Q What does the term ‘pilot test’ mean in the franchise industry?

Having developed a business concept, it is essential at least one pilot operation should be established by a franchisor in order to ensure the proposed franchise system works in practice. As a general rule, such pilot tests should be open for at least a year, particularly where seasonal factors have to be taken into account, and preferably two years. Ideally, there should be more than one pilot test to ensure the business model is robust and eliminate any distortions arising from the results of one unit through the close attention it receives or the uniqueness of the location.The aim of running a pilot test is to help understand a wide variety of potential issues and concerns, including whether the business will be successful; how the business can be improved; the acceptability and availability of the product or service; marketing methods; the laws and regulations applicable to the franchise; the location of outlets; staff selection; the most desirable combination of layout, equipment and décor; and design and opening hours.By successfully running a pilot operation, a franchisor will be able to put together all the elements of the franchise package that it offers to franchisees.In assessing a franchise, a potential franchisee should take great care to ensure pilot testing has been fully and thoroughly carried out. There is a growing trend to start franchising without running pilot tests, particularly when the proposed business relates to a ‘new activity’ the franchisor does not wish other businesses to copy. However, the essence of a franchise is that a franchisor is providing a proven, successful business to franchisees.