Which commercial disciplines does a franchising Authority need?
An Authority carrying fare revenue risk needs customer, product, revenue and investment disciplines, applied within clear public-service guardrails.
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Franchising creates commercial exposure without turning an Authority into a private company. Under a gross-cost arrangement, the Authority receives fare revenue and carries demand risk. Poor customer, network and pricing decisions therefore affect the public budget.
The Authority should draw on disciplines that help successful businesses understand demand, improve their offer and invest wisely. These disciplines should serve public purpose rather than an overriding pursuit of profit.
Where does the commercial function reside?
Patronage and revenue growth should sit within Franchise Management. The Head of Franchise is accountable for results. A Patronage and Commercial Growth Lead owns the plan and leads the function.
A larger Authority may add Commercial Insight and Customer Proposition roles. A smaller Authority may combine them, but it still needs protected capacity and decision rights.
The Growth Lead convenes Network, Customer, Data, Finance, Operations and contract management. Each retains its specialist decisions while contributing to a single commercial outcome.
Build the capabilities a revenue-owning bus business needs
The Operating Model should incorporate seven private-sector disciplines adapted for public transport.
| Commercial discipline | What it means for the Authority |
|---|---|
| Customer and market insight | Segment existing, lapsed and potential passengers by journey need and barrier |
| Proposition management | Join up routes, fares, ticketing, information, stops, app, contact and standards |
| Demand and revenue forecasting | Forecast journeys and income by route, time and product, then explain variance |
| Pricing and product management | Balance growth, revenue per journey, affordability and simple choices |
| Customer lifecycle management | Manage first use, repeat travel, retention and recovery after failure |
| Distribution and partnerships | Create journeys through employers, education, healthcare, events and communities |
| Growth investment management | Fund controlled tests and scale, adapt or stop them using evidence |
This extends beyond marketing. Marketing cannot fix an unreliable route, poor fare or confusing interchange. The function must assemble the proposition around a customer need.
Managing a portfolio
The Growth Lead should own an Annual Patronage Growth Plan and a single opportunity pipeline. Each opportunity should state the customer problem, intervention, expected journeys and revenue, cost, owner, dependencies, measurement period and public-value implications.
Before committing money, test the evidence, deliverability, cost per additional journey, payback and attribution.
Manage these opportunities as a portfolio. Run small pilots quickly, scale strong results and stop weak initiatives before they absorb further funding.
LiteFranchise™ incorporates these elements in its core design. Its business and contractual approach is centred on patronage and fare revenue growth.
Apply management-accounting discipline
A franchising Authority should adopt a private-sector view of which routes, products and customers drive revenue.
The commercial review should consider patronage, revenue, yield, cost, subsidy and forecast variance together. It must distinguish new journeys from product switching or unnecessary discounting.
A socially necessary route may remain the right choice. The Authority should know its cost, beneficiaries and effect on the wider plan.
Manage customers through their lifecycle
Bus Authorities should distinguish acquisition from retention.
- First-time passengers need clarity
- Regular passengers need consistency
- Lapsed passengers need a reason to return
- Failure needs useful recovery.
OneContact, TellUs and IDInsight should provide a single growth view covering first use, repeat travel, retention, cost per incremental journey and revenue contribution.
Give the team permission to act
The Growth Lead needs delegated authority to commission analysis, develop propositions and run bounded pilots within budget.
The monthly commercial review should manage forecast variance and the pipeline. The quarterly Growth and Innovation Forum should assess Operator proposals, attribution and investment. The annual Strategic Review should set targets, route priorities and budget.
Operator contracts should require a Growth Lead, route-level plans, timely data and evidenced initiatives. Incentives should reward verified impact rather than activity. Suppliers should provide machine-readable evidence instead of disconnected dashboards or retrospective PDFs.
LiteFranchise™ includes these elements.
Keep the public-purpose guardrails
The Authority should not adopt uncontrolled dynamic pricing, short-term profit targets or automatic withdrawal from weaker markets. Commercial decisions must remain subject to accessibility, affordability, safety, equality, privacy, geographic fairness and statutory obligations.
The objective is to increase patronage and earned revenue, so the network delivers more public value with less avoidable pressure on subsidy or taxation. It is not to maximise profit.
Useful questions
Before approving the Operating Model, an Authority should ask:
- Who owns the customer proposition, patronage target and revenue forecast as one commercial plan?
- Can the team forecast and explain performance by route, time and fare product?
- Does every growth initiative have a customer case, investment case and measurement method?
- Can the Growth Lead test, stop or scale an initiative without unnecessary administrative delay?
- Are commercial decisions explicitly balanced against affordability, accessibility and socially necessary service obligations?
- Which digital tools will be in use, tested and ready before go-live?
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