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Franchise Supply Chains

A positive word for micro-franchises, shipping and supply can be a huge hurdle when it comes to expansion. Franchisees will get litigious real quick when the franchisor cannot find enough quality supplies in a timely manner. Franchisees start losing money and their frustrated customers start going elsewhere.

Each franchise area has different clientele, it must be left up to the franchisee to be able to order from their preferred range of products and have them shipped on time. The franchise agreement should state that a certain level of inventory must be available to ensure that the store is well stocked and selling at max capacity. The franchisor should also have quality standards on how franchisees will deal with older merchandise in their stores.

One large pet franchise that I worked for would purge their warehouse every quarter and send all of their old stock to franchisees and bill them without their consent. It was written into the franchise agreement. Angry franchisees would mark the unwanted items damaged and get an inventory credit on the products that they did not order. They could not refuse the order, as they signed their franchise agreement, but they could mark inventory damaged so as not to incur extra expenses.

The franchisor would have been better off having an outlet take their old merchandise, such as Winners or Marshall’s, they could have done a discount pop-up shop, or have a fire sale on their online site. It cost the pet retailer so much money to force unwanted old stock onto franchisees with the return shipping costs and admin expenses.

Treat your franchisees as your number one customer, because that is who they are! They invested in your concept, they purchase your products and are ambassadors for your brand. Why would you bill a customer for products that they didn’t want?

The last thing a new franchisee wants to do is be on hold with head office trying to source enough inventory. Franchisees should not have to store double and triple orders because of unreliable supply, that is a lot of operation money to tie up, plus the added expense to store extra inventory in another area. Franchisees from other locations will try and poach other franchisee's stock too, if they know another store was able to purchase a large quantity of a popular item. Area managers can get involved and force franchisees to transfer inventory, and it becomes a mess.

When investing in a franchise, make sure that when you are in the due diligence phase, ask as many current franchisees how the franchisor's supply chain management operates. If there is a pattern of low inventory, late shipments, and lack of care and concern for franchisees, it's best to take another hard look at the opportunity.

Franchise Supply Chains


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