Air Taxi Franchise idea?

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Waldo Pepper's Circus
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Air Taxi Franchise idea?

Post by Waldo Pepper's Circus »

Here's a thought I've been kicking around for a while and I'd like some input from others. When I look around and think of all the lousy operators and how so often its the dedicated pilot in some remote base holding it all together (for the owner), I started thinking of an idea. Imagine for a sec if someone started a type of "franchise" system for 703 operators. The franchisor follows all the tried and proven strategies of successful franchises, to the point where the client would not see much difference between an outlet in Inuvik or another one in Thompson.

Everything stays the same from one base to another. Same aircraft type and year, same avionics, same paint, uniforms, and so on. The mother office (franchisor) retains the standards and is responsible for training, maintenance, quality assurance and so on, and with all franchisees operating under the same OC. A common parts pool could be used, and a few mechanics could cover a wide territory, using a light, fast aircraft like a Glasair to go between jobs.

Each base could be set up ready to go, and then the operating rights sold to an experienced pilot. The pilot would be responsible for marketing, sales and flying, while paying some royalty fee as a percentage of revenue to cover overhead. There would also be a fixed monthly cost to cover the aircraft lease and expenses, but this would still be cheaper than going at it yourself because of the insurance pool and buying power. Administration, training, hiring, and so on would all be taken care of by the franchisor. Hull insurance could be self-insured after enough growth, thereby saving even more money as you're not having to subsidize the Keystones of the world. The pilot would be dedicated as hell because he's keeping almost everything he earns and could sell the franchise if he wants to move on. There could also be a core group of training pilots who working for the parent company who could also fill in if the franchisee wanted to take some time off or needed to switch out planes for a engine change or something.

I know there's a lot of faults in this idea and its only an idea anyways, but I just wanted some feedback on what others thought. It would be a great way for some ambitious pilots to work for themselves and make a lot of money without the high start-up costs in starting from scratch. The royalty fee could even be paid with a downpayment and then amortized over a few years. Its relatively low risk because you should be able to break even on a light piston twin at around 24 hours a month of charter revenue. With one aircraft, you could quite conceivably earn well over $100K a year. The major downside I see to this is keeping control of the standards as you wouldn't need some yahoo flying like an idiot and tarnishing the company reputation. There would be no pressure (except self-induced) to break any CARS as you're your own boss. Is this an idea that somewhat experienced pilots would see as an opportunity or is it just a stupid idea?

Kelner tried a somewhat similar system with his PC12s and only using experienced operators, but this idea would be accessible to the average guy on the street without an OC. After all, if someone can afford 4 years of university and a multi-IFR, that's already far more money than what this type of franchise would sell for. Another nice thing is that you wouldn't be stuck with an airplane at the end since its leased, which would work great for guys or girls who just want ot build some hours and then move up to bigger equipment. I guess what you're really doing is just cutting out the middle man and offering a far better class of service to the customer for a lower price than what else is available.

PLaces like Stony Rapids, Moosonee, Kuujjuaq and Norman Wells would be fantastic places as they're busy and have next to no competition. There's a hundred other places as well, so there would be high growth potential. Tell me what you think or PM me if you want to talk about some more specifics as things could happen with the right interest. The 703 Air Taxi industry is completely fractured right now (and very profitable). I know of a lot of investors just sitting on the sidelines for now who are looking for the right opportunity, but its got to be done properly and safely to succeed. Later.......
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Post by Cat Driver »

Have you looked into what type of airplanes would be availiable for lease as well as suitable?

Hmmmm you might be able to figure out how to get it going......

How long have you been mulling this over?

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interesting....

Post by Klack »

Hi,
this sounds most interesting and I have mulled ideas of this type over in my head as well. I am currently in training for my AME as I already have my CPL and am one day hoping to run something like this. Please keep us posted on how your ideas are panning out.
Cheers,
Shaun
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Post by 5x5 »

I think the idea has some merit and should be discussed some more. I have thought a bit about it but not in any real detail.

There would have to a fair bit of work on the business plan to get all the numbers worked out as you would need a fairly good initial investment to get started. Venture capital isn't as easy to get as it was a few ago, but it can be found.

And at the risk of sounding Cat Driverish :wink: , I imagine that there would have to be a lot of work to get it set up so that TC would approve. The amount of effort that goes in to just getting one operation going makes me think that this would be tough. The requirement for maintenance and operational control could prove particularly onerous.

