Could Franchising Work for Your Operation?

What goes into becoming a franchisee or franchisor in tours, activities and experiences? Arival spoke to Kai Kaapro and Hakan Ugdur to find out

Reading Time: 4 minutes 57 seconds

Franchising is a business model that almost everyone will know from McDonalds, KFC and Burger King. A franchise allows a business to use the name and system of another company in return for an upfront payment and royalty fee. 

In the world of experiences, it’s a model used by TourScale and Unlimited Biking to expand across the United States.

Arival 360 | SAN DIEGO 2024

30 September – 3 October 2024

Insider Pro Access Members Save 20%

THE event of the year for solutions-focused In-Destination Experience
creators and sellers

Save up to $740 with the Early Bird ticket available through 16 April

Learn More

TourScale franchises trolley pubs and paddle pubs in more than 16 locations, as well as running the supply chain for their mobile taverns. It also provides the vehicles, offers training and centralizes the booking and marketing systems for each operation.

Kai Kaapro is the CEO of the operation that has been running since 2010. Manufacturing began in 2019 and franchising in November 2020. Launching the franchising side of the business was delayed — like everything else — by the pandemic.

“When you join a franchise, in exchange for a royalty you get the support of the whole network, you get competitive protection, you get marketing, and you get an established brand name, and all their supply chains,” Kaapro says.

A Franchisee May be Able to Set Up Fast, and Learn From Mistakes Already Made

Could Franchising Work for Your Operation? Ben Finch Arival
“I don’t see any reason for someone else to go through the same process to learn what we learned in 10 years,” Hakan Ugdur says — Unlimited Biking

Hakan Ugdur, CEO of Unlimited Biking, says that franchising makes running a small business easier because it removes the need for marketing and establishing a brand, and provides supply chains, competitive protection and the support of the whole franchise network. 

It also allows operators to learn from mistakes the franchisor has made.

“I made a lot of mistakes,” Ugdur says. “Thank God I didn’t have a lot of money because you really figure things out and you’re paying for everything [when you start a company].

“We already burned all that money, and learned from it. I don’t see any reason for someone else to go through the same process to learn what we learned in 10 years.”

Unlimited Biking operates rentals and tours, as well as running events, mobility programs for hotels, and provides electric bikes for delivery companies. Before the pandemic, they ran 4,000 bikes across the United States, and plan to have 10,000 on the roads by the end of 2022.

Setting up a party bike experience without this support would mean it could take a few years before the operation begins to break even, Kaapro says.

Franchising can Provide Access to a Large Amount of Business Support

Could Franchising Work for Your Operation? Ben Finch Arival
Access to larger marketing teams is one of the advantages of franchising — Jamie Street / Unsplash

There are a range of franchising models in place. These can be high-touch, where the franchisor provides sales, marketing, equipment and business support, or low-touch, where only the brand is licensed and the rest is up to the franchisee.

Both Unlimited Biking and TourScale provide a large amount of support to their network.

Ugdur says: “When you run this as a business, you need to hire a marketing person, you need to hire a salesperson, you need to hire your reservation team and you need to hire an IT team. 

“Having all this is quite expensive. You’re actually making less money than when you were making 50 bucks.

“We have the same team. But instead of promoting one location, they’re promoting five locations. And the more locations we have, the cheaper it gets for everybody.”

TourScale provides training on operations, websites, booking systems and territory protection. A large part of the franchise is marketing.

“Marketing is a big part of what we do,” Kaapro says. “It’s one of the things that benefits a lot from an economy of scale. 

“What audiences are working? What distribution channels do we use? We use this data to ensure that all our franchisees are maximizing their sales, which we’re highly incentivized to do with our royalty.”

Becoming a Franchisee

Operators need to be financially healthy, have no criminal background and be passionate — Daniel Weiss / Unsplash

To become a franchisee, an operator would need to be financially healthy, have no criminal background, and have the experience or passion to work in tours.

A flat rate of $20,000 is paid upfront for each territory with TourScale, and $25,000 with Unlimited Biking. Equipment is bought or leased, and once the tours are up and running, a royalty is paid. 

Operators commit to a relationship over a number of years. With TourScale, this is a ten-year period. Generally, it takes six to nine months to get an operation off the ground.

Ten years is the industry standard for a franchise, Kaapro says. This provides both franchisee and franchisor with security and stability. It is also a period that allows everyone to feel comfortable with the business plan.

Becoming a Franchisor is “Extensive and Expensive”

There is a lot of paperwork involved in becoming a franchisor — Andy / Unsplash

For those wishing to set up their own franchise, the process is somewhat more complicated.

“It is extensive and expensive,” Kaapro says. In the United States, there are multiple legal hoops to jump through, as well as the need to think deeply about what the business is and will be.

The first step is to hire a franchise consultant and a specialist attorney, who are often the same person. Then you have to get the business right.

“First, you sit down and look at the business and decide if it is right to franchise,” Kaapro says. “You have to have a secret sauce. You have to have something that people want. 

“If you can’t provide that value for your franchisees, no one’s gonna join. Or, if they do, they’re not gonna be happy about joining because they’re not getting that value proposition.”

