JUNE 20th, 2016—Last week, the Measure team found ourselves sandwiched between The Simple Greek, an interactive Greek restaurant made famous by reality TV investor Marcus Lemonis, and American Family Care, an urgent healthcare service. What do these businesses have in common? They were both franchisors that exhibited at the International Franchise Expo (IFE) in New York, the largest franchise event in the country. The variety of franchise businesses IFE was staggering, including automobile repair shops, ice cream sellers, pretzel vendors, learning centers, accounting firms, jewelers, lawyers, a ‘spy school,’ a beef jerky maker (our personal favorite), and Measure, the nation’s leading drone services company.
So why are we franchising? The need for centralized service providers in the drone industry has been mounting. Over 5,000 firms have received a Section 333 Exemption to fly drones for commercial purposes in the US; 3,000 of those have come through in the last six months. Exemption holders range from enthusiastic hobbyists looking to recoup the cost of their DJI Phantoms to R&D departments at Fortune 500 companies. The range of applications being flown is even more mind-boggling. Drones have demonstrated value in precision agriculture, tower inspection, search and rescue, and more. Through franchising, Measure plans to bring together the best operators in the country, take commercial drone services to scale, and lead the way towards a safe, responsible, and productive industry.
Operations are mostly a problem of logistics, repeatability, and standardization. As a result, most companies have been confined to one or two local markets where they do most of the business—when there is any business to be done. It hasn’t been until this year that firms have been able to stretch beyond their local markets with significant impact—Measure included. Unlike DJI or 3DR, who can lean on existing shipping infrastructure to deliver their products to stores and customers across the country, for operators to fly they have to move people & equipment, coordinate with the FAA, deal with changeable weather conditions, and more. The logistical challenge is absolutely massive, and it is one that firms are just starting to get a handle on.
Currently, the most common strategy that firms use to combat logistical challenges involves deploying field offices to key markets and trying to drum up business. Targeting key markets works well when the customers have clustered infrastructure; relatively little capital is required and firms have some assurance that investments in people and equipment will generate revenue. But targeting often forces companies to be opportunistic and to follow customers to markets that might not make a whole lot of sense for their roadmap. In an industry where first-mover advantage is still on the table, running a footrace with thousands of other operators is a risky proposition even without being forced to take detours just to keep the lights on. Firms can try and counteract that problem by boosting business development and subcontracting when they can’t put their own resources into play, but there are plenty of pitfalls down that route too. It’s hard to quality control a subcontractor—and when the customer is a farmer who needs to make a decision on field inputs in the next 48 hours, there isn’t time to go back and forth with a third-party provider. Ensuring that operations are flown safely and legally by a subcontractor is also a challenge and a potential source of risk that can both cause headaches for a firm and scare away large, risk-averse enterprises who always have compliance and liability concerns at the top of their lists. And there’s always the chance that an unscrupulous contractor will try to steal your customers out from under you.
An alternative to the step-by-step strategy is one employed worldwide by commercial airlines, and can be summed up by the famous line from Field of Dreams: “If you build it, they will come.” By placing people and equipment across the country in key markets, firms would attempt to generate enough business in each market to justify the initial outlay—which would easily grow to $50 million or more. No operator has raised anywhere close to that much money; the big bucks have gone to software/firmware development and manufacturing. With most customers still in the proof-of-concept phase, investors are nervous about shelling out large amounts of capital to fund services in a brand new industry.
At Measure, we believe both of these strategies force a company looking to scale to follow a flawed roadmap. Franchising is a much more attractive business model that allows us to leverage the best parts of both growth strategies and provides a viable solution to the logistical challenges of commercial operations. By banding together with the best operators in the industry, we can develop consistent standards for operations, data delivery, and privacy; build relationships with bigger customers; and create an environment where safe, legal, and insured is the norm, not the exception. Our franchisees get equipment financing, training, access to lucrative nationwide accounts, and our standardized data offering. We believe that backing the best pilots, operators, and entrepreneurs in the country with the support they need will help them flourish and ensure that the commercial drone industry becomes a safe, profitable, and smartly-regulated space for years to come.