Opting for the pilot franchises is the best possible way to lay the foundation of a successful franchise business. Let us find out how
A pilot franchise is a good way for potential franchisors to understand what it takes to start a franchise. Though franchising is 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, the concept of pilot franchise came into existence. The article discusses the concept of pilot franchises its advantages and disadvantages in detail.
A business owner who is considering expansion via franchising can try and test the franchise by carrying out a pilot franchise initially. Pilot franchising allows the aspirants to assess the business model before investing in it. The potential franchisor can sign an agreement with a pilot franchisee for a specific time period to test his business. If the franchise does well, the franchisor can make his pilot franchisee as his first franchisee. However if it fails, the pilot franchisee would still gain rich experience and earnings as well (as per agreement with the franchisor).
However, the success of a pilot operation can surely make the budding franchisor more popular with many aspiring entrepreneurs ready to invest their hard earned money in his business. Moreover, with the help of pilot franchisee, the franchisor can demonstrate that he has been running his business efficiently.
Merits of pilot franchise
Pilot operations are used as a basis for testing the original franchise model. The franchisor can gauge whether his venture would be successful as a franchise business or if he should stick to his expansion via company owned outlets. Having a pilot franchise can assist the franchisor in the following ways:
Testing business concept: A business may be successful on a small scale but expanding it through franchising may not prove to be profitable. However, if the business has been operating successfully for a long time then there is no need for testing the idea.
Checking relocating ability: A successful business may work well with one outlet business. Expansion of such a business can be done by another owner at a distant place to test its adaptability. Maybe the business has been successful only due to its strategic original location or because of the business acumen of the owner. Therefore, franchising it without a pilot operation may prove devastating for both the franchisor and his franchisees.
Testing business as a franchise: A pilot franchise can be used to test the feasibility of a business as a franchising business. A business which is running successfully expanded via company owned outlets might not do well via franchising. This may be due to the potential franchisor’s inability or lack of franchising credentials. Therefore, operating a pilot franchisee can be a good idea for testing the suitability. It should be always kept in mind that no matter how many outlets had existed earlier but things are bound to be different while running a franchise. These changes may not be necessarily envisaged with the franchise plan and other clauses in the agreement. Therefore testing via pilot franchise is the best way before entering into franchising.
Impact on business: Becoming a franchisor may or may not be suitable for every business owner. It should always be remembered that franchising a business will have certain effect on the original business as well. Few businesses even after a lot of awareness regarding franchising cannot learn or accept the basics of dealing with franchisees or the changes seen in their original business. For such owners, franchising is strictly no-no. With pilot franchising, a potential franchisor and his people can get a fair idea of the business after its conversion into a franchise business.
Innovations in the business: After franchising, a business is bound for certain innovations. The franchisees who are partners in the business have to inculcate innovative ideas for the betterment of the franchise business. Few franchisors might not find such innovations acceptable. Therefore, franchising may not be apt for them. Having a pilot franchise can aware the potential franchisors of such changes while coming up with a franchise plan.
Moreover, operating a pilot franchise opportunity enables the prospective franchisor to assess the factors formed on the basis of the expertise and know-how of the franchisees. These are:
To conclude, it can be said that converting a business into a franchise business is a vital step for any businessman. All prospective franchisors can achieve a fair idea of franchising by operating a pilot franchise and gauging its results. Therefore, it is always recommended to carry a pilot franchise before investing in any franchise.