The Impact of Franchise Territories on Your Business

Franchise territories play a crucial role in the success of franchise businesses, whether they are service-based or location-based brick-and-mortar brands. The division, selection, and negotiation of territories are key components of the franchise agreement process.

Service-based brand territories are often determined by factors such as projected revenue from the customer base, including the number of residents, average household income, and the number of businesses in the area. These brands, which offer essential services like home maintenance, do not require a physical storefront, allowing for more flexibility in territory size and potential revenue.

On the other hand, location-based brick-and-mortar brand territories are typically defined by a radius around the franchisee’s storefront, providing exclusivity within a certain distance. Multi-unit franchisees, known as area developers, may have protected zip codes and the opportunity to sign real estate agreements within a specified timeframe.

Some brands, particularly business-to-business models, may not have territories at all, as their services do not require a specific location. In these cases, building relationships with clients is more important than geographic exclusivity.

Overall, territories are a negotiable aspect of the franchise agreement and can vary depending on the market, the franchisee’s preferences, and the franchisor’s policies. Working with a franchise consultant can help prospective franchisees navigate the territory selection process and find opportunities that align with their goals. Ultimately, understanding and strategically choosing franchise territories can have a significant impact on the success and profitability of a franchise business.