When you buy a mobile or home based franchise generally it comes with an exclusive territory which is figured by a geographical region; like a city, country, zip code or population base. Most Business Opportunities do not have exclusive territories. But what happens when you wish to expand? In a business opportunity situation you could be competing against people using your exact business model, you might already have them competing with you. The more business opportunities that are sold in the region the greater your competition using your exact methods of operation will be. In a franchise home based or mobile business generally but not in all cases you will receive an exclusive territory free from competition of those using your same brand name or exaxt methods of operation. Now that is not to say there will be no competition, generally there is some form of competition in every business. Here is a policy our franchise corporation came up with to deal with non-exclusive but adjacent territories/regions for our franchisees. If you are a franchisor, franchisee, potential franchisee or perhaps a Biz Op buyer this will be of value to your knowledge. Not all franchisors have such policies, but the thought process indeed will be of value. If you are a franchisor and you do not have such a policy you ought to consider one to deal with these issues. Here is an excerpt of our policy from one of our Branded Franchise Companies: " We only allow Twenty Percent of your business to be conducted outside your exclusive territory; Let's say that you want to expand the business outside of your exclusive territory to over twenty percent. Now twenty percent is a good, safe number. If or when we sell the territory to someone else, we can always pay you for that twenty percent of your business and give the accounts to the new franchisee. A new franchisee pays five to eight thousand dollars for marketing when we go into the new city. So, if we were to give you some of that marketing money, that might help compensate you for the twenty percent of lost business. You do not have anything to worry about that. We are on your team and we will obviously help you with getting new business to compensate you for that lost territory. Plus, the word of mouth marketing and referral network that builds in each city by that time would have increased your business in your exclusive territory enough to where you could absorb the loss of accounts and pretty much not even notice it. But if you were to have thirty or forty percent of your business in a territory next door and we were to sell that territory to somebody else, you would be in a world of hurt because you would have an instant noticeable drop in your business. Even if we gave you all five thousand dollars of the marketing money from the new franchisee, you still would not be able to increase your business in your exclusive territory fast enough to absorb the loss. This would be a detriment to your business." Buy having this policy in place it helps the franchisees from too large of a territory the really cannot service which would cause cash-flow issues trying to work such a large area. It also helps because when we sell another territory adjacent, that the franchisee does not have to surrender large volumes to the new franchisee. It also compensates the franchisees somewhat for the temporary clientele base loss; thus, everyone wins. In franchising Win-Win is what it is all about as it is much like a family relationship. Such a policy also keeps the lawyers at bay and prevents unnecessary lawsuits, which ruin the franchise relationship. Think on this. |
