Determining the number of franchises
A franchisor typically begins by developing a business concept which is unique in some ways. It may be a fast food concept with a unique cooking or delivery process. A franchisor should expand his business by carefully determining the number of franchises. The number of franchises depends upon the coverage of area and its potentiality.
Stages in determining the number of franchises
In franchising, the potential of an area can be determined through the following stages.
- Geographical Demarcation
- Selection of Independent variable.
- Valuation of the chosen variable.
- Determining the influence of a specific variable
1. Geographical demarcation: Area is the central point influencing the office of the franchise. The area to be chosen for the location of franchise should be a business centre. It not only influences geographical determination but also the neighboring business centre as well. In geographical demarcation for franchise, it is appropriate to follow the state, district, region or municipality boundaries. The area of the business for franchise is thus defined in concrete terms.
2. Selection of Independent variable: Having determined the geographical demarcation of the area, the franchisor moves to next stage. He should find out all those factors, which determine the potential and flexibility of the area. These factors include age, sex, distribution of population, education level of people, income level of consumers and benefits of location. These factors are classified into dependent and independent variable.
3. Valuation of the chosen variable: After the variables are identified and classified into dependent and independent variables, the marketer studies the impact of these variables – Statistical techniques such as correlation, multiple regression, index number, time series, etc., may be employed in order to assess the impact of the variables.
4. Determining the influence of a specific variable: Each variable has a definite impact on the potentiality of the area. By using appropriate statistical techniques, the influence of each variable on the final result can be understood. The result will also show the relationship that exists among the variables. The relationship between dependent and independent variables helps the marketer decide on franchising.