Finding the Right Formula for Multi-Unit Territory Sizes

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Some franchisees prefer single territories. Others desire entire metro areas. Offering a multi-unit program supports all goals.

 

By Jameka Spencer
Buyers come into franchising at different stages of their lives. Some are young with families, some are seeking a post-retirement career, while others have been laid off from the job market and have struggled to find subsequent employment. Each comes to the table with different wants, needs or goals that they expect to gain from a franchise opportunity. 

Offering multi-unit territories enables a franchisor to tailor the best option for every interested buyer. It was a lesson several years in the making.

When Handyman Matters President Andy Bell and Vice President of Operations Mark Douglass began franchising in 2001, they allowed buyers to purchase territory sizes of 250,000 households.

“This wasn’t based on any scientific research we’d conducted,” Douglass confesses. “It was simply a figure we selected because it seemed reasonable — and generous.” Only time — and detailed follow-up studies — demonstrated that owning a single territory this large wasn’t actually either of these things, nor was it particularly beneficial to either buyer or seller.

Later, when they were able to pull information from their owners, they discovered that across the board, franchisees were generating 80 percent of their revenue from just six or seven zip codes.

 

Flexible Growth Strategy Builds Confidence

“It takes time for a new owner to find his footing,” Bell points out. “He’ll work within his comfort zone at the beginning, focusing particularly on customers within his own neighborhood and where his church, school and other activities are located. He’ll branch out cautiously, adding to his customer base in an ever-widening scope as confidence grows. In the meantime, an enormous amount of territory goes untapped. In fact, we discovered that even when we reduced our territory size to 125,000 households, we weren’t achieving more than 1 percent of market penetration.”
 
Ultimately, the company dropped its household count to 62,500 per territory, a size they believe better serves everyone’s goals.
 
The company also began offering a multi-unit strategy that incorporates an agreement between franchisor and franchisee to implement one territory at a time. Buyers purchase their market share up front at a discounted rate. The plan allows an owner to build one area and then a second, a third, all the way to a fifth as his confidence and expertise grows. It’s a process implemented across an 18-month strategic growth schedule that serves franchisor and franchisee well.
 
“When we started with a 250,000-household count, we still had the same capital investment requirements, and owners struggled to grow the business based on the needs of marketing and associated business cost,” Bell recalls. “The multi-unit approach greatly reduces all of these challenges; it brings in owners with higher business acumen and the appropriate working capital. And for us as the franchisor, it offers faster growth and development of the brand with fewer franchisees to manage and train.
 
“Not everyone wants to be the biggest fish in the pond,” Bell concludes. “Some franchisees are happy to own a single territory that enables them to service their immediate local community; other owners wish to own an entire metro area. The objective in offering a multi-unit program is to support all of those goals.”
 
 
 

Jameka Spencer is Director of Franchise Development for Handyman Matters. She was previously a sales qualifier and served as Director of Install Services, Process Leader, and Trainer for American Exteriors, LLC.

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