Advisory Jul, 19 2014

Test ride to success via pilot franchising

Do you wish to expand your brand to some other region of the country? But you are being skeptical about its success. Need not worry anymore. Just fasten the seat belt and take a test drive via pilot stores in the target locations.

By Yamini S Verma, TFW Bureau
Sr. Sub-editor
Test ride to success via pilot franchising

Pilot franchising means, the first franchisee appointed by the franchisor to estimate the success rate of his franchise business model.

No brand launches its products and service into the market without a thorough research, surveys and tests. Mostly, all the aspiring ventures are launched via franchising through a tried and tested pilot unit. Pilot franchising or any franchise store opened on a testing basis, is the best possible way to lay the foundation of a successful franchise business.

Franchising has emerged as the most successful and an organised business model. It doesn’t only helps in expansion but also assists in branding of the image along with the strengthening of the business network to far sited locations. Pilot franchising being the initial stage of expansion determines either the sure shot success of the business or would guide potential investors what alterations can fetch good benefits in the trade.

Courageous detailing

Pilot franchising is courageous step taken by any brand before foraying into a foreign land to check whether its products or services will be a hit or a flop show. If the franchisor is not sure of success, but wants to give a shot at his risk to try franchising, then pilot franchising comes to the rescue.

According to Dheeraj Gupta, Founder and MD, Jumboking: “Operating a pilot franchise can be a good idea for testing the suitability. One should always keep in mind that no matter how many outlets had existed earlier but things are bound to be different while venturing into a new location. Therefore testing via pilot franchise is the best way before entering into franchising.” Jumboking is a vada pav brand having strong foothold in western part of India. Even the brand made its foray in the southern region via pilot stores with some customization in the infrastructure.

Gupta tells: “Since, we have started, we have been following takeaway format but Bangalore foray was different for us. Citing the consumer base in the silicon valley of India, we came up with one AC (airconditioned) eating joint with seating arrangements and one non air conditioned outlet. To my surprise, the non AC outlet had better response.”

However, one should clearly understand that though pilot stores are considered to be a proven business venture but certain chances of failure cannot be ruled out completely. To safeguard against failure of a franchising business, one has to be good in decision making for perfect location and size of the outlet, equipments requirements, operating methods, marketing and financial necessities and very importantly training and support systems.

An international all women fitness centre brand Vivafit also forayed India via pilot franchising. Manisha Ahlawat, MD, Vivafit India asserts: “We opted for the pilot franchise as this concept of women only fitness was new in India then. Opening a pilot franchise prepared us for the expansion later on. The pilot centre sets the benchmark and also helped us fine tune the concept for the rest of India.”

MRK Menon, CEO, AeroSports elaborates: “When we started originally we established town/city wise franchisees. Now we are experimenting with statewide franchisees. We are driven by a gut feeling and ground results. We move from idea to execution very fast. All this translates in to a strategy for growing the brand. Our first center in Kerala has taken on franchise rights for the whole state while we are now moving on to Delhi for expansion."

In the same tune Kiran Menon, VP, AeroSports says: “Via pilot franchising, a potential franchisor and his franchisees can get a fair idea of the business after its conversion into a franchise business. The term ‘pilot franchise’ stands for the first franchisee appointed by the franchisor to estimate the success rate of his franchise business model.” She further adds: “We initiated our brand in our hometown Thrissur, Kerala, as a sample business as we wanted to check whether the concept of aero modeling and Aerosports will be accepted by the people of the small towns. With the success of our pilot centre we then expanded our footprints to metros and tier-I cities and today we have 80 centres in total since the inception of the brand in 2009.”

Advantages of pilot franchising

Here below are some points that enumerate pilot franchising as an assisting tool.

Lab test concept: Any business on a smaller scale can be a major hit in the market but when it comes to expansion, the business should test the idea of running a successful business.

Scrutinising market: Looking for the right market and right customer can help in the initial stages of franchising as it might determine the demand and success of a brand in that particular area or location.

Determining competitive wave: A pilot franchise can be used to test the feasibility of a business but to check the competition in the market; it may also help in successful business expansion. Since you are the first one to pilot a concept there is no precedent and many lessons come at a cost. But it also gives the first mover advantage and helps in market capture.

Scope for improvisation: There is always a room of improvement via pilot franchising. Having a pilot franchise can aware the potential franchisors of such changes while coming up with a franchise plan with their innovative ideas for the betterment of their business.

Word of caution

Every business venture is also accompanied by some of the shortcomings. Here is the list of it as told by Kiran Menon.

Risk involved: As said in the beginning, Pilot franchising is a tried and tested model. However, it involves a lot of risks. It is a ‘do or die’ situation for any brand that has come up with its niche product or service in the market.

Lack of experience: The aspiring pilot franchisors may have less knowledge about the industry or the location and the consumers of those regions.

Management crisis: Managing time, effort and money is an all time problem that comes handy with a pilot store. If these three are not handled accurately, a pilot franchisor may have to taste failure.

Related: Gate-pass to franchising

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