There are so many small franchises you can buy where you work out of your home and visit your clientele or you work out of a service van and have an exclusive territory. Many franchisors who sell such business franchise opportunities may sell only one unit in a large region, yet grant you a small territory. Many franchisees see this as additional territory to draw from in the beginning but then realize serving a large area rather than concentrating on a small one is not that easy.
In our company which has set up franchises in over 23 states we understand this and also have made a policy which might help you if you are a franchisor or franchise understand the dynamics of un-assigned territories and how they effect the profitability of the franchised unit. After 20 years of dealing with these real life issues which often are not addressed by the franchise agreements or UFOC (uniform franchise offering circular) we feel it our duty to help the world understand the true dynamics of the issue. Franchise attorneys who have never made an honest dollar in their entire lives and regulators who are too brain dead to understand supply and demand and free market fundamentals rarely, if ever address these issues? But then what can you expect from those groups of folks anyway, after all they are the cause of most of our problems in the United States. Here is our policy and you might enjoy the thought process here and it will help you understand the reality of home-based business franchises and territories. This is actually a excerpt from one of our franchise brands Confidential Operations Manual and we wish to give this information to the business community to prevent conflict and mitigate lawsuits. We want the franchise attorneys to be the ones looking for work, not America?s greatest contributors; The Small Business Entrepreneur. Here is the policy from the manual:
?Now there will be unassigned territories. Sometimes these territories will be unassigned for quite a while. You are free to work in these unassigned territories if you wish. We recommend that you do not spend your time to develop more than twenty percent of your business outside of your exclusive territory. When, in the future that territory is sold, you could lose a lot of your clientele. You would not want this to happen. When we sell the area to someone else and you have forty percent of your business there, you will lose forty percent of your business overnight. That is not something that we want to have happen to your business and certainly something that you do not want to have happen to your business either. So try to concentrate no more then twenty percent outside your exclusive territory. Now you may be land locked by other franchisees, which actually is a benefit, not detriment. It is better to have franchisees around you because all of you will do better believe it or not. They are not going to cannibalize your business because you have an entire city and a population to base that will obviously support one, two, three, four or more service units. Some cities will support more service units than others will which is a good thing. But nevertheless, we do not sell a territory that will not support a car wash truck and be able to produce a reasonable level of income. We would never do that.?
I hope you found this interesting and I hope it helps franchisors draft smart policies and franchisees protect their client base, from a potential over night catastrophe. I hope this prevents lawsuits and puts a few attorneys (scoundrels-opinion) out of work as they are the largest detriment to the franchisee-franchisor relationship. Think about your business model and your territories carefully, play to win.
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