For TourScale, this took a year, even with 10 years experience of running their own operation and manufacturing their own bikes and boats.

Then comes the legal bit. “You have to draft up a lot of legal documents,” Kaapro says. “That takes months and months and months. The hardest part is the franchise disclosure document. It’s a lot of pages, and on every page there’s probably 12 decisions you have to make about your path.”

Justin Buzzi from Get Up And Go Kayaking and Andrew Cole from Tourscale will discuss Franchising: Is it Right For Me? at Arival 360 San Diego. Tickets start at $895 for non-members. Or become a Pro Access member and receive 20% discount on your tickets, as well as gaining easy access to all of the Arival Accel series of virtual events and premium research for a full year, starting at just $179

GET ON THE LIST!

Sign up to receive insights tailored for the in-destination industry as well as updates on Arival.

Sign Up
Print Friendly, PDF & Email

trending

already a member?

Lost your password?

NEED TO REGISTER?

Become an Arival Insider
THE ARIVAL INSIDER PRO ACCESS MEMBERSHIP; YOU GET ALL THIS TO HELP YOU ADVANCE YOUR BUSINESS.

Included in Free Membership

Included in Arival Pro Membership

The Arival on-demand video library archive
Access to the entire library of over 150 video sessions and webinars

Arival.guides
Short, digestible research & trends reports delivering insights into our industry, such as The Tour Operator Outlook for 2021.

Arival.travel articles
Topical articles about marketing, tech, operator business and operator stories in all areas of tours, activities & attractions & experiences

Job board access
Find a job from our regular listings, post a resume to the talent network and learn strategies from the job resources articles

New webinars
Helpful, instructional sessions covering subjects such as Mastering Facebook Ads, Grow Your Business and How To Work With OTAs — topics to help advance your business.

Discounts on all Arival in-person events
20% Discount on all Arival in-person events (save up to $300)* based on business type

Arival ProShield – Insurance program
Access to tailored insurance solutions by Granite Insurance is available exclusively for Arival Insider Pro Access Members. Insider Pro Access Members also have access to a suite of resources from Granite Insurance including templates, forms and other informative documents.

Insiders Pro Access member exclusive webinars
Paid membership-only webinars to deepen your understanding of important industry topics.

Job postings & talent directory
Post jobs & connect with candidates most applicable to your business.

Private roundtables to connect, learn and engage
Small, focused and intimate discussions exclusive to Arival Insider Pro Access members.

Full access to Arival’s library of in-depth reports
Up to date, deep analysis of tourism topics ranging from Self-guided Tours to Sales & Distribution Trends and Outlooks, based on the data that defines the industry.

The latest on-demand videos
Over 350+ on-demand videos featuring hot topics in tours, activities & attractions

Insider discounts in digital marketing, tech, e-learning, and more
Save money on additional tools, services and learnings you need to run your business. Exclusive to paid members.

Membership Overview
ARIVAL CODE OF CONDUCT​
CONFERENCES AND COMMUNITY SPACES​

At Arival, we believe travel can make the world a better place. Our mission is to establish and inspire a diverse community of individuals and companies in the In-destination Industry by providing opportunities to gain insight, share knowledge and build connections. To make it possible for true collaboration, creativity, innovation, and idea exchange to thrive, we are committed to facilitating a welcoming and respectful community for all. This Conference Code of Conduct shares our community expectations and applies to all attendees, employees, exhibitors, speakers, sponsors, volunteers, and other participants at Arival- produced and sponsored events. We empower all participants in our community to actively engage in creating a friendly, inclusive and safe environment for all.

Arival’s core values include the following, and create an expectation for conduct at our events and in online community spaces:

We demonstrate a deep respect for human beings inside and outside our company and for the communities in which they live.
We value integrity and strive to consistently interact with others in ways that are authentic, ethical, and fair.
We are dedicated to transparency, committing to clear, open and honest communication.
We actively pursue and advocate for inclusion, diversity and representation of varying cultural backgrounds, perspectives and ideas

Arival welcomes people from all cultural backgrounds, and does not discriminate on the basis of race, color, creed, gender (including pregnancy, perceived pregnancy, childbirth, breastfeeding, or related medical conditions), gender identity, religion (including religious dress and grooming), marital status, domestic partner status, genetic information, age, national origin or ancestry, military or veteran status, sexual orientation, physical or mental disability, or any other basis protected by federal, state, or local laws.

Accordingly, participants must refrain from displaying any demeaning, harassing, aggressive, or intimidating behavior or materials that would interfere with others’ experience and participation in our community.

If you witness or are subjected to inappropriate or disruptive behavior or have any other concerns, notify an Arival staff member as soon as possible.

Inappropriate or disruptive behavior will not be tolerated. Arival reserves the right to refuse entry to or remove any party from any event or community space at any time when participation or behavior create a disruption or hinder the event or enjoyment of the event by other participants. All determinations are at the sole discretion of Arival, and the decision of the Arival team will be final. Severe breaches of this Conference Code of Conduct may result in disqualification from participating in future events. Individuals expelled due to violating this Conference Code of Conduct will not be eligible for a refund or other consolation.

If you have questions regarding this Conference Code of Conduct or its implementation, please contact us at [email protected].