opportunity to do the business you want to be in, says Peter.
“If you’re going to take a territory for a service franchise it’s imperative you feel comfortable logic has been applied so each territory has similar potential,” he said.
“We often see the ‘beer and pizza map’ approach, which involves a big map, a couple of franchisees and a franchisor with a black pen and a beer and a couple of pizzas and they’ve drawn lines on the map as they feel correct.
“This normally has no logic to population, other geographic areas, demographics or business potential which need to be considered for a proper territory.”
Where can I access franchise site and territory selection information?
You can conduct basic demographic information searches yourself, and may like to take additional due diligence steps, such as monitoring foot-traffic at the desired franchise site.
There are also a number of franchise site and territory selection consultants who can assist with franchise site and territory selection.
To conduct an information search yourself, Peter recommends the Australia Bureau of Statistics (ABS) website, and in particular Quick Stats and Quick Maps under the ‘Census Data’ section.
In Quick Stats you can put a postcode, a suburb name or local government area and up will come a map of that area and the basic demographics comparing that to the Australian average.
So very quickly you can look at any area and get a feel whether it’s:
The ABS data is currently based on the 2006 Census. The next Census will be in 2011 with the ABS data updated by 2012.
Whose job is franchise site selection?
Franchise site and territory selection varies from franchise to franchise, however ultimately the franchisee needs to be happy the site will generate results they are comfortable with – so the franchisee needs to do their due diligence.
When it comes to franchise site and territory selection Peter warns:
Preventing poor franchise site and territory selection
If a poor site has been chosen inevitably you will have lost quite a bit of money by the time you realise, Peter says.
Investing in franchise site and territory selection processes, due diligence and advice before you commit to a location could be the difference between success and failure, or a good franchise business and a great one.
Author: Fiona Taylor