“Balanced territories” - Is one ton of bricks the same as one ton of feathers?

Here’s the Google AI Overview of “one ton of bricks vs one ton of feathers”,

“A ton of bricks and a ton of feathers weigh exactly the same, because a ton is a unit of weight, so one ton always equals one ton. The difference lies in their density and volume; the feathers, being much less dense, will occupy a significantly larger space than the bricks to reach the same total weight.”

Your franchise territory opportunities follow the same principle, is 100k population in two territories the same? Now the question’s been asked, you’re thinking, of course not! And yet we see it over and over again where there is a quest to sell “balanced” territories with the “same” opportunity. The biggest thing we want you to take away from this article is that “equal territory opportunities don’t exist”.

Let’s take our 100k population territory target example. A 100k population territory in a city is going to be significantly smaller in size than 100k population in a rural area. It’s going to be much harder for you to reach customers in the rural area or for them to reach you. There are many times where we inform franchisors that parts of the country aren’t accessible to the franchise model because the population density is too sparse.

On top of that, they will have a completely different demographic and business mixes to each other. Typically, urban areas attract younger people and a big mix of different businesses with much higher densities of both too. As you move outside of the cities, the population tends to get older and there are varying levels of affluence across different parts of the country.

In cities you’re also going to get a lot of commuter traffic, meaning the population living in the territory isn’t the only population you have access to. In fact, think about any retail or commercial hub, the population will be very low, but would you consider these bad places to set up a store or a gym?

So given these factors, hopefully it's clear to see why we don't believe truly "balanced" territories are possible. In fact, sometimes striving for this balance can achieve exactly the opposite.

Let's a take a 100k population city example, call it City A. But your territory target is only 70k. To maintain balance, you award 30k population from the City A to a neighbouring franchisee whose main population centre in their territory is City B. But City A and B are 30 miles apart. Realistically the people and businesses living and operating in City A have no reason to travel for the same service in City B. So the territories appear the same, but in reality the franchisee that owns most of City A in their territory is likely to benefit from the entire 100k population. Whereas the franchisee with City B isn't able ot exploit 30k population within their territory and so actually has less.

What should I do about it?

Your options for dealing with this are going to vary depending on which country you operate in. Different franchise laws may force your hand into how you define your territories. But as a general guide, here are some tips to follow:

1. Add a drive time or distance component to your territory planning.
   Think about how your business operates i.e how do your customers reach you or do you go to them? In either case, there will be a limit to how far your business can profitably and effectively service these customers.
   
   
2. Simplify your criteria.
   The more variables you throw into your territory planning the more difficult you will find it to make a territory. Having advised probably over one thousand franchisors over the years, we can confidently say your customer profile is probably broader than you think. Get the base characteristics right and you’ll likely have a bit of flex in your franchise concept, service offering or pricing to accommodate for each individual market.
   
   
3. Don’t just judge franchisees on their sales performance.
   When you realise that franchise territories aren’t equal, you quickly realise that you can’t judge the performance of your franchisees on their sales performance alone. Have a think about what % of the market they are servicing, or better yet, plot their customer locations to identify where they trade. Does all the franchisee’s revenue even come from within their territory?
   
   
4. If possible, work to territory “minimums” instead of balancing.
   What we mean by this is make a territory that contains over the minimum required number of potential customers to work. From there, increase the size of the territory to suit the local market. If you need a territory to contain 100k population, but a town/city contains 170k population, then make a territory of 170k. Or reserve the remaining 70k as an “add-on”. In either case, there’s not enough for two franchisees to operate there and so whoever enters that area first is going to get access to all 170k population by default, whether you award it all to them or not.

Hopefully these tips will help you go out there and sell some amazing franchise territories. You’d be amazed at the exponential growth that can be achieved by getting this part of your franchise development right.