Part of getting the ball rolling for your store is ordering the merchandise and supplies. You’ll have to have the shelves set up with anything you’re hoping to sell, or if you’re not a retail or restaurant business, you’ll have to stock yourself with the equipment for the job as well as the office supplies necessary for taking the information you’ll be receiving. Your franchisor should provide you with the help you need to get the equipment your business will need to run, including whatever top of the line technology they use, any brand specific products, and where to order uniforms if they have them. Most franchisors have a deal with many vendors that offer a discount for buying in bulk or because their ongoing business relationship has been going so long that they now receive perks or discounts.
Depending on the size of your location and the specific deal you have with your franchisor, you may have no need for all the equipment or merchandise that is available through the franchisor’s vendors. You should speak with your franchisor if you do not have a list of necessities before you purchase anything. There may even be information in the contract as to what you are required to offer vs. what are optional choices.
The FDD should have given you a general idea of what to expect when it comes to ordering supplies and merchandise. If you read it with proper understanding, you shouldn’t be too worried about it now, but here are the different things you may face when it comes to ordering products:
Many, if not most franchisors will have it in their FDD that you are to purchase merchandise and supplies from their vendors through their system. This is pretty normal, especially for well-known brands. These brands and franchisors will already have all of their methods and products down to a T which means they know what they are getting and who they are getting it from. Often times Franchisors will have a system setup to make ordering in bulk easier and cheaper. Sometimes franchisors even receive a commission from the merchants or suppliers they have deals with.
When you’re reading over the FDD and the information regarding merchandise and supply purchase, make a note of what they say and if you have any concerns, bring them up with your franchisor prior to signing the franchise agreement. Some attorneys warn that many disputes with franchisors over the last two decades have been over marked up prices on the merchandise that franchisees are forced to purchase from their franchisor. If you’re able, ask about the prices before hand and if there is a percentage markup on the prices. This could make running your store harder as it increases overall prices for objects you will need on a regular basis. The attorneys also said that franchisees had an easier time doing this when they were certain that the supplies weren’t a huge source of income for the franchisor.
While the FDD will state information on supply orders, the franchisee will also receive more information that was not listed in the FDD during the training period.
While some franchisors might have just one place where you’re allowed to go for supplies, other franchisors might have a list prepared for approved merchants that franchisees can purchase their supplies from. These merchants may or may not have a special relationship with the franchisor through contracts or a long-running relationship. They may be Okayed by the franchisor because of their proven quality in product that reflects what the franchisor is trying to say to their clients—Whatever the reason, these lists of suppliers can offer more variety in choosing when and how your merchandise gets to you. A good franchisor will try to keep operational costs as low as possible to help you make as much money as possible. If your franchisor has gone to the trouble of finding great, reliable suppliers for you, take advantage of that. You don’t have to just trust them blindly, but during training ask other franchisees about where they get their supplies from, how trustworthy are the suppliers provided and which ones work best for them. As a general rule, make it a point to continue educating yourself as you go.
As a franchisee, you should always be learning something new every day, especially if you’ve never managed or run your own store before. There is enough to learn to keep you busy for some time.
Regardless of size, all franchisors want to keep consistency across their brand. That means providing the same standard for every product in every store across the state, nation, or world. Many franchisors will set a standard for their product that must be met, but aside from that, franchisees are able to pick their own vendor and order from who they want. If you choose to go this route, talk with your franchisor before you order anything to be sure they are up to franchise-mandated code or ask about specific rules regarding suppliers or vendors of your choice.
Cooperatives are buying groups that several franchise systems use to purchase any and everything for their chains. Many, in fact, are started by franchisees and the franchisor has nothing to do with them. There are also some cooperatives that are both owned by the company and the franchisees. What buying groups do is order in bigger bulk to receive lower prices. This gives each franchise a competitive advantage over all the other stores who can’t order quite as cheaply.
Cooperative member can also share what is called patronage dividends which is like stock dividends. They are distributions of the earnings made from the cooperative.
Remember: Regardless of how you purchase, your supplies must always meet the standards set by the franchisor.