The content was part of Pre-entry Franchise Education Program - Module 3 organized by ACCC and Griffith University
Peter Buckingham was asked by Griffith University tackle to some frequently-asked questions about site selection and territory planning in franchise industry.
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Spectrum also has other videos that can assist you in franchising, including data analysis, strategic planning.
Published in Franchise Buyer Jan/Feb 2016
This should be the biggest question asked in selecting and opening a new business.
If the business is already operating, then the past sales are a fairly good indication for the future sales.
On the other hand, if the business is a new business, how do you estimate what your revenue is likely to be? Whether it is a large franchised brand, your own independent coffee and/or cake shop, an ice cream or yoghurt store or any other retail business, the same basic questions need to be addressed.
How do you realistically estimate the sales in dollar terms that your new business will do?
If you are joining an established franchise chain, the Franchisor may offer to provide some information, such as the demographics of the area, and maybe a listing of phone numbers of other Franchisees for you to talk to. The final word from the Franchisor is along the lines of “Do your own due diligence, as I cannot say what sales revenues you will generate” (and you will probably be asked to sign a document confirming this).
... Do they have a proper site selection process?
Published in Franchise Asia Juanary 2015
How do large multi-nationals decide where they spend their money on new sites? Whether they are in the oil industry, the QSR’s or any other very large chain of retail stores, I hope there is some logic in their site selection process.
Variability of information
The starting point for the decision of where to invest in retail should be available data. In an ideal situation, this would be a Census of population and housing, with data down to small areas such as every 100 households, traffic counts on the main roads, some form of pedestrian counts, business and employment information and probabaly the attractiveness of the surrounding / adjoining areas (often called the Generator score).
If you make sales predictions for your Franchisees and really cannot justify those numbers, be prepared to add “Your Honour” to the end of every sentence you make. Gelare International has just found that out. As much as they felt they had done “the right thing”, the Federal Circuit Court and Judge Riley totally disagreed.
This is another case that should highlight to Franchisors that they need a process and sales prediction tools if they are going to make any statements to their potential Franchisees.
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.
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.
I am a very keen Hawthorn fan, and now have the personal record of attending 7 Grand Finals in which they have played – and seen 7 Premiership wins.
So what does Hawthorn do differently from the other 17 teams in the AFL? They work to Their Rules – and do it the best way possible. Whilst I cannot say I am an expert, these are my views – and I think they have a real business connotation:
Hawthorn has been amazing at identifying young talent, and then developing it over a few years. Some of this talent comes in quickly, but they are not scared to wait and let the bigger boys develop, even if they play in the Box Hill Hawks for a couple of seasons.
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.
Published in Business Franchise Australia and New Zealand
Many businesses we deal with are structured at marketing to other businesses (Business to Business - B2B), and therefore the logic of how to establish a territory that is normally used when you sell to consumers (Business to Consumer - B2C) goes out the window.
Many B2B businesses sell a product, the likes of printing companies such as SNAP and KwikKopy, and many sell a service. The service may be couriers such as Fastway, changing office light bulbs, or providing business loans or business insurance. Both products-based and serviced-based franchises normally need to give a territory, especially if there is central ordering, and jobs are allocated to franchisees. You want to be sure you receive all the jobs you are entitled to!
The core thinking in this type of business is we want to know where the customers – other businesses are, rather than where people live.
Peter Buckingham is the Managing Director of Spectrum Analysis Australia. He is a certified Management Consultant, and a Fellow of the FCA and IMC.