.Finding a reliable, price-competitive supplier often tops the lists of essential tasks for emerging franchise brands. While a good supplier is key for any industry, it becomes increasingly important in franchising. Franchisors set up the supply chain, but when it comes down to daily operations, it’s up to the suppliers to deliver quality goods – on time – to each franchise location.
Here are a few tips for finding a quality supplier for your emerging franchise brand – and how to develop that relationship into a continuously prosperous and beneficial one:
The wholesale industry is large and highly fragmented, with 50 of the largest distributors generating 25 percent of the profits. Within such a competitive industry, finding the right supplier requires a good amount of time and research. Understandably, for many business owners, the first thing they consider when looking at suppliers is price.
Research online, check out trade magazines and trade shows and talk to people you’re currently in business with to find suppliers within your price range. You can also talk to manufacturers, who will be able to refer you to smaller suppliers if need be. Smaller suppliers are often better able to accommodate businesses just getting off the ground.
While it is important to find a supplier whose products are within your price range, keep in mind that the wholesale industry is volume-centric. This means that as you are able to grow and open more franchises, product prices will become more competitive, since you can buy in bulk. With more buying power, you will also be able to revisit any negotiations you initially had with the supplier, and ask for a more reasonable rate as you grow. This is not to say you should try to negotiate with the supplier to reduce prices on every purchase order – just when it makes sense for both of your businesses to re-negotiate.
Almost as important as a supplier’s pricing is their reliability. Unfortunately, this is much less black-and-white than product prices, and is best gauged once you’re already in business with the supplier. Good suppliers will ship the right number of items on time and ensure they arrive in pristine condition.
Whether you decide to go with a bigger or smaller supplier will largely depend on your own preferences and personal philosophy. Some emerging franchise brands prefer to go with larger suppliers, who have the resources to devote to backup systems. This minimizes the possibility of any adverse effects on your business, since, generally, the supplier will be able to fix the error before it impacts your day-to-day operations. Other emerging franchise brands prefer to stick with smaller suppliers, since they receive more time and attention.
Regardless of the size of your supplier, if you aren’t getting your goods on time, or they are consistently damaged, it’s time to find a new supplier who you can depend on.
As you assess which suppliers you want to work with, it is important to determine your territory or expansion strategy. As the franchisor, if your franchise territory strategy will be regional or national, make sure the supplier can provide products to those areas and the freight charges are reasonable.
Another key predictor of your success with a given supplier is their stability and track record. Focus on suppliers who have been in business for many years, and who have not made drastic changes to their company while they’ve been in business. Obtaining financial statements from the suppliers will allow you to assess the financial strength of the supplier.Typically, three years of financial statements will help you determine if the supplier is financially strong.Talking with other customers can be a great indicator of the supplier’s stability and reliability, and whether or not you should consider doing business with them. Suppliers with solid reputations and seasoned executive teams are usually your safest bet. But, continue to keep an eye out for telltale signs of problems, such as early shipments or premature requests for cash receipts.
The most important aspect of any supplier relationship is timely, consistent and honest communication. Suppliers will run into problems, inevitably even the best ones do. How they react and respond to these issues and how clearly and quickly they communicate the issue to their customers and come up with a solution is crucial to your business and franchise system. Find a supplier that will be open and honest in their communications and relationships and you will find yourself a winner in the supply chain.
Finding the Right Supplier for You
Finding the appropriate supplier is paramount to any emerging franchise brand. You need to have suppliers you can depend on and trust to accommodate your growing business, and ensure your success as a franchisor. Finally, always hedge your bets with supply chain management. Have a backup supplier tested and ready to go with your franchise system in case the main supplier fails to deliver. Never put all of your eggs in one basket, especially when their business is counting on you.
With 30 years of franchising experience and 800+ franchise owners representing more than 1,200 locations for five brands, Winmark Franchise Partners can help you grow your brand through sound strategy and expert franchising advice. We can help you find the best suppliers and maintain positive relationships with them as your brand continues to grow, as well as assist with any other facets of your business. For more information, contact us here or at (844) 452-4600.