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Feb, 03 2011

TEST RUN YOUR BUSINESS IDEA

By Tushi Deb The successful running of the pilot operation is essential to the preparation of the franchise package. The experience obtained in setting up and running the pilot will provide the basis upon which the elements of the business package will b

The successful running of the pilot operation is essential to the preparation of the franchise package. The experience obtained in setting up and running the pilot will provide the basis upon which the elements of the business package will be structured.

WITH the global economy opening its doors for franchisors to invest in the matured, developing and emerging markets, an attempt to expand without testing the waters is like being loaded with chances of failure. So assessing a product before planning a final launch is certainly catching up fast with franchisors across the globe.

Whether it's an Indian brand going abroad or a foreign brand all set to test the Indian market, pilot franchise is steadily gaining significance. While it is a pre-requisite of a franchise brand to conduct a well-drafted market research regarding consumer pattern and behaviour, the true test of a brand lies in mass acceptance. Often it has been observed that a particular concept of brand that is immensely popular in several countries may experience difficulty to gather momentum in a particular market. Several global franchise brands like Vivafit, Jumpbunch, Contours International, Aloha India, Sir Speedy to name a few had launched their franchise operations via pilot franchise in India. Jumpbunch, an international and unique concept of providing a fun 'n' friendly introduction to sports and fitness to children aged between 15 months and 8 years, has launched a pilot franchise in Bengaluru. Elaborating on this, Dhanalakshmi, Master Franchisee, Jumpbunch India, says, “We have launched with a pilot operation in Bengaluru and it is doing very well. Since the concept is very new, it took some time to gain acceptance but we have not had a single child dropping out of our programme since they enrolled in it.” Similarly, Vivafit, a women only fitness centre from Portugal, is all set to launch a pilot in India. Speaking on this, Manisha Ahlawat, Master Franchisee, Vivafit India, states, “We are launching the pilot centre in Gurgaon very soon. We have started our pre-sales and have got a very positive response from many women who have joined already.” Likewise, numerous brands that started India operations with pilots are now doing steady business. Aloha India that started its India operations in 2002 with six pilots has expanded with around 1,300 centres across India and during 2011 to 2012, the company is looking out for a huge expansion of 200 plus centres.

Way upward

Witnessing the rise in franchise investments, several international brands are seeking to assess the emerging Indian franchise market. According to industry experts, a pilot franchise is an excellent idea for potential franchisors before committing to a franchise business. The pilot operation enables the prospective franchisor to assess the factors that form the basis of know-how and expertise that a franchisor will convey to the franchisee. This includes specific terms regarding the type and size of location, the equipment required, the operating methods, along with the marketing and financial requirements. Besides, it is believed that assessing a new concept or a debutant brand can be tremendously beneficial and effective via a pilot franchise. Observing the significance of a pilot franchise, Kumaran K, CMD, Aloha India, avers, “It is mandatory that when we launch any new product, we make our pilot franchise to test the market and convert it into a model franchise. Aloha is more concerned about taking up pilot franchisees. We conduct a lot of research work in the market to offer an appropriate platform for the franchisees.” Likewise, Ahlawat zeroes in, “The biggest benefit is that it is a proven concept, so you don't have to reinvent the wheel.”

While a pilot franchise is essential for a brand to assess the market, launching a pilot itself is a vital aspect. This is true specially for global brands willing to launch new and innovative concepts in a volatile and unpredictable Indian market. Pointing out the parameters essential to the launch of a pilot, Ahlawat affirms, “We had to be very thorough with our research for selecting the first Vivafit location in India. We looked at a location that would be easily accessible, safe and convenient for the future members. We were also very careful in following the systems and processes set by the brand in Portugal. When compared to other international brands in the same segment, Vivafit had better franchisee support system and world-class customer service, sales and CRM systems that will help us in serving this market in India.” Dhanalakshmi chips in, “We had looked at positioning the product, its awareness, the content, its pricing and any other modification required to suit India.” For Aloha India, introducing the globally successful abacus concept in India was a challenge, as abacus was something unheard of in children's education earlier. So the launch of its pilot in India in 2002 was essentially customer-driven. “When we launched the pilots, we paid more attention to the customer need and accordingly, planned our approach and business functions. We would take the feedback from customers to improve our processes, which helped us to develop. Our priority has always been customer relationship and their satisfaction. A separate department exists to monitor customer relationship and franchise relationship,” states Kumaran.

