What is a Franchise Territory? How & Where They're Created

There are many factors to consider before buying a franchise including the cost, the strength of the brand, and the market where you’ll operate. Many new entrepreneurs often decide based on the first two, without considering the third. The territory you’re assigned by the franchisor may make a big difference in how successful you can be.

Franchise Territory Defined

A franchise territory is a designated geographic area granted by the franchisor. The franchisee is given sole rights to market, sell, and provide the company’s products or services within that area. This allows franchisees to build a customer base and expand their business within a defined space.

How Franchises Determine their Territories

To determine a territory, most franchises start with thorough market research. They identify factors including population density, household income, demographics, competition, and the demand for their products or services. They then set up their territories based on one or more of those factors. While each franchise has its own method, here are some of the most common:

• Population A minimum and maximum population threshold for each territory ensures that it’s large enough to support the franchise's business. Higher populated areas usually have more customers, but they also tend to have more competition.
• Geographic boundaries Territories can be defined by natural geographic features, such as rivers, roads, or city limits. Franchisors may use mapping technology to visualize and define specific franchise territories. This can help identify boundaries and ensure adequate coverage while preventing overlap between neighboring territories.
• Local factors: Franchisors may also consider local factors that can influence the business, such as traffic patterns, accessibility, proximity to commercial areas, and other market-specific dynamics
• Performance metrics Franchisors might consider awarding larger territories to successful franchisees who have consistently demonstrated exceptional performance. They may also consider offering flexibility in territory size based on the franchisee's preferences, investment capabilities, and local market conditions.

The Benefits of an Exclusive Territory

Having your own territory offers several advantages that can significantly impact your business’ success:

• Reduced competition: As you are given exclusive rights to operate within your territory, you won't have to compete directly with other franchisees from the same brand, reducing the risk of market saturation and pricing wars.
• Targeted marketing: With a clear understanding of your territory's demographics and preferences, you can tailor your marketing efforts to the local audience.
• Customer loyalty: By providing personalized services within your territory, you can build strong relationships with customers, encouraging loyalty and repeat business.

Understanding the Limits of Your Territory

Understanding what a franchise territory entails is pivotal to your success. Item 12 of the franchise disclosure document (FDD) specifies whether the franchise offers protected territories as some franchises do not. It will also spell out how the territory is determined, if it’s protected, and under what circumstances the franchisor is allowed to operate in a franchisee’s territory.

Before signing a franchise agreement, make sure it states the location as well as the size of the territory. Also, if you want a larger territory, some franchises will charge you additional fees.

Certain industries define territories based on their unique needs and goals. Restaurants and convenience stores may define territories based on geographic factors, focusing on proximity to customer populations. Service-based franchises might calculate their territories on driving distance to efficiently serve customers without incurring excessive travel costs. Home based franchises could define territories by postal codes or specific neighborhoods to cater to local demands.

The Importance of a Territory in The Residential Cleaning Industry

Because the house cleaning industry is highly competitive, having a designated territory is very important. It needs to be a highly populated area, to avoid driving long distances between jobs. It also needs higher-income households, so they can afford your services.

At Two Maids, we understand the importance of having defined territories for our franchise locations. We give all our franchisees an exclusive territory of between 50,000 and 300,000 U.S. Census households. The average territory is about 160,000 households. There may be exceptions based on the demographic breakdown that allows for a smaller or larger territory than our minimum or maximum designations.

Get Started with Two Maids Today

Having an ideal territory is only one of the reasons franchising with Two Maids is so appealing. To learn more about our other benefits, including our pay for performance model, contact us today. A member of our development team will answer any questions you have about Two Maids, including how we designate our territories, so you can determine if franchising with our brand is right for you.