From Pilot Outlet to Reliable Franchise Figures

A profitable company-owned outlet does not, on its own, prove that a franchisee can build a viable business using your franchise concept. You may regularly work unpaid hours, pay unusually low rent or attract customers primarily because of your personal reputation. If you want to turn an existing business into a franchise network, you need to make these advantages explicit. This guide explains how to turn figures from a pilot outlet into verifiable financial information for prospective franchisees.

1. Establish what your pilot outlet actually proves

A pilot outlet is an existing or new location where you test whether your business concept can be replicated by others. To produce useful financial information, it should operate as closely as possible to the way a future franchisee would: with the same processes, staffing levels, purchasing terms and support.

Start by describing the outlet’s circumstances. Record its catchment area, floor space, opening hours, accessibility, competition and proportion of repeat customers. Also note how long the outlet has been operating. A new business owner cannot assume they will start with an established customer base.

Next, record your own work. What tasks do you carry out at the outlet, how long do they take and what expertise do they require? Where possible, let a manager run the outlet independently. This will help you establish whether its performance depends on your personal presence.

Choose a measurement period that captures relevant seasonal effects. This is a practical research decision, not a legally prescribed period for running a pilot outlet. Identify any gaps in your experience, such as not yet having measured a quiet winter or a full start-up phase.

2. Turn business profits into a replicable financial model

Do not simply copy the profit figure from your annual accounts. Prepare a separate, normalised statement: a calculation that explicitly adjusts for exceptional circumstances and missing costs. Keep the original figures so that every adjustment can be traced.

Pay particular attention to these items:

• Owner’s labour: identify unpaid hours and calculate the cost of hiring someone to do that work. Distinguish this from personal drawings, which are not the same as a business expense.
• Premises: state whether your rent is representative of the locations where you expect prospective franchisees to open.
• Purchasing: check whether a franchisee would receive the same discounts, payment terms and minimum order quantities.
• Franchise fees: include the proposed ongoing fee, marketing contribution and mandatory system costs in the model.
• Support: specify which tasks will be handled centrally and which local staffing costs will remain.
• One-off benefits: keep grants, exceptional contracts and one-off discounts separate.

Prepare a cash flow forecast alongside the profit calculation. An initial franchise fee, security deposit, opening stock and fit-out may require funding before sales begin to build. Loan repayments also reduce available cash, even though they are not expenses in the profit calculation.

Ask an accountant to check that the accounting records, adjustments and model reconcile. This strengthens the supporting evidence, but it does not turn a forecast into a guarantee.

3. Separate actual figures from expectations

Clearly label each statement as historical figures, an adjusted calculation or a future scenario. State the period covered, data source, VAT treatment and assumptions. Make sure prospective franchisees do not mistake a modelled example outlet for an actual trading result.

For example, use a base case and a downside scenario, without relying on arbitrary growth percentages. Support the differences with demonstrable factors, such as visitor numbers, staffing rotas or local rental proposals. Show what slower customer growth would mean for the financial reserve required.

Prepare a comparison note for each proposed location. Why are your pilot outlet’s figures relevant to this site? What differences limit the comparison? A busy city-centre outlet cannot be treated as comparable to one on a business park without explanation.

Discuss uncertainties during recruitment too. Avoid statements such as ‘this is what every franchisee earns’ when your evidence relates to just one outlet. A franchise network builds trust by sharing limitations, not hiding them in the small print.

4. Include the supporting evidence in your disclosure pack

The Netherlands has specific franchise legislation: the Dutch Franchise Act, incorporated into Book 7 of the Dutch Civil Code, Articles 7:911 to 7:922. The pre-contractual disclosure requirements and statutory standstill period are particularly important for your financial documentation.

As a franchisor, you must provide information in good time, including information about your financial position and financial data relating to the proposed location. If data for that location is unavailable, you must provide data from one or more businesses you consider comparable, explaining why. There is no general statutory obligation to provide a turnover or profit forecast. However, any information you do provide must be carefully substantiated.

Bring the data together with the draft agreement, appendices and explanations of fees and investment requirements in a pre-contractual disclosure pack. Have a lawyer specialising in franchising check it for completeness; a spreadsheet alone is not enough.

The required information must be supplied at least four weeks before the franchise agreement is entered into. Statutory restrictions apply during this period: among other things, you may not proceed to signing or require franchise-related payments or investments. Keep copies of each version and acknowledgements of receipt, and give prospective franchisees room to carry out independent due diligence.

Practical conclusion: only recruit on the strength of your pilot results when you can explain what was actually earned, which costs are still missing and why the figures are relevant to the prospective franchisee’s location.