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How many pilot franchises should a franchisor run to prove its system is viable?
It’s worth pointing out that there are two things that need to be piloted before thinking about franchising a business. The first is the business concept, the second is the franchise. In most cases, when businesses approach consultants like ourselves to see if they can operate as a franchise they will have proven the concept by having one or more company owned outlets operating successfully. Sometimes people come to us with little more than an idea, in which case they need to operate that business themselves - in the format in which they intend to franchise it - for at least a year, and ideally up to three years, before preparing to franchise it. Once the concept is proven, it still needs to be adapted for franchising and those adaptations need to be tested and piloted in locations that match those likely to be franchised with people who match those likely to be franchisees. In an ideal world, at least three pilots over a period of at least at a year should be sufficient to measure consistency of operation and ensure that properly selected future franchisees are likely to be successful. If there is only one pilot, the outlet may succeed or fail simply because of the location or the operator.
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Companies to Consider
Cash positive from month 1
Bridgewater Home Care
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Yes, with Natwest and HSBC
Laser Clinics United Kingdom
Blossom Home Care
Broadway Wine Company
£648,000 per annum with a gross profit of £108,216 and EBITDA of £82,956 by Year Three
Discussed at interview stage
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