By Sasha-Lee de Bod

Once a franchise model/concept has been developed, it must be tried, tested and proven in the market before it can be replicated.  It is important to note that just an idea cannot be franchised.

In franchising, the franchisor must be able to show that someone other than themselves can successfully run a copy of their business. The franchising term for doing this is called ‘Piloting’ or ‘running a Pilot’.

When implementing a franchise model and/or expansion method that impacts an existing operation, especially if the work process is changing, it can put the company at risk if it is not managed and executed properly.

There is some truth in the idiom: “It looks good on paper”.  Planning, theories and game plans are great, but piloting over a specific period of time, offers realistic and practical experience, provides feedback and insights for the franchisor at the earliest stages of development to assess, refine and prepare the franchise model before roll-out.

Why is piloting important?

  • Piloting serves as part of a strategic plan that can be critical to the success of the franchise network
  • Valuable insights are given into challenges or gaps that need to be addressed to ensure that the franchise model is ready for the market
  • Piloting provides feedback on the positive impact that an owner-operator mechanism has on the overall profitability of the business operation.
  • The projected or estimated franchise model can be replaced with actual facts and findings.
  • A pilot operation will establish the viability of the franchise model and product/service offering.

1. Structuring a pilot operation/plan

In the ideal world, concept testing would be done through a number of pilot outlets that are dotted across the country to test various demographics.  The pilot outlets, although company-owned, would be operated in a decentralised manner, the objective being to mimic, as realistic as possible, the conditions under which future franchisees will be expected to operate.

In the real world, time is precious and budgetary constraints come into play.  The format of the pilot will frequently be governed by the type of business the franchisor is in and influenced by the size of the existing operation.  In most instances, an established pilot company-owned outlet will serve as the pilot operation.

This will work, but what is the cost? What will happen if your company-owned units are extremely busy and highly profitable?  It takes a while, at least 3-4 years to see a significant return from your franchise operation.  The last thing a franchisor would want to do at this stage is to have the franchise team upsetting the efficient, functioning and established income streams.

This is primarily the reason that many prospective franchisors decide to setup a pilot operation from scratch.  The pilot operation is operated at arms’ length, and constitutes an ideal “franchise laboratory”, making it possible to experiment, test and re-test every aspect of the business without interfering in the activities of the existing operations.

It is important for a prospective franchisor to choose a piloting area that will result in effective testing and success of the franchise model.  The pilot operation should be close enough to effectively support but not negatively impacting existing operations in surrounding areas.

2. Running/Implementing a pilot operation/plan

  • Explain the purpose and objective as well as the key expectations of the pilot operation in detail to important stakeholders
  • Free is never a good idea – even if a pilot operation is seen as a “test subject” it is important that they still contribute towards the franchise setup of the operations as well as the ongoing franchise fees.  By investing capital into an operation, it ensures commitment and motivation to perform.
  • The prospective franchisor needs to work closely on the pilot operation and ideally. own and run the pilot operation to ensure authentic and honest feedback on the franchise model and operations.
  • Agree on realistic time frames for milestone reviews and or final delivery.   There are many factors that contribute to the timeline testing, such as industry, fads, trends, location, affordability in the market etc. It is not easy to put a set timeline on a pilot operation, but one needs to focus on what is realistic considering the factors involved.
  • A franchisor needs to keep their eyes on the ball through:
    • extensive engagement,
    • training,
    • assistance,
    • support and
    • being ready to make enhancements

3. Test, assess and evaluate

Piloting is a chance for trial and error. Findings in the pilot can be recorded and analysed until the ultimate combination of what works has been found.  This should not be limited to product mix, but must extend into every aspect of operations, including but not limited to the following systems that are currently in use like:

  • Point of Sale (POS)
  • Accounting
  • Management
  • Process and Controls

 In addition to the areas already mentioned, the testing process will cover:

  • Site selection procedures,
  • the corporate image (signage, furniture, fittings and décor),
  • equipment,
  • production and/or procurement,
  • human resources (staff recruitment and selection, training and motivation),
  • marketing and sales promotions,
  • new product and service offerings
  • administration,
  • financial and key performance indicators and
  • every other aspect of operations that is likely to impact on the success of franchisees.

4. Introduce the resulting changes

Once the franchise model has been piloted and tested it is important to incorporate changes not only into the franchise operations but into the company-owned outlets as well.  It is very important that this is done before franchising commences.

Conclusion

Feedback from piloting can help inform critical decisions related to strategy and can give the prospective franchisor an early jump on securing and introducing the right partners, securing the needed resources and ultimately cutting down on the time it takes to see the return on investment (ROI) for the franchise network and its franchisees.