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How do I ensure I have an appropriate territory when buying a franchise?

I'm considering a fast food franchise here in San Antonio. Any advice or resources on where to research whether the territory is right for a new franchise?

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Answers (10)
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Jun 12, 2017
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May 31, 2017
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Try a deli and/or diner. It's hard work, but good rewards and fun. Plus in the right area it is an excellent investment that will grow. And you can do this anywhere there are people. We doesn't like to eat great food? Also, know of 2 possible locations in Florida under a different name that may be available together or separate.

Nov 8, 2009
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With all of the great businesses out there for sale that are established, stable and very profitable I would strongly recommend that you not attempt a start up. Go buy something that has already gone through the VERY difficult and expensive start up process.

Don't believe the marketing hype from the franchisor about how easy it will all be. A start up is never easy and most fail. MOST - most - MOST.

Sep 24, 2009
Chuck Woolweaver
FranchiseConsulting.Net
Franchise Your Business in 60 Days
Palm Beach County, FL

Depending on the franchisor, most QSR franchises base their territories on a minimum population that they feel is adequate for you to be a success. However, the trend over the past few years has been to limit the size of the terriory to "point of site". Read the FDD/FA to determine the size of the territory that this franchisor is granting.

Please contact we with any other questions.

Sep 24, 2009
Jon Holmquist
Edgemaster Model 400 sharpener
President
Marion County, OR

Consider the possibility that you are the first of a kind in a new city. The territory limits really don't apply since you are the only show in town. In that case hit the ground running and get whatever business you can until another franchise of the same kind comes then you should have your name "all over town" before you have to pull in your reins. One reason to consider a new franchise in a new territory. Other than that do what the people below recommend. Jon at Edgemaster

Sep 24, 2009
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FindMeAFranchise LLC
Jefferson County, KY

Sabine----first know that the territory in a franchise agreement is one of the few things that can be negotiated but I'm not sure that's what you're asking. I think what you are really asking is about market---is there a market for this concept. Regardless of how large or small your territory is, you must have a product that people want to buy. There are marketing companies that can do surveys for you or you can conduct your own survey in and around----usually within a 3 to 5 mile radius----where you want your location to be. Most franchisors will not choose your location. You must do that---hopefully with the help of a good experienced commercial real estate professional. The franchisor should however, at minimum, look at your location and approve it. Understand that the riskiest of all businesses is retail and restaurant. Therefore location is critical and with the best location comes higher expenses but .....hopefully.... higher revenue....that will depend on you. Hope this helps. Tamme@findmeafranchise.com

Apr 7, 2009
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Franchise Advisory Group
PA

Sabine
Bringing a new concept to a territory has it's pros and cons. The pros are that you can be the first in the area to own the next best thing. People are typically drawn to a new concept, because by nature we are a curious and like to try new things, however the cons are that this is a new concept and is not well known, thus takes a great deal of marketing to get off the ground. The best way to evaluate a territory is to look at the competition and see how your concept is different, both product and price wise. Also, thing about the marketing and start creating a plan. Good marketing is going to be the key to creating a buzz. Identify your customer (Franchise can help you there) and run demographics to see if your customer is in the area. Be careful with Food Industry however, it typically slows down and struggles during a recession.

Apr 4, 2009
Fayaz Karim, MBA, CA
Subway Valuations, Business Searches
Consultant
Orange County, CA

Nice explanation by Rob
Verify, do NOT trust. If it is not in writing, it is you are not protected. Extreme PIta can and does give it in writing what your territory is and that is the way the industry should be. Fair to the franchisee too!

Apr 3, 2009
Rob Goggins
Great Clips, Inc.
Vice President of Franchise Development
Carver County, MN

Trust and verify. To some degree you have to trust that the franchisor has the experience to properly craft a territory that a) allows them to maximize brand awareness so they can drive consumer sales and collect royalties so they can make a profit, stay in business and continue to enhance the system, and b) allows you to maximize your revenue and profit. The two are not mutually exclusive.

In my experience newer franchisors tend to craft territories that are larger than they should be. Their desire is to make the territory as attractive to prospective franchisees as possible so that they recruit as many new franchisees as they can to start growing the system. From your perspective this might seem like a great deal at first blush. More times than not, however, you wind up with an oversized territory that you can't effectively cover or market to, and now you've blocked out other prospective franchisees from joining you in the marketplace. Again, at first you think this is a good thing. But those neighboring franchisees can actually benefit you by increasing the brand awareness in the market, helping reduce your per-unit marketing message and perhaps even sharing labor when appropriate.

The more mature franchisors will generally have modified any early territory crafting "errors" and will be awarding the proper territory relative to the investment. The main thing to consider when talking with mature franchise systems is the viability of the particular territory you're considering. If there are room for 10 territories in Dallas, and 9 are sold, why is #10 the last one available? It doesn't mean it's a "dog". It could just mean that the other territories were closer in proximity to the franchisee's homes. It could mean the population density isn't there in #10 now, but it's obvious that growth is heading in that direction in the near future.

Back to your question. Do your own research to the best of your ability. Check out the latest census data (www.census.gov), talk to customers, investigate competing franchise systems and learn how they craft territories and talk to the franchisees. Finally, trust your gut.

Mar 25, 2009

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