How Do Franchises Divide Territories?
- Exclusive or Non-Exclusive Territories Some franchises use exclusive territories while others adopt a non-exclusive approach. ...
- Defining Territory Rights Three of the primary methods for dividing franchise territories are based on population, distance and ZIP codes. ...
- Master Franchise Territories and Sales Quotas ...
- The Franchise Agreement ...
Why do franchise territories need to be well defined?
What is master franchise?
About this website
How is a franchise territory determined?
The fastest, simplest and most cost-effective way to define franchise territories is to use existing administrative boundaries, such as zip codes, townships or states.States.Counties.Towns/Townships.Municipalities.Zip codes.
What are the 4 types of franchise arrangement?
Below are four types of agreements franchised businesses commonly form.Single-Unit Franchise Agreement. In a single-unit agreement, the arrangement grants the franchisee the right to open and operate a single franchise unit. ... Multi-Unit Franchise Agreement. ... Area Development Franchise Agreement. ... Master Franchise Agreement.
How do you structure a franchise?
The following are the steps to franchise your business:Determine if franchising is right for your business.Issue your franchise disclosure document.Prepare your operations manual.Register your trademarks.Establish your franchise company.Register and file your FDD.Create your franchise sales strategy and budget.
What is territorial franchise?
A protected franchise territory refers to a specific area that a franchisor grants the franchisee the right to operate within, meaning other franchisees and sometimes the franchisor itself are unable to enter that market.
What are the 3 conditions of a franchise agreement?
The key elements of a franchise agreement generally include: Territory rights. Minimum performance standards. Franchisors services requirements.
What are the 3 types of franchise agreement?
TYPES OF FRANCHISE ARRANGEMENTSSingle Unit Franchise. Single Unit Franchise (or Direct Unit Franchise) is the most traditional and historically the most common form of franchising. ... Multi Unit Franchise. ... Area Development Franchise. ... Master Franchise.
How are most franchises structured?
Determining the proper legal entity is a key factor that needs to be designated well before signing a franchise agreement. The most common legal structure options are S-corporations, C-corporations, sole proprietorships, general partnerships and limited liability companies.
What are the 5 types of franchising?
The five major types of franchises are: job franchise, product franchise, business format franchise, investment franchise and conversion franchise.
What are the types of franchise relationship?
There are two main types of franchising, known as Product Distribution Franchising (Traditional Franchising) and Business Format Franchising, which are conducted under a variety of franchise relationships.
Why is territory important in franchising?
Basically, you want an area that has plenty of room for growth, so you can reach your financial goals. One where the economic conditions are good, along with a large number of consumers who can and will purchase your products or services.
Why are franchisees typically assigned territories?
The bottom-line purpose for having a protected territory is to ensure there won't be undue competition for the franchisee from the sales of products or services by another outlet using the same brand and/or operating system.
Can franchise be assigned to heirs?
A contract may require heirs to meet qualification standards set by the company. The new owners may need to meet certain personal and financial criteria required by the company. In most cases, franchise agreements require heirs to sell the franchise back to the corporation.
What are the 4 types of franchising and give an explanation about it?
Learn the 4 main types of franchise arrangements: single unit, multi unit, area developer and master franchise. The franchising industry is very versatile, with multiple franchises, industry options and investment ranges. In addition, there is a diversity of types of franchise arrangements available.
What is the most common type of franchise agreement?
single unit franchiseA single unit franchise is an agreement where the franchisor grants a franchisee the right to open and operate one franchise location. This is the most common and simple type of franchise relationship.
What are the types of franchises?
The five major types of franchises are: job franchise, product franchise, business format franchise, investment franchise and conversion franchise.
What are the common franchise terms?
Here are a few common franchise terms that you should be aware of. A Franchisor is the owner of the franchise brand and business system. Franchisors can license their franchise to various franchisees. A Franchisee is a person or group who licenses the right to carry out business under a particular franchise trademark.
How to divide sales territory?
1. Geographically. One of the most popular ways to structure a sales territory plan is to divide up accounts according to geographic location.
Why do companies divide territories according to company size?
Dividing up territories according to company size also allows for predictability of contract size and a lot of segmentation. Categorizing accounts by size, such as global enterprise, mid-sized business and small business, prevents coverage gaps. It also makes it easier to assign the right rep to the right account.
Why are sales territories important?
Why sales territories are useful. As companies grow, they need to divide up accounts in a manageable way. Sales territories provide clear-cut boundaries, so there’s no confusion about which sales rep works with which client. This is crucial for several reasons: To prevent under-servicing.
What is a sales territory?
A sales territory is a defined area in which a single salesperson or group of salespeople work. That defined area can take on different shapes and forms. As you’ll see below, not all sales territories fit a neat geographic structure. Depending on the size of the territory, there may be one person handling all the area’s clients.
What is the purpose of arranging sales territories according to industry?
When you organize sales territories according to industry, you empower sales reps to specialize in a particular niche. This gives them the ability to study industry-relevant topics and, more easily, establish and build a rapport with their clients. The sales plan for that area can ditch more generic messaging and tailor marketing materials and pitches to the industry.
What is quotapath compensation?
QuotaPath is the most adaptable compensation solution for sales reps to finance to everyone in between. Try it for free today!
Why do we have a balanced sales territory?
Balanced sales territories give everyone a chance to maximize their compensation. To motivate and boost morale. Giving a sales rep their own territory establishes ownership; they’re in charge of their piece of the pie. It’s their responsibility to make sales happen.
Exclusive and non-exclusive territories
The common belief among franchisees is that when they buy a franchise the contract forbids any other franchisee from working in their territory.
