franchising aspects Oct, 01 2010

Maximise Profits With Pilot Franchise

Most aspirants venture into franchising as it is a tried and tested business model. However it is also true that businesses take time to get established. Being the first or the pilot franchisee of a new franchising business can offer lucrative benefits. R

By Abha Garyali
Sub Editor
Maximise Profits With Pilot Franchise

Over the years, franchising has emerged as the most successful mode of business expansion. If franchisor is not sure of success, but is willing to try franchising, pilot franchising is the way forward.

Pilot franchising

The term ‘pilot franchise’ stands for the first franchisee appointed by the franchisor to estimate the success rate of his franchise business model. During the initial phase of expansion via franchise route, the franchisor himself is not sure of his business model and thus appoints his first franchisee. Being the first in the expansion channel, the franchisee enjoys lot of first hand advantages like personal care and guidance. However, the risk factor attached to the first franchisee is also a point of concern. As the franchisor is testing his franchise business model there are equal chances of success and failure. Pilot franchisees also have to sign an agreement with the franchisor regarding their franchise duration, rights, outlet location and so on.

Benefits for pilot franchisees

Being a pilot franchisee may have lot of alluring profits for them. Let us have a look at some of these:

  • Low franchise cost: The price of a pilot franchise is considerably less as compared to the post pilot franchises. As the franchisor himself is new, and the brand is also new, the initial cost of the franchise is considerably less.
  • Dedicated and efficient handholding: It being the franchisor’s initial unit, the franchisor provides his best to make it successful. He gives his best training and support to his pilot franchisee. Moreover, the pilot franchisee can get individual attention in his business.
  • Personal attention: Being the first franchisee, franchisor renders personal attention to the franchisee. The success of the franchise depends only on the performance of the initial franchisee.
  • Becoming a master franchisee: In many franchise concepts cases, the pilot franchisee later on takes the role of master franchisee. He can carry out all the rights and duties of a master franchisor.
  • Experiencing lot of leverages: The pilot franchisee enjoys a lot of leverages, which may not be offered to regular franchisees. He enjoys more freedom in selecting his territorial rights as compared to others. In few cases the pilot franchisee after being successful in his venture can take up a partnership with the franchise owner.  
  • Strong relationship with franchisor: Pilot franchisee can have better relationship and communication with the franchisor. He can display his pleasure and grievances openly to the franchisor.
  • Reselling to get higher profits: In case if the pilot franchisee wants to sell his business due to personal reasons then he can earn profits on its re-sale. However, it should always be checked with the franchisor if he allows re-selling or not.

Along with all these lucrative benefits offered in the pilot franchisees platter, there are few hurdles also.

Word of caution

If you aspire to become a pilot franchisee, then have a look at some of the shortcomings before taking a decision:

  • Risk involved: As said in the beginning, franchising is a preferred business as it is based on a tried and tested model. However, this tested model is not available in the concept of pilot franchise.
  • Lack of experience: The aspirant may have less knowledge about the franchisor and his company. The business owner in some cases may not have the qualities of becoming a successful franchisor.
  • Non-franchise able business: There are few business concepts, which may not be successful if they are franchised. Therefore being a pilot franchisee, an aspirant may taste failure.

To conclude, pilot franchising offers a great hint about the success of a franchising business. It is through pilot franchisee, a franchisor being new to the business can attain maximum profits in less time.

Related: Must haves for a franchise agreement

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