When you choose a franchise business, you’ll have some of the same challenges as any other business. You will have costs, including supplies, materials, and maybe also wholesale prices on goods that you resell.
Whether it’s tomatoes for the sandwiches you sell, skin care products for your spa, or drug tests for your drug testing service, there will probably be things you have to buy. Even a consulting service which has no inventory or raw materials may need business cards and other marketing pieces, books or manuals, or software.
This is no different from any business so far, but with franchises there is often a requirement to use specific suppliers, to have your vendors approved by the franchisor, or even to buy directly from the franchisor.
Some franchisees resent this. They want to be able to source their supplies wherever they want, and they imagine that their franchisor is taking kickbacks from suppliers. Usually, the decision revolves around three factors.
Franchisors have a vested interest in making sure that their client’s experience at any franchise is great. If one franchise uses lower-quality liquor in their drinks or prints reports in black and white instead of color, there will be a difference in the quality of the experience for customers at that franchise.
There have been some high-profile cases in which franchisees have decided to shave costs and increase profits by cutting corners on materials. Since the franchisor generally takes a cut of revenues rather than profit, raising profits may benefit a franchisee even if the number of customers falls. A franchisee who’s in the business for the short term could damage the brand’s reputation by making choices that are all about profit, where the franchisor who’s in it for the long haul is motivated to keep quality high.
On the other hand, a disagreement about quality can go both ways. A franchisee who wants to be able to use local produce for maximum freshness, for example, may find that the franchisor will be open to that. It makes sense to discuss issues of this kind with your franchisor.
A pretzel bun might be just as good as a soft sesame seed bun, but the experience will certainly be different. People who go to a franchise restaurant want a consistent experience, not something special and different each time. And this is typically true for every franchise business.
Franchisees are typically not able to pick supplies that they prefer or suppliers who give them a better deal. Allowing this would mean that the franchise wouldn’t have consistent goods and services.
Questions of consistency and quality can masquerade as disagreements over price, but price is often one of the big advantages for franchisees. Being able to buy as a network with other franchisees can give a franchisee an incredible cost advantage over an independent business. Even for items like pens and toilet paper, the franchisor’s buying power and supplier relationships can help franchisees cut costs. Independent businesses often must pay retail for supplies of this kind, because they don’t resell them and can’t buy in quantities that would allow a price break.
Add in the savings from not having to track down suppliers and negotiate with them, and a franchisor’s sourcing is more likely to be a benefit than a drawback.