Getting to collaborative real-estate planning: using automated systems and fact-based analytics, franchise companies determine the best new market areas and the optimal number of sites they can offer in those trade areas to maximize store penetration while minimizing cannibalization.

Author:Nadilo, Rudy

Location, location, location. For years, that has been the mantra of homebuyers as well as franchise companies and franchisees. After all, one of the most critical elements to a successful franchise company, beyond a good concept and proven system, is having the right store location. The problem is that while everyone knows the intrinsic value of a good location, many franchise executives still rely on outdated manual methods to identify territories and select store sites.

Here's how it typically goes: After using a combination of best guesses, intuition, maps and possibly brokers to come up with general territories, franchise executives make the sale and then hand off the rest of the process to franchisees, who use a similarly low level of sophistication to find exact locations with the help of brokers. Too often, franchisees pick sites that are most convenient to their homes, rather than what is in the best interest of the franchise. This outdated and disjointed ritual is ineffective for franchise companies and franchisees alike, often under-seeding areas with stores, so store revenue totals aren't maximized within areas, and sometimes over-seeding them, causing cannibalization and occasional lawsuits.


Given the competitive nature of franchising, successful franchisors need to be razor-focused on fact-based decision-making that works for both parties. The common goal is to open as many successful locations as possible while minimizing the impact of each new franchise on the existing franchise network. A franchise company should also keep in mind that different franchises are popping up daily and the potential franchisees meeting to discuss a chicken franchise might also be looking into hamburger, bagel or even copier chains. These days, potential partners are often sophisticated buyers looking for added value beyond the great idea with which you started.

While franchisees recognize that franchise systems seek to open many stores, they want to ensure that their franchisor will both protect their investment by minimizing encroachment and maximize their potential through marketing and merchandise programs tailored to the needs of the new location's trade area.

Franchise companies probably have already provided franchisees with many of the elements required for success, including the strategic marketing direction for company, brand value and to target customers. Why not work with franchisees to provide the optimal...

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