Franchising is not about licensing an idea. What it is about is licensing a proven business system. Whilst many businesses operate profitably, that does not mean that they are able to franchise because there could be any number of reasons for the profitable operation. They could include the fact that the management team is brilliant or that they operate in a particular locality where there is an unusually high demand for their products or services.
In pilot testing the profitable business is able to prove that the success that they have experienced can be replicated when others are involved in different areas so as to enable a franchisor to say to a prospective franchisee “I cannot tell you how successful you will be because that depends on you, but I can tell you that if you follow the system that we have created you will be successful”.
The only way that a new franchisor can prove that its system can be replicated successfully is through pilot operations where one or more franchisees have taken the system and been successful.
Once of course a franchisor has a number of franchisees up and running who are operating successfully then, of course, prospective franchisees do not need to be concerned about pilot operations.