The key benefit of franchising, aside from the ticketing, is that it allows network-level planning to be done in a way that isn't really practical for a commercial operator looking to maximise short-term revenues. If you actively design a bus network to encourage modal shift, then you can provide a significantly better service to passengers without it necessarily costing more to run than the deregulated subsidies currently in place.
A few examples:
- Regular and frequent evening or night services may not be 'profitable' in their own right, but lead to significantly increased patronage during the day for all sorts of trips where people would not risk making them by bus otherwise, for fear of missing the last bus.
- Controlling the entire network means you can actively segregate your route network for different purposes - you can run a slow 'all round the houses' bus route A for connectivity around a housing estate to the nearest centre/suburban hub, with connections to a faster bus route B (or tram B) that gets you across an urban area quickly. Running A or B on their own would likely be unprofitable, but together and with flexible integrated ticketing, they easily attract enough passengers to be viable.
- You can run buses or routes with a broader view than just raw operating costs vs ticket revenues - e.g. ensuring every part of your region is reachable without a car at some minimum frequency (e.g. every two hours), enabling a significant amount of economic activity both directly from the not insignificant proportion of the population who do not drive (e.g. children, people with disabilities, the elderly) and the time and money saved by those who would otherwise be driving these demographics around. Or you can consider the road safety and environmental benefits of fewer cars on the road when those people can use public transport to get around instead - which lowers healthcare costs and reduces disruption caused by the emergency services responding to accidents.
In more rural areas, an hourly or two-hourly bus which runs reliably throughout the week can work wonders in preventing villages from dying out as wel as attracting day trippers for outdoor activites like hiking or birdwatching.
Going further, I would suggest that properly funding and investing in a countrywide, integrated, clean and reliable bus network (administered and operated at a local level) with good connections to trains and other public transport would be one of the single most effective measures you could take to rapidly boost the economy and turn stagnating productivity around, without costing the earth and while directly impacting people's lives for the better. Of course the devil is in the detail, but setting high level strategic goals (x% modal shift, minimum connectivity) and actively supporting their implementation would already go a very long way.