Should I choose an exclusive territory?
At first, choosing exclusive territories might seem the best choice but you might need to think twice before making up your mind.
Exclusive territory and protected territory
While some people think that exclusivity and protection are two words with the same meaning that are used interchangeably, you need to know that there are some differences.
Dividing territories
As we said, the main challenge of dividing franchise territories is to well distribute the franchisees in a city or country and ensure enough profits for the franchisees.
Dividing the area into a few big territories
This method involves dividing the region into a small number of territories, each covering a vast area.
Dividing the area proactively
Using this strategy leads to more profits and smaller territories but it also requires more information.
Market considerations
The important thing that you need to understand and keep in mind is that every business has a specific thing to consider when determining the size of the territory.
When dividing sales territories, it is also important to consider company size.?
When dividing sales territories, it is also important to consider company size. Instead of assign ing reps to certain boundaries on a map , they may be assigned to specific accounts. For example, senior reps who have proven track records may receive larger accounts, while new reps may be given smaller accounts.
What is a sales territory map?
Utilizing sales territory mapping software has a multitude of other benefits, such as the following:
Why use sales territory mapping software?
Sales territory mapping software also simplifies the route planning process. When sales routes are not optimized, sales reps inevitably waste time and money on the road. In turn, this leads to lost opportunities and poor performance. Implementing innovative sales territory mapping software gives sales managers the ability to determine the most time efficient and cost-effective routes for sales reps to cover all prospects and customers in their assigned territory.
The Basics Of Franchise Territory Mapping
A franchise territory refers to an area in which a franchisee is authorized to establish and operate a franchised business. The franchise agreement determines the size and scope of the franchise territory.
How Does Franchise Territory Mapping Work?
Franchise territory mapping is often used by franchisors to manage franchisee territory opportunities. The mapping process can also resolve issues that may arise when identifying and communicating available and existing territory geography.
The Franchise Territory Mapping Process
Franchise territories can be defined in one of two ways: strategically or non-strategically. If a franchise has a dedicated executive team, the franchise territories will generally be mapped to a designated market area (DMA). DMAs refer to geographic areas in the United States that represent specific media markets.
Identify Audience, Objectives & Competitors
The first step in franchise mapping involves identifying the target audience. It is important to understand what types of consumers are interested in the products or services being offered and where these consumers are primarily located.
Perform Analyses Of Customer Data
When performing territory mapping, it is important to evaluate market data thoroughly. Consider performing an analysis of customer data to gain data-driven insights on the market.
Divide Franchise Territories & Assign Locations
Another important component of franchise territory mapping involves dividing territories and assigning locations. When dividing and assigning territories, it is important to create a balanced plan that will set the sales team up for success.
What Are Its Benefits?
Many benefits come from sales territory mapping, including the creation of well-balanced territories that will maximize the potential of sales reps and cultivate new opportunities. Balanced territories keep sales reps motivated and allow the company to continue growing and profiting.
How long does it take to create a territory network?
Creating our territory networks take days and weeks, not weeks and months.
Does a territory need a river, forest or mountain range?
No territory needs a river, forest or mountain range dividing the opportunity. We'll take care of it.
What to consider when discussing franchise territory?
When discussing the franchisee territory with a franchisor, it’s not unusual for a prospective franchisee to focus on the size of the territory, more than other important considerations. Many franchisees believe the larger their proposed territory, the more they’ll be insulated from fellow franchisees and the greater the potential for increased growth. However, there are a number of issues that should be considered.
What is a franchisee's territory?
A franchisee’s territory represents the foundation of their business. It’s where their customers, revenue s and increased growth will come from. A territory that’s too small can restrict the growth of sales. In some franchise programs a neighboring franchisee can be on the border of another franchise territory and vie for customers in that territory.
Will the territory be exclusive or protected?
Will the territory be exclusive or protected? Some franchisors will allow a franchisee to market or sell into an “open” territory until it’s franchised. Be sure to ask what happens to the customers you gained if the “open” territory is franchised. Some franchisors require franchisees to relinquish the customers, while others allow a franchisee to retain them.
Can a franchisor sell through other stores?
The franchisor may retain the right to sell through other locations such as supermarket s and other retail outlets. When you and your attorney review the Franchise Disclosure Document, focus on the important questions regarding your proposed territory, how it’s defined and what rights are retained by the franchisee and franchisor.
Can a franchisee be on the border of another franchise?
In some franchise programs a neighboring franchisee can be on the border of another franchise territory and vie for customers in that territory. Jeffrey M. Goldstein, a Washington D.C. based franchisee attorney offers some important points regarding a franchisee territory. “When many people hear that they have a “territory,” they assume this means ...
Can a franchise agreement be a territorial protection?
the internet). As a third option, some franchise systems do not offer any territorial protection at all .
Does the franchisor reserve the right to sell directly to customers regardless of where the customers may reside?
Alternative Distribution Channels: Does the franchisor reserve the right to sell directly to customers regardless of where the customers may reside? With the advent of E-commerce, this practice has become more prevalent. The franchisor may retain the right to sell through other locations such as supermarkets and other retail outlets.
Why do franchise territories need to be well defined?
Franchise territories need to be well-defined to protect the interests of both franchisees and franchisors. An effective franchise agreement should be prepared and reviewed with the participation of a franchise attorney. These agreements are for fixed terms and must be periodically renegotiated. Always review the franchise agreement carefully.
What is master franchise?
A master franchise is another franchising method for assigning territories. In this case, the master franchisor grants a master franchisee the right to market franchises in a specific area. The master franchise strategy is used by many major franchisors.
