Four ways to define protected franchise areas
Franchise territories are the cornerstone of a successful, scalable brand. Well-designed boundaries protect existing franchisees, foster growth, and mitigate conflicts. While poorly designed boundaries can lead to franchisee disputes, revenue loss, and market inefficiencies. For example, territories that are too large lead to market under-penetration, leaving substantial revenue opportunities untapped. Conversely, overly small territories can result in franchisee cannibalization, discouraging future development and causing franchisees to abandon expansion plans altogether. Choosing the right method to define protected territories is critical, especially for new franchisors. Adjusting territory boundaries later can be disruptive to franchise relationships and operations, so getting it right from the start is essential. But what is the best approach? Let’s explore four common methods, their advantages, and their limitations.