Aid to growth

Keeping in view the considerable amount of hand-holding that goes into a pilot, a franchisee is believed to be in a favourable position. Numerous franchisors estimate pilot as a win-win option for the franchisee due to the low franchise cost.

Putting across the initial support rendered to Aloha pilot franchisees, Kumaran explains, “The initial investment for the pilot project was executed as 50-50 per cent. The responsibility of the operations was shared as 40 per cent to the franchisee and 60 per cent to the company. Besides this, with the pilot franchise, we made ourselves available at all the times, constantly monitoring performance and guiding them to perform better. We made them to understand the SWOT analysis of the business. Training was made available to them as an ongoing process.”

Similarly, a Jumpbunch pilot franchisee is rendered complete hands-on support for six months from the date of signing on as a franchisee. Notifies Dhanalakshmi, “We have a detailed induction and training programme for a week. Post this, our team provides additional local support for marketing and sales in the area, for which the franchisee has bought rights to. If business has already been developed in the said area by the master franchisee, in most cases, the ready business will also be transferred to the new franchise owner.” Apart from this, testing a franchisee with initial approval is a vital step towards franchisee development. “We offer a good initial training programme of 10 days for the staff, right from the owner, manager, commercial and instructors. All participants are tested and approved before going to work in the Vivafit. Our support is extensive during store preparation, pre-sales and opening of the centre. Post-opening, there are regular support visits, an excellent intranet with a franchisee forum, updates to manuals, extra trainings offered, etc. We will have very interesting and eye-catching monthly marketing campaigns to increase brand and concept awareness. There is a yearly back-to-basics programme as well as an yearly convention,” confirms Ahlawat.

From the franchisee's perspective, taking up a pilot and ensuing its way to success is a critical aspect. Keeping in view the market readiness, potentiality and above all, the worthiness of launching a brand or an absolutely new concept entail risks in abundance. Discussing this, Shery Christopher, Owner & Managing Director, Shery Christopher Consulting, US, explains, “The pilot franchisee should be prepared to show the franchisor that they have the necessary qualifications, skills, knowledge and understanding as well as the necessary finances available to open the first pilot unit for them in the new country.” “If you want to be the one to open the first unit, do your homework before you meet with the franchisor. Show the franchisor that you have a clear and complete understanding of not only their franchise system but the competition in the market. Show them that you are fully aware of the costs and investment you will have to make and above all, that you are capable of making them, both personally and financially,” she adds.

Quantum of risk

While a pilot franchise is considered as a secure medium to test a brand in a potential market, quite a few shortcomings are sure to surface in the trail to success. If experts are to be believed, the quantum of risk in operating a pilot primarily depends upon the individual brand, the space and the location in which it will be operated and the level of acceptance and response it generates both from the franchisee as well as the consumer. Highlighting the initial challenges faced during a pilot, Kumaran avers, “It was a real challenge at first, as the response was not up to our expectations. We offered workshops; advertisements, live demo and seminars were conducted. We worked through direct marketing and conducted approximately more than 150 orientation programmes and seminars, for the students and parents to understand the product.” However, according to Ahlawat, “There is less risk as compared to other formats, as this is a new concept and whoever joins now will benefit from the first mover advantage as women's fitness is a growing need.”

Access to success

Keeping in view the pilot as a safe step towards market testing, future growth and expansion, global brands are leaving no stones unturned to turn their pilots as a tool for future success. States Ahlawat, “We have hired qualified and experienced fitness trainers from Portugal and India so that we are able to replicate and present the same world-class experience for the women in India.”

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