That being said, all it takes is work to get this kind of thing sorted out. I'd suggest seing if you can round up a bunch of folks who have previous, and fairly recent, experience in setting up different kinds of flying operations and spend some time noodling this out.

The key will be to work very hard at keeping the discussions positive. When a difficulty is brought up (and there will be lots of them), don't treat it as a reason why you can't do it, instead look for ways to overcome it so you can do it.

Let me know if you'd like to spend a bit more time talking.
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Waldo Pepper's Circus
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Post by Waldo Pepper's Circus »

I've thought about the issue from Transport's persepctive and they should be okay with it if it is structured in a way that control can be retained by the franchisor. That is why I suggest training, maintenance, quality assurance and the OC remain the responsibility of head office. When I worked at Air Sask, they constantly based aircraft out of Wollaston and Lynn Lake and just rotated them out for maintenance and crew changes. If you look at Borek's structure, they run a similar type of operation except they normally have on-site maintenance and a base manager.

Certainly for Transport to sign off on it, there would have to be a strong corporate strcuture in place to control these remote bases and the franchisees at these bases would have to have some operational experience. I suppose it would mainly depend on just how removed these bases are from the headquarters. I could see a few hundred miles being no problem but when it became 2,000 miles, there would have to be a greater span of localized control. I think the ticket here would be to start off in a single province and prove yourself there for a bit before branching out further. Unlike Cat Driver, I have found Transport in Ontario to be quite open to discussion and have been very pleasant to deal with.

The thing that this idea has going for it is that it makes the pilot's effort and dedication directly responsible for his/her income. If they want a night off or cancel a trip, well, no one will tell them any differently. The final paycheque at the end of the month should be far greater than working for someone else and more enjoyable. Any effort expended to generate market share and earnings would also carry some value to it that could be resold in the future to a new buyer for a higher price, just like franchisees do today with their service and retail outlets. A good base like Yellowknife would only be limited by the pilot's ability to market his/her sevices and would be backed up by a recognized, professional, national air taxicarrier. I think that the best way to start this type of operation is to develop a solid business plan and present it to some successful Franchisors with their capital and knowledge of brand control.

The only way this would work is if the customer could see some perceived difference between the franchise airline and the local deal next door. If all the franchisees are clean with newly painted aircraft, new avionics, new interiors and simulator-trained pilots, it would contrast sharply with the average bush operator. The start-up cost for a twin Piper or Cessna plus single hangar and office wouldn't run more than $450,000 - $500,000 CDN turn-key which is about average for decent franchises today. Even a Harvey's or 7-Eleven would run you that much and then you still would only be leasing the building. But which would you rather do: run the till at 7-11 or own the store, and which would be more satisfying? All the operational and regulatory aspects of the charter company are already taken care of, so for the new owner its just a matter of successful marketing and responsible flying.
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Post by Cat Driver »

Just a quick refresher on the TC issue.

For the past eight years I have been operating a Canadian registered airplane under 705 and operational control has been with me and my foreign crew....

The holder of the operating certificate is in the Ontario Region, we have only once brought the airplane back to Canada for crew training and maintenance the rest of the time it has been in Africa, Europe, South America and Now back in France.

The TC people in both Business and Commercial and M&M in Ontario have been just great to work with, the oversite was fair and did not cut corners, the secret is mutual trust and there will be no problem.

All, I repeat "All " of my problems this past three years were contributable to two top management people here in the Pacific Region....and there are enough of us that have been bullied by these two that I am confident they will be dealt with, hopefully soon.

Waldo has a good idea, it just needs fine tuning and it should work.

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Post by helinas »

Hey Waldo Pepper's Circus: I think what you have there is a good idea and if you need any assistance let me know. I have 14 years airline experience doing all ramp, customer service, towing and de-icing activities and had my own co-owned operation using a navajo in the late 80's and early 90's so I know a liitle bit about starting somethng from scratch.
We have to think of something to get this troubled industry back in some respected shape.

cheers :lol:
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Post by mcrit »

This sounds like a great idea, and I think that it is high time that the people at the sharp end of the stick in this industry, (the pilots), got a chance to see more return on the effort that they invest. The only trouble I see with this is the cost. I agree with the $500G estimate to set up a franchise. I don't see how a pilot is going to come up with that kind of cash. I will admit the depth of my ignorance in financial matters, but I find it very unlikely that a bank is going to extend a loan in these circumstances.
What this means is that someone with financial backing, (i.e. not a line pilot), is going to end up owning the franchise. While this makes no difference in terms of the brand recognition it does shunt the pilots back to where they are now: the bottom of the food chain taking orders from someone who may not equate profit with safety.... etc.
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Post by Doc »

