“We are at a greAt time for a franchisor to fix
their territory issues at present. once every five
years we have the full release of the census,
giving us reasonably fresh information to work
w i t h.”Peter Buckingham | managing director | spectruM analysis- Postcode boundaries can be moved by
Australia Post to suit the market. - New postcodes can be added (normally new
developing areas), and whole postcodes can
be removed or combined (normally in some
country areas). - Unless you have a very good overall
recording system, such as an electronic
mapping system (or someone who is
keeping track of all this), these post code
changes will escape you. - In many franchise systems, it simply is not
given the importance or horsepower to be
kept up to date. - The potential problems it may cause in
franchisee confidence and potential legal
issues in the future. - The inconsistency in the business potential
of different territories – why some work
really well, and why some franchisees may
be starving for business.
What should be used to make up
territories?
We are at a GREAT time for a franchisor
to fix their territory issues at present. Once
every five years we have the full release
of the Census, giving us reasonably fresh
information to work with. The 2016 Census of
Population and Housing cost us (the taxpayer)
around $470 million according to the
Australian Bureau of Statistics (ABS) – and
we should be using it!
The Census data allows us - once we have
mapped a system’s territories into a GIS
(refer above) - to then measure each territory
in many ways. We can count the number
of people, number of households, cars,
computers and many other things you told the
ABS you had in your house, and then we can
understand the internal components of the
households in each area in terms of average
income, ethnicity, language spoken at home,
employment and many other factors.
Australia’s base geography (2011) is now
54,805 Standard Area 1’s or SA1’s, each with
a population of between 200 and 800 people.
SA1’s then fit into 2,214 SA2’s, each with
a population of between 3,000 and 25,000
persons (fairly similar to postcodes in size),
then 351 SA3’s and finally 106 SA4’s.
What is important is that nearly every
territory that has been drawn manually
can be electronically copied, and unless the
franchisor has used minor streets and lanes
as the boundaries, most main roads serve as
the boundaries between SA1’s. Once drawn
accordingly, all the Census factors can be
measured.
If the franchise system is more a Business to
Business (B2B) type of operation, then there
is similar data available through the ABS to
count the number of businesses and business
types in any specific area.
For a Home Based or Mobile franchise, it is
very important that you start off by knowing
these basic parameters, and then you think
in terms of what is good or poor for your
business concept, and make adjustments to
the territory accordingly. The aim is never to
make every territory equal in its base number
of households or population, but to make each
territory similar in the amount of potential
business it should offer each franchisee.reality check
If going into a franchise system, stand back
and understand the long term numbers. There
are a couple of numbers I want to quote to you
for this section:- Australia has a population 24,357,000
(according to the population clock on the
ABS website on the evening of 9/2/17). - Australia has around 2,171,532 businesses
(2016 ABS Business Data). - Australia has around 852,629 businesses
that actually employ someone (2016 ABS
Business Data).
If a franchisor says they want to give each
territory 10,000 persons, then you are looking
at over 2,000 territories Australia wide.
For a point of reference, Jim’s Mowing is
reported to have around 1,600 territories, and
probably the most of any service business in
Australia. By comparison most of the lending
institutions such as Mortgage Choice and
ANZ Mobile Lending have around the 100 –
200 territories.
Similarly, if a franchisor says all you need is
1,000 businesses in an area to be successful,
then theoretically you could have 2,200
franchisees! Maybe their long term strategy
is to only have 200 or 300 franchises, but
then why cut the areas to be so small, and
what happens if your area has one of the
‘Big 4’ accounting firm’s offices, so there are
thousands of shelf companies registered there.
Probably not much profitable business will
ever be done with such companies, unless you
are a liquidating franchise!
The point is apply a reality check to
understand what the Franchisor ‘could’ do if
they were ever to fill all their territories, and
what that could do to you, and the long term
business.summary
If you are looking at taking on a mobile or
home based franchise, ask the franchisor what
research they have done, and more important,
what assumptions they are making when
working out your territory, and whether it has
a reasonable chance of sustaining the business.
Also look at it in terms of what could happen
in 10 – 20 years if they were to fill all their
territories, and what could be the impact
on your business? If the answer is cloudy or
blank, I suggest you look at another franchise
system.
Select well, Grasshopper.Peter Buckingham CFE is the Managing
director of Spectrum Analysis Australia
Pty ltd, a Melbourne based mapping
and statistics consultancy, a Certified
Management Consultant, and a Certified
Franchise Executive.
Spectrum specialises in assisting clients
with decisions relating to territory building
and retail location, using various scientific
and statistical techniques. Contact Peter
directly via:
03 9830 0077
[email protected]
http://www.spectrumanalysis.com.au