Article was published on Expert Advice page, Business Franchise Australia & New Zealand Magazine Sep/Oct 2013 and Franchise Asia October 2015
Creating a Territory Plan or having Preferred Marketing Areas is a desire of most franchise systems, however evolving into a good system can be a nightmare.
Most Territory Planning exercises we handle begin from the “Beer and Pizza” approach, and in many cases have evolved at people’s discretion. The “Beer and Pizza” approach is normally when a group of management (and some franchisees), converge around a map on a Boardroom table with beer, red wine, a couple of pizzas and a black crayon, and some good ideas! Inevitably it is built around where existing stores are, or where dominant Franchisees want to have as their exclusive territory. The downside is uneven opportunity in territories, overlaps and spaces in between, which we call no man’s land.
Published in Franchise Asia 2015
I am surprised by how many businesses decide to opt for a franchising model with no plan for how to properly achieve it. I see businesses that have tried to do it themselves, engaged a lawyer as a consultant, or just tried a shotgun approach and fired off volleys whenever they see a problem fail miserably.
Let’s start with a franchise consultant who can take an overview of the development of the franchise.
Franchise consultants are specialists who act like conductors of an orchestra, Their job is bring in (and out) the various instruments as and when required. In our case I say our business is the first violin – needed for strategic network planning, site selection policies and territory planning – and then we pass our work back to the conductor and the client to move to the next steps.
If you are buying a retail franchise you need to understand what makes a great location.
While we can list 10 or 20 drivers or factors that lead to the success of a retail business, they have different levels of importance depending on what you are selling, and how.
For example if you are selling petrol and convenience goods, your first driver is probably the numbers of cars passing the site. If you are a restaurant owner, and have a drive through as a major part of your business, this still may be your number one driver. If you have a local restaurant – sit down and wine and dine – then the area, demographics, competition and other factors will probably be more important than traffic driving past.
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.
Fast food and Quick Serve Restaurants across Asia have traditionally been “inline” stores in a shopping strip. Across the western world, the trend over the last 30 years has been to Drive Thru’ s, almost at the exclusion of any free standing restaurant that cannot offer a Drive Thru being sold, or knocked down.
In many countries such as Australia and the USA, we would be expecting around 60 - 70% of all major fast food restaurants like McDonalds and KFC to be what they call FSDT – Free Standing Drive Thru, and probably selling well over 60% of their revenue thru the Drive Thru windows
The science of drive thru’ s has greatly improved over the years where the process now starts well away from the store where you read the menu boards and place your order into the microphone. In many large stores you then drive forward into a window where you pay your money, and then drive on again to the window where you collect your food before heading out. This maximises the efficiency and moves the maximum number of customers thru the service lanes.
In all steps of the franchise process, be it internal operations of the Franchisor, the interface to Franchisees, or the internal operations of the Franchisees, having delegated roles and responsibilities makes the process of getting the job done far more effective.
It is not very effective having the CEO of McDonalds licking stamps for envelopes, and a young backroom burger flipper telling the CFO how to invest the spare cash!
I had the privilege of attending some of the America’s Cup racing in San Francisco this Spring, and if you want to see how to run an efficient operation, just have look at these teams. 3 years ago the concept of racing 72’ catamarans on hydrofoils was just a dream, and never had such a vessel been built.
International yachting came together and decided to start by building and racing Americas Cup 45 Catamarans, to have sailors become use to racing such vessels, and then to graduate to AC72’s around 1 year before the America’s Cup.
This was a “start from scratch” event where the teams had to design and build their vessels, learn to sail them and become extremely competitive for the racing that was to start in July 2013, with the finals of the America’s Cup in September 2013 in San Francisco.
Despite not regaining the America’s Cup from the Americans, in what turned out to be a nail biting series, let’s compare the Emirates Team New Zealand to a Franchise system, and see where it comes together?
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.
What can we learn from our existing store network?
We regularly read about how businesses can be benchmarked from a financial viewpoint. Many franchise systems spend considerable time and money comparing franchisees to the ‘norm’, and to use this information to try and improve performance.
Mapping from the past
Most retail or service franchisors seek to have some mapping to understand their distribution network, either from a store perspective or for territory planning and anaylsis. Over the years mapping has evolved from a printed wall map (originally from UBD or Melways), with black texta markings or coloured pins, to more sophisticated computerised mapping.
The digital-age version is shown below as a large-format wall map (modern continuous printers mean the only size limitations are the dimensions of your wall). The formatting can be manipulated to suit the purpose, the boundary lines are very clear, it can be reprinted easily, and the underlying boundary files can be used to extract population and other demographic data. However, the map itself still has limitations because it is a static image.
Peter Buckingham is the Managing Director of Spectrum Analysis Australia. He is a certified Management Consultant, and a Fellow of the FCA and IMC.