Advisory Jul, 08 2011

Franchise Feasibility check

Before initiating a franchise venture the aspiring franchisor is usually doubtful about its success and is curious to know if his proposed franchise is conceptually and financially sound or not. The solution lies with the Pilot franchise concept. Read on

By Ramanjit Kaur
Feature Writer
Franchise Feasibility check

When considering the idea of taking up the franchise route, every new franchisor is in a dilemma whether franchising is right for his business expansion or not, whether he will be able to turn his franchise plan into a successful full-scale franchise operation or not. Though franchising is considered as a well proven business model to expand any business, but chances of failures cannot be ruled out completely. Therefore, a franchisor is advised to study the market first in terms of the demand of the brand products and their potentiality in that particular market. The best way to approach a new market is to launch a ‘Pilot Franchise’ to test the feasibility of the new location and to identify the potential and problem areas of the brand and the business operations. Accordingly, the franchisor can adjust and improve before launching the franchise business on the larger scale. This article will help you to know about the merits of pilot franchise along with the risks involved in it and how a new franchisor can go about it, to make the Pilot Franchise concept for the betterment of the business.

What is the need of ‘Pilot Franchise’?

A pilot franchise is a concept which has been adopted years ago by the franchisors to prove the viability of the franchise concept and to safeguards against the failures of franchise businesses. The pilot franchise concept allows both the parties (franchisor and the pilot franchisee) to operate the franchise business and recognise the various loopholes and the prospective opportunities hidden in it. A franchisor can go about the pilot franchise either by launching a company owned outlet in the new location or select a pilot franchisee to test run the business for a period of six months to one year. If the pilot franchise runs successfully and generates ample profits, then the franchisor can go ahead and convert the pilot franchise into a franchised outlet. This way, the franchisor will get to know about the factors that contribute to the success of the franchise. Some of these factors are:

  • A perfect and profitable location for an outlet
  • Area and investment required to launch a franchise outlet
  • Maintenance of the set standards of the brands
  • Operating methods for running the outlet
  • Training and support systems for the franchisees
  • Marketing and complete handholding requisites

These are the basics that every new franchisee requires to get started with a new business in order to make sure that the business runs smoothly, without many hiccups. Operating a pilot franchise enables the franchisor to know and understand these basic requirements coupled with the experience in setting up and running a pilot franchise to structure the franchise system with all the necessary elements that are of utmost importance to make franchising a success for his business.

Significance of pilot franchise

Besides these, a pilot franchise is also important as it helps a new franchisor to evaluate the franchise preposition of the business. This is because of the certain reasons:

  • When taking a small scale business to a larger level, it becomes a bit difficult to ensure the profitability of the franchise business.
  • A company expanding via company owned outlets sometimes fails at the franchise front because of the lack of franchisor’s franchise credentials. Therefore, it is necessary for a franchisor to understand what all it takes to franchise a business.
  • Relocating an established business can cause devastating results not just for the new venture but for the brand name

as well. Thus, launching a pilot franchise is a smart option for the franchisors to understand what all it takes to get
started with franchising and expand the business successfully and profitably.

In short, for a businessman who is thinking of franchising his business to mark its presence around the globe, it is of utmost significance to run at least one pilot franchise in each region to ascertain that your business model will make it a success.

Related: Revamp to rake in more returns

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