Growing a Franchise
Territory strategy can shape a franchise system’s growth for years. Manna Coffee founder Ted Lisitsyn explains why structure should reflect how the business actually scales.
Territory strategy has long been one of the most important — and often most misunderstood — elements of franchise development. A well-designed territory can create strong unit economics, support franchisee growth and help a brand scale efficiently. A poorly designed one can limit expansion, create conflict between operators and leave valuable markets underdeveloped.
For many franchise systems, territory planning starts with familiar metrics such as population density, demographics and drive times. But as newer business models emerge, particularly in automated retail and other low-footprint concepts, some founders are challenging traditional assumptions about what a territory should look like.
For Fedor “Ted” Lisitsyn, founder of Manna Coffee, the conversation begins with a simple distinction: not every brand is competing for the same type of customer traffic.
Traditional franchise concepts typically define territories using geographic boundaries. A restaurant, fitness center or home-services business often depends on attracting customers from a surrounding trade area, making ZIP codes, population counts and radius protections logical planning tools.
Lisitsyn believes those measurements become less useful when the business operates inside closed environments such as office buildings, hospitals and residential complexes.
“One of the biggest differences is that we're not really competing for traffic,” Lisitsyn said. “Imagine a coffee kiosk in Building A and another kiosk across the street in Building B. If you work in Building A, you're probably not going to Building B to buy coffee. It might happen, but it's rare. We aren't competing for foot traffic in the traditional sense. We're competing for locations.”
That difference has guided the way Manna grows. Instead of treating territories as broad geographic areas, the company looks at where strong host sites are clustered and which buildings can support steady daily use. The goal is to secure space inside places where the customer base is already there.
Manna is not the only brand thinking this way. As more concepts grow with smaller spaces and lower startup costs, founders are looking less at how much territory they can cover and more at how many worthwhile locations a market can support.
One of the most common mistakes growing franchise systems make is assuming that larger territories automatically create better opportunities for franchisees. In practice, territory size means little if operators cannot effectively develop the market.
Strong territory planning starts with understanding what a franchisee can realistically support and grow.
“People often think bigger is better, but that's not always true,” Lisitsyn said. “If someone has one kiosk, that's one set of economics. If they have five kiosks, that's another. But when you start building density and operating 20 kiosks in a region, that's where the real advantages appear because your operational team becomes much more efficient.”
For many franchise systems, density creates advantages that extend beyond individual unit performance. Operators can reduce travel time, share resources and create stronger brand awareness within a market. Those benefits become even more important as systems scale.
According to Manna's internal modeling, clustering locations can significantly reduce servicing costs while improving response times and operational efficiency.
The same principle applies to more traditional franchise concepts. Whether a brand is selling coffee, fitness memberships or home services, concentrated development often produces stronger long-term economics than spreading units across a large territory.
Territory decisions made during a brand's early stages can create challenges years later. Many emerging franchisors are tempted to award large protected territories to secure franchise sales, and while that approach may accelerate development in the short term, it can create significant barriers to future expansion if franchisees fail to fully develop their markets.
Lisitsyn sees a similar risk within location-based businesses, where reserved sites can block growth if they are not activated quickly.
“Our equivalent mistake would be allowing a partner to reserve the best venues in a market without a clear launch timeline,” Lisitsyn said. “Unlike geographic exclusivity, a location hold without activation blocks the highest-value real estate. A building occupied by one partner can't host a second operator regardless of how much demand exists.”
To avoid that issue, Manna ties placement rights to specific locations and development schedules rather than broad geographic claims. The company also maintains a proprietary location marketplace where partners can identify and evaluate qualified sites before committing.
That lesson is not limited to Manna’s model. Franchisees need enough protection to justify their investment, but those rights should come with clear expectations. Otherwise, strong markets can sit undeveloped while the brand has few options to keep growing.
Franchisees still need to know their investment is protected, especially when they are putting significant time and money into a brand. But franchisors also need room to keep growing as markets change and new opportunities open up.
Many systems have moved toward performance-based territory protections, rewarding operators who actively develop their markets while maintaining pathways for additional expansion.
Lisitsyn believes that balance becomes easier when territory rights are tied directly to operational performance.
“Partners are protected at the building level, and that's really the protection that matters when you're fighting for valuable square footage rather than street corners,” Lisitsyn said. “We can continue growing because we're not locking up broad geographic regions. We're protecting actual operating locations while keeping the flexibility to pursue additional opportunities.”
That philosophy also allows Manna to support multiple operator types within the same market. Smaller operators can manage a handful of locations while larger partners develop dozens of kiosks across a region. Manna is also deliberately building space for both large and small operators within the same markets. A partner managing three kiosks and a partner managing thirty are not in competition. In practice, they can share a service employee covering refills and maintenance across both portfolios, turning what would otherwise be a fixed cost into a shared one. That cooperation is what makes this model genuinely passive for operators at every scale.
Territory planning should not be treated as a one-time exercise completed during a brand's early development stages. Markets change, franchise systems mature and new opportunities emerge.
As brands add units and enter new markets, leaders should regularly evaluate whether their territory structures still support the way the system is actually growing. For Manna, reaching 100 active kiosks created a natural checkpoint to review territory policies, clarify location management processes and address potential conflicts before they slowed expansion.
“We crossed an important milestone at 100 kiosks, and one of the biggest signals we watched wasn't geographic overlap,” Lisitsyn said. “It was when two operators independently tried to secure the same building. That's when you realize you need clear rules before conflicts happen. The earlier those processes are defined, the easier it is to scale.”
Ultimately, territory strategy is less about drawing lines on a map and more about creating a framework that supports sustainable growth. The exact structure will vary by industry and business model, but the goal remains the same: give operators enough opportunity to succeed while preserving the brand's ability to expand.
For franchisors evaluating their own approach, the most important question may not be how much territory to award, but what type of opportunity the territory is actually designed to protect.
Want to learn more about how 1851 helps franchisors grow their franchises with confidence? Visit www.1851growthclub.com and see what we can do for you.
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