Business Franchise Australia and New Zealand 55proceed or not - you have every right to ask
the franchisor to convince you that what
they are putting before you is reasonable.
Information such as the above is available,
and should probably be included in the
Disclosure Document, that is an obligatory
right that you have to receive.
It does surprise us at times how some
franchisors come to us for territory planning
advice, and when we ask what is in their
business plan and what assumptions they
have made as far as market size and market
share, we get a blank look.
In our view, a franchisor should consider the
question of territory numbers in one of three
ways:
- Have some successful territories that can
be measured and replicated, and you
understand that each territory has been
built to meet a requirement. We call this
the ‘Cookie Cutter’ approach, where a
franchisor can say that certain franchisees
have been able to successfully operate the
system based in the following territory.
Usually this is based on population,
number of households or number of
businesses in a B2B type application. This
is then adjusted in size if the area (and
postcodes) is seen to be better or worse
than the average as far as it is likely to
consume the service you are offering. - The franchisor may have an internal view
that a franchisee needs to invoice out
$500,000 p.a. to cover his own labour,
return on investment, parts that he would
expect to use in mobile servicing and
other operating costs. If the Melbourne
/ Geelong target market is $7 million,
then we should be able to support 14
franchisees when we approach maturity.
This may need to be the 5–10 year plan,
but at least you can issue some franchises
and ask the franchisees to ‘care take’ other
areas until the system can support the
mature number of franchises. - Sometimes a franchisor has been
successful in another market, and
therefore we can use the territory numbers
and sizes from elsewhere, and transpose
that into the market we are working in.
For example, if we have been operating
for some years and have 20 territories
in Sydney / Newcastle / Central Coast
/ Wollongong, this would be equivalent
to having 16 in Melbourne / Geelong,
based purely on population and household
numbers.
Whichever way it is put to you by the
franchisor, you should expect to see realistic
assumptions, facts and data to support this
view.commitment of the franchisor
Many applications we receive for Territory
Planning at Spectrum Analysis start with the
franchisor asking us “How many territories
should I have?”
Our initial reply is that we do not write the
Business Plan, and this type of work should
be considered in an urgent sense before any
territory planning can occur. We walk them
through most of the steps above to come out
with a logical and realistic position. In our
view, once established, it should be a Board
ratified decision, as it is fundamental to the
future of the system.
Only recently we had an inquiry on behalf
of an overseas franchise wanting to come to
Australia, and we were told based on their
experience, they should have 300 – 360
territories. The concept was IT based, and
when we delved deeper into the logic, it was
a wet finger in the air approach based on the
number of businesses.
We can only say that (on behalf of any
future franchisees), they do undertake some
realistic research, and not try and convince
us they know best, or we will be just making
another donation to the European Bail Out
fund.
Once a Franchisor has undertaken
reasonable research, they should be able
to show you a logically thought out set of
information based on realistic assumptions,
with mapping to back it up.fEATURE:
F ixed v
’S m
oBile Fr
AN
chi
SeS
city pErsons HousHolds pop.rAtio
sydnEy
(newcastle/Central
Coast/Wollongong)5 ,141,78 3 1, 8 0 2,10 4 34%
mElBournE
(Geelong)
4 ,173 , 24 8 1, 4 9 7,12 5 27%BrisBAnE
(Gold Coast/
Sunshine Coast)2,965,630 1, 0 6 9 ,10 4 19 %
pErtH
(Rockingham/
Mandurah)1,728,743 6 2 7, 0 9 0 11%
AdElAidE 1,225,233 475,370 8%
Summary
If you are looking at taking on a mobile
franchise, ask the franchisor what research
they have done, and more importantly, what
assumptions they are making in working
out your territory, and whether it has a
reasonable chance of sustaining the business.
If the answer is cloudy or blank, I suggest
you look at another franchise system.Peter Buckingham is the Managing
Director of Spectrum Analysis Australia
Pty Ltd, the leading Geodemographic
and Sales Prediction Modelling Company
in Australia. He is a Certified Franchise
Executive, and also a past Director
and Vic / Tas President of the Institute
of Management Consultants. Peter is
contactable at:
[email protected]
http://www.spectrumanalysis.com.au*Based on census 2011 population estimates.Typical market map for Sydney territories.