Sample; Territory Reduction Policy for a Franchise Company

I propose this thought on the subject of Franchisee territory reduction based on performance for a Mobile Business Model. Please read the sample policy below as it explains the reasoning and methodologies considered to extend brand without risking underdeveloped territory. We will use a Mobile Car Wash Franchise Business for this discussion. This sample is speaking from the Operation Manual of the franchisor to the franchised unit:

If the volume of your business decreases to forty percent of your original volume, we may request that you decrease your territory. During the first four months after purchasing your franchise, your business is just really getting going and you can kind of see that your franchise is working. Any time after the four-month start up period, if your business drops to forty percent of that initially achieved volume, you are not servicing your area's client demand adequately. Let's say at the end of the four-month period you are doing ten thousand dollars a month gross revenues with your car wash truck. In later months if your volume drops to 40% of that or four thousand dollars a month, we, rather then terminate your franchise for non-compliance of our standards, which could be a leading reason for such a drop, would allow you to make your territory smaller. All without you losing your franchise.

Let's say for instance you are getting older, you love the work, you kind of want to retire but you want to go out on your car wash truck a couple of days a week. We would understand that, not a problem. But in that case we would want to decrease your territory. We would ask you, if in fact you are only going to work three days a week and you are not going to service your area's total volume, can we decrease your territory by the factor of which you no longer want to work? For instance, if you are working six days a week or five days a week and you want to just work two days a week, that is a significant drop. That means you are not getting to sixty percent of your business. Well that sixty percent of your business needs to be serviced by someone. If you were not willing to do it, we would like to take your current exclusive territory, decrease it so that someone else could have part of your area to work in or you can sell that portion to the next nearest franchisee. This only makes sense.

Now we are not going to decrease your territory without telling you or warning you or helping you if it wasn't your intention to decrease it in the first place. In other words, if you really do want to control the whole territory but you just do not want to work the truck yourself fulltime, we can train your managers for a set training fee. You can have them run the truck on the days you are not running it. You can also decrease your work load but still service your entire territory by using an independent contractor who might rent a car wash truck from you and work for you three days a week. He/she could continue to build the route and you could still keep your original customers that you love to do. We do have franchisees that think like this. They would still like to work but only on a limited basis. This is fine with us. But if you just want to do your business a little bit, then we would want to decrease your territory. Of course, we would compensate you for the decrease in area and reassign it to a new person. Or we could let you sell part of your territory to another person. We need to approve the sale or transfer. This would give part of your area to someone else and let him or her build upon that business. This arrangement would let you can keep any of the original customers that you got during the Blitz marketing mission that you wish to keep.

Percent Market Penetration

At the end of five years if you only have 1.2 percent market penetration and you are not really wanting to expand your business beyond that, we may ask you if you would not mind selling your business or decreasing your territory. Or would you consider taking on an investor who will buy a second car wash truck and be in a partnership with you to service the rest of the area's volume. Over a five-year period you should have achieved a three to five percent market penetration without too much problem. One point two percent is about the minimum that we would expect after five years. Each year consistently more and more people will know about your business. Since more people know about your business and want your services, you are going to have more potential customers. So, one point two percent market penetration over a five-year period would be kind of a dismal result. Although, if that is all you wanted out of your business, just to do it half way and work at your own pace, that would be acceptable to us. But we will advise you there are customers not getting serviced that probably want service. By this time you would already know that you are not getting to all of the customers that you want to get to. In which case you want to either add units with managers or hire independent contractors to run your truck on the days you do not want to work. We will be willing to help you with this but you have to understand that it is important to have complete market penetration. There is no reason to let would-be competition get a foothold in your area. You obviously will not be getting market penetration if you are not hitting all of the customers and if you don't service the customer "someone else will".

Now, if you lose some of your customers because something happened to the customer base in your territory like corporate relocation or downsizing, or you had a bad worker or you got injured and now you are better, we will want to go back into your territory and fix whatever was messed up. This makes sense. Obviously we want to do this. So kind of expect that if you have a problem with your business, we are going to come in and fix it with you. There may be a point where you are not going to want it fixed but we are going to come in and fix it for you anyway. We want you to be successful and the cars and customers to be serviced properly and to an adequate degree.

You may have your master franchise decide that you are not pulling your weight and they are going to come in there and help you. This usually happens after the fourth or fifth year. At which time we are going to have to ask you to either start servicing all your customers, or agree to sell part of your territory to someone else that wants to buy a franchise or to an existing franchisee that wants to add on to their territory or sell your entire operation and move on to something else. Take a profit by selling, shake hands and everyone wins. We really need to get to all of the cars and be a household name in your area. We want to be a household name in every city in the United States and later the world and your territory is not any different than anybody else's. All cities need to have complete market penetration over a five-year period. There should not be any competition remaining and if there is it is because you are not servicing your customers correctly. If you are not servicing your customers correctly we want to come in and help you fix that. If you were not willing to have us come in we would have to request that you take on a partner, buy an additional car wash truck or make your territory smaller. We can agree on something that is good for you and sell that territory to someone else with the proceeds going to you. These are all things to think about with your territory. If you are not going to work your territory then let someone else work it. Car Wash Guys must always dominate the industry.

"Lance Winslow" - If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs

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