Waldo....what are you thinking boy? The idea sure sounds like a good one. Many times I've been in remote areas thinking "ya know, a guy with an airplane....a one-man band...could do real well here!" I think Cessna tried it in the 70's and 80's with their "Cessna Pilot Centre" idea. But the idea of a franchise air taxi would be worth looking into. Just my thought, but it might be best to get in bed with Cessna, Beech or whoever.
With the right marketing, a "one-man band" could operate just about anywhere.
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Post by Waldo Pepper's Circus »

Mcrit, you have just found out why franchises are able to expand the way they do. The pilot is the owner but does not have to come up with the money. If you go out today and buy any decent franchise (Dairy Queen, Tim Hortons's, and so on) you pay a deposit and the remainder of the equipment is leased from the franchisor. That is how you can get started with a Subway or Dominos for $25,000 and do quite well. The power in a franchise is that they are affordable so the franchisor is able to expand quickly. If I had to wait for each pilot to come up with $500K, it would never work. The money comes from private equity funds like some of the micro-cap funds you've seen for the RRSPs. These investors are just people off the street who place their money with a fund manager, so there is no direct relation between the investor and the pilot. The investment fund simply puts the money up for the purchase of the aircraft and hangar. The pilot then pledges a given amount for working capital, pays the franchise fee, goes through the training program, franchise indoctrination program, and then begins working at his/her outlet.

Your only risk is having to find enough of a market to fly aproximately 25 hours a month to cover your fixed costs. After that, you'll probably be earning around $200/hr in your pocket. Expand with a second aircraft and you can see that the money quickly adds up. You could quite easily clear $10,000 for a 100 hour month. Don't forget your maintenance, insurance and administration costs are below avergae as well because you don't have to maintain an AMO, spend time on training programs and administrative manners, and can self insure the hulls. There are many markets in northern Canada where the local outfit is flying 3 - 5 old, beat-up aircraft and the customer has no choice. The local operator is also generating around 300 revenue hours a month. You enter that market with far nicer equipment and only require 10% of his market share to turn a profit. When you decide you've had enough and want to move on, assuming you've built a decent market and established a positive repuation, you'll be able to resell your franchise for far more than you initially paid. Its common in the industry to sell at 3X earnings so for every dollar you earn in a year, its worth $3 to the buyer. Make $50,000 your first year and the franchise is now worth $150,000. This is the most common method that banks use for estimating business values and is what they would base a loan apporval on for the subsequent buyer.

Doc, are you saying you want to sign on here or what?:) I like the idea as well but it needs a lot of refinement before its workable, mainly in the brand management and quality control. Its just so hard to avoid those pilots who will act all mature and responsible during an interview and then fly at tree-tops and think its funny once they're hired.
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Post by Flyingpusser »

:idea: Waldo, you have a great idea, although it's time has not come YET. But it will. Whenever I see these MP' or executives at the local airport disembark 30 year Navajos with patched up paint and boots I think there has to be a better way. To use the food franchise analogy when the golden arches appeared in the late sixties, all there was for fast food were greasy joints that had no higher standards to look up to.
Customers were really impressed with the efficiency and cleanliness of the places at first. Then they realized that the high standards were the same at each location and that also contributed to repeat bussiness.
The air taxi scheme, to be economically viable must be an entirely new business model with the following attributes: speed, flexibility, low operating costs and commonality of equipment and procedures.
The plane: I think it has to be a brand new twin jet with with 5 or 6 seats and a good warranty. It has to be a single pilot machine with the latest glass panel and and two way digital link to a central dispatch who would flight plan digitally with Navcan and upload flight plans and weather to the flight deck. The central dispatch would assign flights based on who is nearest and available. The pilot would carry spare clothing because if he is eager, he would not sleep at home too often.
All planes would be alike, clean, well appointed and require minimal maintenance. The aim here is to do more than northern jobs. These taxi planes would do a lot more work between larger cities, like Ottawa and Toronto than Thompson and Gillam.
If this seems far fetched, just look at business people in the city. They never use the bus or subway for their job related travel. They use the taxi service, even if it costs 10 times more. It is a matter of efficiency and speed. With today's airline service looking more like a Greyhound operation with additional security, executives are moving away from this and are chartering slowtations and HO's. This process is long and cumbersome and most of the time very expensive.
I think a Web based dispatch with real-time location of all assets could provide customers with a short notice booking option.
:roll:
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Post by Cat Driver »

Conversely:

A refurbushed Navajo is a proven bush plane and 1/4 the cost of a jet.

