Breakthrough in Market Planning

I attended a franchise trade show recently and visited with a company that was selling multi-unit territories that had been pre-defined based on the expected number of development opportunities and their approximate locations.  The map they had on display looked something like the diagram on the left below, where the green and orange boundaries represent territory boundaries and the black dots are target locations for stores.  The franchise rep said that the target locations had been generated by a sophisticated modeling program and then field-validated by the real estate team.

A more traditional territory plan is shown on the right, where each target store location is a point representing the ideal center of the trade area which is a polygon showing the primary trade area.

I certainly commend this operator for using “best practices” in market planning by laying out their territories in advance and proactively offering them to prospective franchisees. 

What’s interesting about the map one the left is the way that the boundaries are just large enough to surround the points.  This means that a franchisee can select locations up to the edge of the boundary without worrying about encroaching on the stores in the adjacent territory because there is a “buffer” between the stores built into the market plan.  If the buffer is based on the appropriate level of spacing between stores based on the density of the area (e.g. urban, suburban), then it’s a great planning tool.

The problem with the traditional approach shown on the right is that franchisees in adjacent territories might select a location closer to the same edge of the territory and have significantly overlapping trade areas.  One solution to this problem is tocreate a second zone within each trade area that limits the range of choices for a site and creates a buffer similar to the one built into the map on the left.

This is the first time I’ve actually seen a map like the one on the left in a live sales situation and I believe it’s an important step forward in the state-of-the-art in market planning.  It certainly doesn’t eliminate every issue that can arise between franchisees in adjacent territories, but it establishes some clear expectations at the beginning of the process that reduces the chances of conflict at some point in the future.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s