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What does territory development mean in franchising? (Definition)


What does territory development mean in franchising?

Explanation of terms: Area development is mainly used for the supra-regional and international expansion of franchise systems. Alternative forms of expansion are master franchise and direct franchise.

Franchise systems often complete their national or international expansion by awarding Master franchise licenses. Master franchisees acquire the license to develop the franchise system within of a certain area, be it in a larger region, one or more federal states or one or more countries. The master franchisee not only has the right, but usually also the obligation to develop the respective area. This can be done both through the opening of locations by the master franchisee himself and through the allocation of Single licenses or multi-unit franchise licenses to other franchisees. The master franchisee then also acts as a franchisor in his area.

Area Developer (Area Development Manager)

With another Territorial development model set up franchise systems Area Developers, also known as Area Development Managers. With this form of area development, the area developer concludes a contract with the respective franchise system and is responsible for the Acquisition of franchisees responsible in a defined area. Often the Area Development Manager also looks after the franchisees, offers advice and support services, observes the market, controls the franchisees and supports them with operational management issues such as marketing or personnel issues (source: Dr. Patrick Giesler, ” Franchise law – the basic knowledge for franchisors “).

Area developers also open themselves in some franchise systems Franchise operations or a pilot operation. Area developers often receive for newly won franchisees Commissionswhich can result in the quantity of franchises taking precedence over quality. If an area developer is primarily or exclusively entrusted with the task of attracting franchisees, the terms franchise broker or broker are also used. However, franchise agents or brokers usually have several franchise systems in their portfolio.

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Area development at a glance:

  • Development of larger regions, federal states or countries with the franchise expansion
  • Two models for area development: master franchising or hiring area developers or area development managers
  • Master franchisees can develop the area themselves and open their own locations or, as a franchisor, issue further franchise licenses in this area
  • Area developers are responsible for attracting franchisees
  • Area developers also take care of the franchisees, offer additional services for franchisees and are the interface to the system headquarters
  • Area developers sometimes receive commissions for newly concluded franchise contracts

What is meant by area planning?

Explanation of terms: Territory planning in franchising describes how franchise systems plan to divide a country, city or region into sales territories. Area planning is not to be equated with area development or area development: Area planning is more of a rough strategic goal, the latter terms are to be understood more as more concrete measures.

In his Video “What is territory planning” for FranchisePORTAL defines the franchise consultant Eugene Marquard the term based on some additional aspects. This should not be confused with the definition of a protected sales area in which every franchisee can act exclusively. Rather, it is about a general definition within the system development.

Eugen Marquard speaks of strategic planning, in which the franchisor defines the locations in which he would like a location in the event of area-wide expansion. It is mostly based on the availability of the location factors determined in the pilot phase. Based on the data of desired locations, area sizes or catchment areas and demographic analyzes, it is necessary to determine the individual areas by postcodes. This creates transparency and security among the franchise partners.

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Source: https://www.franchiseportal.de/definition/gebietsentwicklung-a-4817


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