Rapid growth is a good problem for many franchise companies to experience. They’re able to leverage greater economies of scale, which can lead to lower costs and better profitability for franchisees.
However, it can also cause complications for infrastructure, especially the supply chain.
Consumers rely on receiving the same product at every location, whether they’re in New York City or Denver. That’s the backbone of franchising.
But, if your supply chain can’t keep up with your brand’s growth, you risk making both franchisees and customers unhappy. When deliveries don’t arrive at every store on time because suppliers are out of product, you don’t have enough suppliers, or distribution is underdeveloped, franchisees can’t sell to customers. Those lost sales for franchise owners tend to generate dissatisfied customers, and they can create a huge liability for your brand’s reputation.
When your franchise system is expanding quickly, it’s essential to efficiently manage the supply chain. Continuous communication is key to keeping your supply chain running like a well-oiled machine.
Don’t Allow Disruption in Communication
Everything starts with communication. If you have a functional group within any organization – whether supply chain, operations, and training – the strategy of the company should be communicated. Everyone should know what the one-year, three-year and five-year growth forecast is.
Constant communication allows you to better plan for the anticipated growth and adjust as needed. You can more accurately manage the supply chain and decrease the probability of interrupting service. Yet, sometimes the growth of a brand takes off, exceeding expectations. It may seem like you can never truly be ready for such growth.
Best practice is to always be prepared with a Plan A, a Plan B and a Plan C. For example, if I’m relying on one or two suppliers for frozen strawberries, and I find our growth is outpacing what I contracted for, the suppliers might have some extra I can purchase. But, if I have a plan with four suppliers in the mix, buying a little bit extra from each gives me a lot of extra cushion compared to one or two suppliers.
If you rely on agriculture suppliers, you must have contingency plans in place to deal with any blows from Mother Nature. We’ve seen natural disasters hit a good portion of the country in the past 12 months, including floods and sub-zero temperatures. Natural disasters can affect the ability of my manufacturers to produce the goods I need. So, rather than relying on fruits and vegetables from one part of the country, I source from suppliers in multiple regions. That way, our franchisees are not precluded from receiving supplies should one area of the country be adversely affected by the weather.
Help Suppliers Help You
There may be occasions when suppliers can’t keep up with the demands of a fast-growing company. Again, regular communication will significantly decrease the likelihood of disruption.
Share your company’s growth forecast with your suppliers. By doing so, they can assess their infrastructure, their systems and their ability to grow with you. Maybe they’ll need to make a capital expenditure of equipment, processing lines or pick up another farm. If you’re talking about agricultural products, those suppliers require long-range planning because they can’t just immediately pick up a new piece of equipment. They usually have to wait until the next crop season. Communication allows suppliers to do their planning in order to support you.
Manage Your Relationships
As your franchise company grows, you may find you have to step away from a supplier who has been fair, prompt and reliable but may not be positioned to grow as quickly as you’re ready to grow. Exit the partnership with grace and professionalism.
How you communicate the end of the relationship, as well as how you maintained the association, is key because you never know when you’re going to need help from additional suppliers in the future. You may need to call on them again as your supply chain strives to meet the demand of a growing franchise system.
I believe having a baseline of anticipated growth will get you 80 percent there. The remaining 20 percent is your plans for the unexpected. But, if you don’t have the anticipated growth factored in, you’re 100 percent trying to plan for the unexpected, and it makes your supply chain unstable.