Written by: Nigel Lester, Director Customer Information Management & Location Intelligence at Pitney Bowes Software
Location is fundamental to a franchise’s success. By locating your business in the wrong place, relocating for the wrong reason, or missing an opportunity to capitalise on a trending concentration of your target demographic, you run a real risk of compromising the future of your business through lost opportunities or too-high operating costs.
Today’s most successful franchises are ‘location intelligent,’ with the ability to interpret, manage and act upon the complex relationships between their organisational data and location. They are benefitting from operational efficiencies and competitive advantage in the market.
With the urban landscape changing at a rapid pace, it is more important than ever for franchise businesses to get ‘location-intelligent’ and put steps in place to manage and regularly update their territory and customer data.
Eliminating territory disputes
When a franchisee invests in a new business, their contract will generally set out the territory and number of homes their agreement includes. But as a brand grows and more franchisees come on board, managing franchise territories becomes increasingly complex.
Along with the complexity of defining territories, the risk of inadvertently creating territory conflict and damaging relationships with franchisees also escalates. Territory disputes arise when boundaries aren’t clear, or if one franchisee believes another franchise has a territory advantage. This can be a major issue for franchise businesses.
Many organisations rely on internal data, arbitrary postcodes or information from the census to determine their franchise territories. This can be ineffective as census data is only updated once every 5 years, meaning it quickly becomes out of date and doesn’t keep up with rapid changes in the urban landscape.
Internal data is often also unreliable and relies heavily on it being updated regularly to capture changes to the territory area (such as new buildings or estates). With many corporate head offices making decisions on territory boundaries being in different states or even countries, there is often no local knowledge, meaning territory boundaries are also often based on gut feel.
Accurate data on territories is vital to ensure all franchisees have an equal opportunity to flourish and be profitable. Without accurate data many franchises essentially operate in the dark. As well as causing territory disputes, this lack of data can also negatively impact a franchise business as potential customers may not be in the system and others suffer poor customer service when addresses do not match up to those in the system.
To overcome these issues and to remain competitive, many franchises are choosing to invest in location intelligence technologies.
Better business decisions
Location intelligence lets businesses derive meaningful insight from geography and location to make better business decisions. When supported by rigorous customer data, this can help identify the best sites for their franchisees, safeguarding their investment and helping them become more profitable.
The foundation of effective location intelligence is accurate, up-to-date geocoded national address files. This makes it vital that, before embarking on a location intelligence project, businesses find a system that can provide regularly-updated address data and integrate it with existing data systems.
The best systems will integrate address/street mapping information, customer records and general area demographic data to build a full picture of the potential franchise territory.
Goodlife Health Clubs is one of the fastest-growing gym networks in the country. Historically, Goodlife had a site selection approach based largely on instinct, with little science behind it.
It has now implemented location intelligence to develop a site analysis and selection system with Pitney Bowes. The system brought together national demographic data, consumer potential spend indicators as well as key mapping information.
Goodlife has now identified the target demographic criteria that correlates to its best customers and is using that information to benchmark and assess each proposed new site. Goodlife’s property analysts can rapidly combine detailed demographic and membership reports into site assessments.
By identifying areas with limited competition and the demographics of its ideal customers, Goodlife can optimise the chances of success for a new site. It can also identify areas that are more heavily contested by competitors and vacancies in the market.
In every successful retail business, the issue of cannibalisation will eventually arise. In addition to mapping out new territories, location intelligence can help avoid cannibalisation between existing franchises.
Opening a new franchise can have an unintended impact on existing franchises. For example, customers do not always go to their nearest franchise, sometimes choosing to go further to the franchise of their preference.
The use of drive-time models, which simulate geographic catchments of travelling times, is one particularly effective location intelligence technique for franchise businesses, letting them include travel convenience as a consideration in new territories.
Franchises that operate loyalty cards or membership programs that capture a customer’s address have a significant advantage here, since they can determine precisely how far customers are willing to travel, and then simulate that behaviour in a drive-time model with a proposed new location.
Location intelligence stretches far further than simple site selection and can be beneficial to other areas of the business. The marketing department can use location intelligence data to inform its activities, allowing highly-targeted marketing campaigns to support the franchise.
In its simplest form, location intelligence will help to cleanse non-existent or irrelevant addresses from the marketing system, minimising any wasteful spend on direct marketing. Regularly updated data means that any new developments will be added to the address database, maximising new business opportunities.
Having a more accurate representation of a franchise’s territory and its residents lets marketing departments focus communications on areas with low existing penetration and engaging existing customers with more relevant communications, containing meaningful up-sell and cross-sell offers.
Design and size
Location intelligence can also help inform the design and size of a new franchise. For example, a restaurant franchise may have people order online and collect their food from the store to take away. If the majority of customers choose online orders or takeaways, this should inform the size of the eating area. It can also inform the marketing department to focus offers around online orders.
Getting to this level of understanding can be challenging, but is becoming easier with the wealth of data available today. After extracting what information you can from your customer and transactional data, you can then begin to marry it together with external sources, such as demographics and consumer expenditure models, for a well-rounded view of the market landscape.
Specifically, Goodlife uses location-based demographic data to make decisions about the type of club facilities it will provide to better cater to its customer base. For example, clubs in areas with high numbers of families with young children may offer childcare services to attract and retain members and create a competitive advantage.
Mining and analysing your customer’s data can provide a wealth of helpful knowledge to your company. When considering the next location for your franchise, don’t guess; utilising location intelligence will help you make an educated decision.