Expanding your successful business into a franchise is a common way to grow a great idea. While franchising can be a financial windfall to both the franchisor and the franchisee under the right circumstances, many franchisors fail to properly define the territory they will serve. Too large or too small a territory, or crowding a given market with too many franchise locations to be supported, can be lethal to a franchise that may otherwise flourish.
One of the most common mistakes that new franchisors make is taking on too large of a territory when they initially expand from a single location. A territory that covers too large a service area will be difficult to serve properly, and often leave your franchisees exhausted trying to reach a far larger market than is wise, or often even necessary. Contrastingly, an overly cautious franchisor may establish too small a territory that misses out on a valuable market that is just outside of its scope. Committing to the due diligence required to properly establish the ideal territory location and size for you franchise offering is almost always worth the additional up-front costs and prep time.
Another common pitfall for franchisors is over-saturating a valuable market with too many franchises for any of the individual franchise locations to be optimally successful. In some circumstances, having fewer well-resourced franchise locations in a given market can be more profitable for the franchisor in the long run. Franchisees who feel supported and not pitted against each other in a scenario that is only designed to benefit the franchisor will be more motivated to make the most of their opportunities.
Franchising is a great opportunity for many businesses, but it can be a difficult path to walk for an unexperienced business owner. The assistance of qualified, experienced legal counsel can protect the business’s interests and help guide the business to achieving its goals.
