We gathered the testimony of Data Analysis, an expert in data analysis, mapping and geomarketing.
Strategic choices
What is the potential for developing a franchise network?
Two questions need to be asked:
- You have to be able to appreciate the average rate of development of a franchise in France.
- Most surveys show that a franchise network grows on average by 7 units per year so when you build a franchisor business plan you can reasonably think that you will achieve this performance of more than 7 per year.
Nevertheless, the pace of development can vary quite significantly from one brand to another :
- The more capital-intensive the concept, the narrower the target of franchisees and therefore the more likely the pace of development will be affected
the
- more the constraints of the location search type, by their specificity, their financial and technical characteristics are heavy the more the pace may also be affected
- finally, the pace of development is very much linked to the communication effort that is made and there is a direct correlation between the communication budgets invested and the pace of development; in this regard, remarkable examples have recently been observed. We could mention the success of the Stéphane Plazza real estate network, which grew by an average of about 100 units per year, but at the cost of very high professionalism in development and significant advertising efforts.
The second thing is the potential: how many franchisees can I install in a market such as the French market and what is the method of defining this potential?
We must start by defining a typical catchment area: “In my brand, customers come from these geographical areas”. You establish a customer map and thanks to this data you will be able to define the typical characteristics of your catchment area. Obviously, the more pilots you have, the more you will be able to do a fine analysis and define exact characteristics of catchment area typology.
Then, thanks to marketing and geo-marketing software, you will be able to define how many areas in France are similar to your typical area. We draw up a map that we are sometimes called a zone that corresponds to the geographical definition of all the territories that offer sufficient potential for the installation of a franchisee of your brand. This provides the maximum development potential to build the franchisor’s business plan. We know which territory to offer franchisees. This territory must meet the characteristics identified during this study and it will be defined in the appendix of the franchise agreement by a captioned map so that there is no difficulty in interpreting this map. It is the guarantee of an exploitation potential. This is the guarantee that you will cover your market as well as possible.
With maturity, brands often discover that they can go to smaller and smaller catchment areas by perfecting their know-how and knowing their criteria better and better. It is therefore a continuous work. We do it initially to appreciate the development but it is good to do it again then to refine the criteria and better know the catchment areas by trying to go down in terms of catchment area to improve the development capacity of the network.
The definition of the franchisee's typical catchment area according to Data Analysis
We gathered the testimony of Data Analysis, an expert in data analysis, mapping and geomarketing.
The franchisee’s typical catchment area does not actually exist. For each point of sale, its type of location and the nature of its activity require taking into account its own criteria.
A catchment area is defined as “a geographical area from which the bulk (80%) of a point of sale’s customers come.”
It is calculated according to various elements: number of inhabitants, attractiveness, turnover of competing businesses, infrastructure…
The catchment area can be calculated according to two methods: either the number of square kilometers surrounding the point of sale is calculated (isometric method), or the transport time to access the point of sale is calculated (isochronic method).
The main criteria to be taken into account when adapting the calculation of the catchment area at the point of sale studied are as follows:
- The size of the settlement agglomeration
- The business sector
- The existence of an attraction centre (a point of sale located in a regional shopping centre will benefit from its catchment area)
- Competitive pressure: the presence of competitors is not necessarily a bad thing if you do not sell strictly identical products or if you do not sell in the same way. In addition, the willingness of potential customers to want to compare offers makes it possible to extend their own catchment area to that of competitors
- The existence of natural obstacles or infrastructure (river, valley, expressway, etc.).
Example: the creation of a highly specialized business, whether in a city of 50,000 inhabitants or in a city of 100,000 inhabitants, will affect a potential clientele spread throughout the city.
Conversely, a convenience store will affect an entire city of less than 5,000 inhabitants and only a few neighborhoods in a city of more than 50,000 inhabitants.
Similarly, a fast-food restaurant in the city centre may be limited to a few minutes’ walk, while a themed restaurant on the outskirts will be allocated a 15-minute drive.
Assessment of the potential of catchment areas according to Data Analysis
Once the catchment area has been defined, its potential should be studied, by studying the population, the market and the competition.
Population
study:
In the context of BtoC brands, the typology of the population is very important. It can be studied according to different criteria (age, socio-professional category, type of household, type of housing, income, etc.). These criteria will make it possible to compare the target profile of the concept with the present clientele and to answer the essential question: Do I have the right location for my business?
In the context of B2B brands, the typology of companies present in the area should be taken into account.
In addition to the resident population, people working in the area should be studied. In the case of fast food these will be the main customers of the MIDI.
Market study:
The theoretical market of the activity of the point of sale makes it possible to determine the potential turnover that requires in addition to taking into account the competitive pressure and the market share retained by the concept.
Competition
study:
The study of the competitive pressure present in the area, and close to the point of sale, makes it possible to differentiate and verify the non-saturation of the market in question.
Zoning: definition of territories offered to franchisees
Zoning, or sectorization, is the division of a territory (e.g. France) into fair sectors, either in terms of potential or customers. It defines areas encompassing catchment areas but can be extended as the latter.
As with catchment areas, the criteria for creating these sectors are multiple and specific to the concept studied and not to a particular point of sale.
To define these criteria, it is necessary to know the levers directly influencing the turnover of a point of sale. This can be, for example, the penetration rate, a market share expected by the network head, or feedback from the brand’s pilot stores.
The sectorisation criteria are specific to each brand, they should be defined upstream to ensure the relevance of the sectors obtained.
Apprécier le potentiel de la franchise : les choix stratégiques