The glass cockpit adds very little to bush planes.

Weather up loading is available on a PDA overlay on the moving map from.

http://www.anywheremap.com

Instant communication to anywhere on earth is easy by sat phone.

And last but not least why would any top notch air taxi operate any airplane with only one pilot?

Just some things to ponder.

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Post by Panama Jack »

I thought I saw this concept being announced in Wings magazine a few years ago, a franchise, coast-to-coast operator, using PC-12's. Never seems to have come to fruition.

From an investor's point of view, is aviation really a worthwhile thing to sink money into (given the comparable track record of opening up a Subway, a Tim Hortons, a KFC) or are we looking for any excuse to operate airplanes because we like flying?
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Post by Anti-Ice »

Very Very Very Interesting.

While the complexities and red-tape of such an idea are staggering I see huge potential. Altogether an excellent idea, if it can be brought to fruition (whose got the business Phd ?!? )

I would imagine that owning a franchise branch of said operation would enable a person to enjoy massive tax savings. We all know that owning your own business is good for that, write off everything. Trucks, computers, tools. Heck, maybe we could even incorporate?

I am extremely intrigued, although possibly lacking in comittment. I especially like the idea of providing our own insurance. After all having to use commercial underwriters is one of the exorbant costs driving small operators under.

Great Idea, keep the thought train chugging ( no not beers! )
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Post by twotter »

It sounds like a very good idea, however, to make it work, would take a lot of effort. I don't personally think that jets are the way to go, as the usage and usability might be limited. Maybe, like Cat says, a fleet of Navajo's would work.. Or another type to think about might be the B100.. Small but efficient..

Some very good points have been brought up with this though, with central dispatch, maintenance, etc. There are certainly advantages with fleet buying power, especially with parts and fuel...

As for TC approval, if the parent company has the licence, then all bases other than the main, could just be sub-bases under the main licence. This would also simplify things when it came to dealing with TC... One ops person, one maint person...

It sounds like a good idea to me and if you ever get it going let me know as I might be interested...

Cheers
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Post by Cat Driver »

Find the best Region to start the ball rolling with TC for the paper work.

And it ain't the Pacific Region.

Then use a powerful MP as your bag man to grease the paper work through.

Nothing like an MP squaking about bringing new business into the money stream.

I am retireing or I would be interested in something like this...but enough is enough I have some living to do.

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Fully integrated service.

Post by spinwing »

Why stop with planks? Add flingwings and you might have something.
Why just pilots as franchisees? I am a pilot but an AME might be just as well suited to manage the operation as he would be at the base/office more often.
Forget about satphones, too expensive software is available to give you instant e-mails anywhere as well as METARS, TAFS, flight time logging, etc. Maintenance planning, crew time,, software is available.
Like anything else, the business plan is the key if you want someone else's money. They really are not that difficult to produce if you have you act together.
Great Idea. :)
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Post by Cat Driver »

Spinwing.

To connect to e-mail or a land line phone in remote areas, only a Sat phone will do it.

They are not all that expensive as we have been using them since 1996 for communications in remote areas...instant clear communications no matter where you are on earth.

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GPS uplink

Post by spinwing »

There is a Canadian developed system which will allow you to send and receive text messages or e-mail from anywhere. If you are in the bush or a remote strip in where ever and want a down load from the EC site, push a key on the keyboard (dash, cable or wrist mounted) and the info is on your screen within 3 secs.
A page of text - and you have a written record - is approx. $ 1.20

You can't do that on a satphone. 8)
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Post by Desk Jockey »

Waldo,

I thought of the same idea with respect to Flight Training Schools. After recently purchasing a FTU / 703 operation I can tell you the amount of red tape is incredible. I will say ALL of my dealings with TC (except for one occasion) have been very good.
Having said that I come from an aviation background, and I deal with TC quite frequently. If I didn't have this exposure I can admit I would not have gone through with the purchase.
If you have any questions please feel free to send me a PM.
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