Franchising FAQ: How Are Franchise Territories Determined?

Franchise territory exclusivity is one of the most important factors to consider when researching a potential franchise.

That’s because having a protected, generous and clearly defined territory will ensure that you won’t have to compete with fellow franchisees for customers; that your staff will remain loyal; that you will control the reputation and perception of your brand in your area; and that you will have an easier time getting franchise funding.

Now that you have an idea of why franchise territory exclusivity should be a determining factor when considering investing in a franchise, it’s equally important to understand how franchise systems actually determine their territories.

That’s because territory size and scale can vary widely, and you want to make sure that the franchise you select recognizes offers territories that are designed with you and your goals in mind. Here is a closer look at an answer to a common franchising FAQ: How are franchise territories determined?

Exclusive Versus Non-Exclusive Franchises

The first question you should ask when starting your franchise is the same question many franchise systems ask when starting out as well — do we offer exclusive territories? The answer largely depends on the franchise’s products, services and model.

For example, a franchise system that sells a high volume of goods online wouldn’t be too concerned with territorial exclusivity, while it would be more important in a service-oriented business that requires interaction with customers.

The goals of the franchise system can also play a factor; franchise companies that want to maximize brand exposure will do so by selling as many franchise licenses as possible, regardless of its impact on individual franchisees.

If a system sells locations instead of awarding them, that should signal a major red flag for potential franchisees. On the other hand, franchise systems that want to maximize franchise operator success will be more inclined to offer protected territories.

Defining Franchise Boundaries

Even those franchise systems that do offer territorial exclusivity use different methods to define these exclusive areas. Here are the most common methods:

By Zip Code

Franchise systems will award new franchisees a cluster of zip codes in which to operate, with a minimum number of zip codes as the threshold for a territory. This approach works well in densely populated areas, but it create headaches for franchisees in locations where zip codes are large but underpopulated.

By Radius

Under this method, territories are defined by physical distances. Though seemingly fair and straightforward, it is actually a pretty arbitrary and unfair system. Consider the fact that a franchisee in a city — with many potential customers — will pay the same franchise fee for their location as would a franchise operator in a more remote area.

By Population

This approach ensures that all franchisees have access to an equal number of people. However, those people may or may not be the right demographic. In addition, the physical size of a territory may be limited, as a franchisee in a busy downtown urban center may have a territory of only a few blocks, while a rural franchisee’s territory could reach for miles.

Bin There Dump That Territories Are Defined By Your Success

At Bin There Dump That, we believe that a great territory is one that ensures success for franchisees like you. That’s why we offer well-defined, well-protected territories that consider all the factors that really matter to franchisees.

Our territories include many zip and postal codes and large, expansive physical boundaries that incorporate highways and roads. We also make sure that our territories include:

Make Your Move. Mark Your Territory.

If you want to learn more about joining Bin There Dump That, we invite you to start the process by downloading your free franchise kit now.