In franchising you will see and hear a lot about ‘franchise territories’. A franchise territory is a specific geographic region where you will operate (exclusively, in most cases). When reviewing a franchise opportunity it’s important that you understand what territory you’re operating in and where your limits are.
Some franchisors, when putting together your territory, will calculate territory size and it’s parameters by looking at things such as how many businesses are located in the territory (if you’re in a B2B business) or how many households are located with the territory with a certain household income.
Many of them will look for a round figure, such as 10,000 small businesses, but it’s your job to investigate this and decide just how much business is realistically there. The intent of an exclusive territory is to protect your business and prevent other franchisees from taking over your sales by offering identical products and services.
Bigger Does Not Necessary Mean Better
When it comes to assessing a franchise territory, bigger does not necessarily mean better. What you are looking for is an area that is well populated by your target demographic, where there is a proven and sustainable demand for your product and service.
One of the best ways to evaluate a territory is to ask the franchisor how they went about calculating the territory size and then ask them to compare it with similar territories of existing franchisees. If several existing franchisees have a similar terriorty size and make-up and they’re all succeeding, then you can be more assured that you’ve got a good territory lined up.