When you are about to buy a franchise you must look at the competition both from others companies, and from the franchise brand, and ask what is a reasonable distance between stores?
Competitors are normally not a great problem, and in fact, as in the case of homemaker centres and certain types of shopping centres or shopping strips, neighbouring competition can actually be an advantage.
This is what we call “clustering”. Name a reasonably sized homemaker centre/precinct, and count the bed stores, furniture outlets and electrical retailers. Experience has shown that these retail outlets actually work best together, as the combined drawing power of the homemaker centre far outweighs the advantage of being out on their own.
Should a franchise that operates out of a “bricks and mortar” store give territories or not? That is one of the biggest questions in Franchising today.
There are many opinions, and companies do it differently depending on their size, brand awareness, level of investment required by the Franchisee and basically, the view of the CEO or his franchise advisors.
The Franchisor’s views are normally around the line of let’s keep it to a minimum as it gives us more flexibility for the future. The Franchisees view is normally around thinking of it as an exclusion zone and therefore a guarantee that the Franchisor (or his successor) cannot introduce another store into the area.
Published in Business Franchisor Mar 2013
Building a business is normally a long term affair. When we do a business plan, we envisage what will happen over the next few years, and use our best forecasts to make the long term decisions, and hope all goes to plan.
Why is it then when many businesses look at their long term network planning, there is a huge variety of processes used, from being proactive, such as companies like McDonalds and Caltex, through to companies that are totally reactive – where they can be led like a bull with a ring through the nose?
In many cases the location strategy for a business is driven by minimising expenses, and to that end, minimal staff (and in some cases the property department is the waiting room for retirement). When working in the oil industry, I must confess that was our assessment of many of the property managers of the time!
However the decisions this group makes for your business are some of the most important long term decisions that can make or break a company over the next 10 or 20 years.
Poor planning in new store development leads to the closures of the next 5 – 10 years, and the costs of those can be astronomical. Think of companies that rose like comets and sunk down just as quickly (some to try and re energise again). Names like Starbucks, Klein’s Jewellers, Allan’s Music and Clive Peeters come to mind.
Peter Buckingham is the Managing Director of Spectrum Analysis Australia. He is a certified Management Consultant, and a Fellow of the FCA and IMC.