3 Reasons Emerging Franchisors Need to Nail Supply Chain Management
The supply chain is a large part of what keeps each location in the franchise system operating smoothly and efficiently. It’s how you receive everything you need to conduct business. But, it’s often overlooked until something goes wrong, like the critical supplies you need to run the business arrive late or not at all.
A well-managed supply chain reduces the likelihood of that happening. It’s important emerging franchisors establish a supply chain that functions like a well-oiled machine. Here’s why that’s necessary:
1. It Affects Brand Standards
A well-managed supply chain helps deliver on your brand standards, the guidelines developed to ensure the brand experience is replicable throughout the entire chain. After all, the reason consumers enjoy visiting a franchise brand’s locations is that they count on receiving the same product and/or service every time.
In order to ensure that replicable experience is consistent, the suppliers in your chain must send the same quality product to each franchise location on time, every time. Emerging franchisors need to establish this right from the start because brand recognition depends heavily on customer satisfaction.
For example, should a restaurant franchise run out of ingredients that would make serving menu items impossible for a period of time, that brand will end up with some unhappy customers and their business will likely suffer. If the quality of the product suffers because a restaurant had to source ingredients from another distributor or supplier due to a breakdown in their supply chain, it runs the risk of creating some dissatisfied customers, too.
2. It Can Make for Happy or Unhappy Franchisees
Not being able to serve even a small fraction of their customers is a franchisee’s worst nightmare. Not only does that amount to a loss of revenue, but it also means negative online reviews, which can hurt business. Needless to say, reliable delivery of supplies goes a long way toward making franchisees happy. So does simplicity of placing orders. Ordering should be a function they shouldn’t even think about. Anything that takes time away from running the business can be irksome, so emerging franchisors should consider investing in an ordering system that is effortless to operate. Many larger distributors have ordering systems that help make the ordering process easy and efficient.
Happy franchisees are necessary to franchise growth. They hold the key to your brand’s scalability because franchise candidates will contact them during their due diligence research. Like an unhappy customer, the unhappy franchisee has the power to turn other candidates away. But, like a satisfied customer, they are also capable of convincing franchise candidates to invest in the brand’s franchise opportunity.
3. Your Reputation Depends on It
Supply chain management holds a lot of influence over your franchise brand’s reputation. The health of your supply chain can make or break satisfied customers and franchisees alike. Both or either can help or hinder expansion because they will share what they know. And, either a good or bad reputation will evolve.
A bad reputation can spread quickly thanks to outlets like Yelp and Facebook, and linger for years. It can stifle growth in one or more markets. A bad reputation can also drive away investors who believe in the concept and may be ready to provide a cash infusion. A good reputation can have the inverse effect.
Develop a Manageable Supply Chain
A healthy supply chain that will make both customers and franchisees happy should include:
- Respectable suppliers – These are suppliers that offer safe products at fair prices. This is especially important for restaurant concepts whose reputation could be ruined by serving contaminated food. While bargains are good, be wary of any supplier constantly undercutting the competition – they may not have the financial fortitude to stay in business very long. When they go under, you’ll be forced to search for a new supplier. Leverage all the units in your franchise system to get the best pricing.
- Reliable distribution – Your distributor should make deliveries on time, every time. This is paramount for restaurant concepts that use perishable food. They should also be able to maintain reliable delivery as your franchise system grows into new and varying markets.
- Secondary suppliers – Use these as your Plan B if your primary suppliers can’t deliver on time for some reason. Be sure your Plan B has been tested and is ready to deploy before you need it.
Build a Relationship with Suppliers
Because so much is riding on the vendors that make up your supply chain, treat them like a partner rather than a distant supplier:
- Pay your bills on time. This may make you eligible for perks, such as flexible payment options, early pay discounts, increased buying power or a priority service designation if you have an emergency.
- Be human. When they make a mistake on their end, work with them to resolve it rather than shooting off a nasty email or making an angry phone call. Although you should hold them accountable, also realize they’re human, too.
- Communicate proactively. Your suppliers will likely be willing to work with you if you find you’re having trouble paying a bill on time as long as you’re open and honest. Also, make sure you give them as much lead time as possible to get your orders ready. Keep them updated about your growth and what your needs will be down the road.
- Be transparent. Let them know your expectations and how you think they’re doing. It’s OK to let them know about your relationships with other suppliers. It may keep your relationship with them honest and keep the pricing competitive.
With 30 years of franchising experience and more than 800 franchise owners representing more than 1,225 location for five brands, Winmark Franchise Partners can help you grow your brand through sound strategy, such as developing effective supply chain management, and expert franchising advice and services. Contact us here or at (844) 234-8520.