When purchasing a franchise, one of the most critical aspects to consider is the size and protection of the territory you will be operating in. Securing a territory that limits competition from other franchisees within the same brand can be the difference between a thriving business and a struggle for market share. This is particularly true in cities like Des Moines, Iowa, where the ease of transportation in the metropolitan area means that most people are only 10 to 15 minutes away from any given location.
Why Exclusive Territory Matters
An exclusive territory gives you the right to operate your franchise in a specific area without the risk of another franchisee from the same brand opening up shop nearby. This protection is crucial because it ensures that you won’t be directly competing with another franchisee for the same customer base. Without this protection, your business could suffer from market saturation, leading to decreased profits and potential conflicts with neighboring franchisees.
The Unique Case of Des Moines
In a city like Des Moines and its suburbs, the importance of exclusive territory becomes even more pronounced. Des Moines is a city where people are accustomed to driving, and most locations within the metro area are easily accessible by car within a short timeframe. Because of this, the geographic distance between two franchise locations might not be enough to prevent overlap in customer bases.
For example, if another franchisee opens a location just a few miles away, the convenience factor that might deter customers in larger cities from driving could be significantly reduced. In Des Moines, that short drive might not seem like a hassle at all, meaning you could end up competing for the same customers.
Negotiating for Exclusive Territory
When entering into a franchise agreement, it is essential to negotiate for an exclusive territory that adequately protects your business. Here’s how you can approach this negotiation:
- Understand the Franchisor’s Policy:
Some franchisors have standard policies on territory size and exclusivity, while others may be more flexible. It’s crucial to understand what the franchisor typically offers and whether there is room for negotiation. - Assess the Local Market:
Conduct thorough research on the Des Moines metro area, including population density, traffic patterns, and the locations of other franchisees. Use this data to argue for a territory that prevents overlap and competition. - Highlight the Unique Characteristics of the Des Moines Metro Area:
During negotiations, emphasize the ease of transportation and the compact nature of Des Moines. Explain how the short travel times within the city increase the likelihood of customer overlap between nearby locations, making a larger or more exclusive territory necessary. Invite the franchisor here so they can see the ease at which people move about the metro area. - Seek Legal Counsel:
Work with a franchise lawyer who understands the intricacies of franchise agreements and can help you negotiate favorable terms. An experienced franchise lawyer can ensure that the terms of your exclusive territory are clearly defined and enforceable. And while you are at it, hire a franchise lawyer who has experience in the Des Moines metro market. I know a guy!
The Long-Term Benefits
Securing an exclusive territory not only protects your initial investment but also contributes to the long-term success and sustainability of your franchise location(s). By ensuring that your customer base is secure and not shared with another nearby franchise, you can maximize your revenue potential and establish a stronger presence in the market.
Conclusion
For franchisees in the Des Moines, Iowa metro area, negotiating for an exclusive territory is not just a smart business move—it is a necessity. The city’s ease of transportation means that without this protection, you could find yourself in direct competition with another franchisee just a few minutes away. By understanding the importance of territory, assessing the local market, and negotiating effectively, you can set your franchise up for success and ensure that you are not competing for the same slice of the pie.