Everyone loves the “Sell Side” of doing business. Selling is fun and it’s how you make money. If you don’t sell something, you don’t have any business.
That’s obvious. Less obvious perhaps is the power of the “Buy Side” (the cost of goods that you sell), if you can reduce your Buy Side costs, all the saving goes to the bottom line.
Yet have you noticed that nearly all franchises concentrate exclusively on trying to sell as much as they can. They overlook the Buy Side completely. And that is a mistake, because both sides have an impact on the bottom-line profitability of a franchise.
That is another way of saying that if you buy and sell intelligently, you will have a much more profitable franchise.
The Wisdom of Thinking about the Buy Side
Really good Franchise systems already know focusing on the Buy Side is critical to franchise success. Younger brands and smaller brands that haven’t hit critical mass tend to be more focused on growth of units, which is also part of the sell side. The more units they have, they reason, the more they can potentially sell.
Yet if you are concerned with bottom-line profits, it doesn’t have to be either/or. Being highly effective in buying will help you grow your franchise system and help the profitability of your franchisees.
Furthermore, providing buying services to your franchisees offers a range of advantages, both for the franchise system and individual franchisees. And the sooner you start doing that, the better.
Here Are 10 Reasons Why
- Economies of Scale/ Negotiating Power – One of the primary advantages of buying services is that they leverage the collective purchasing power of all franchisees. By pooling their orders, franchisees can often obtain products and services at a lower cost than if each franchisee negotiated separately.
- Consistency – A buying service can help ensure consistency across the franchise system. By purchasing the same products or services, each franchise location can provide a uniform experience for customers, which is crucial for brand consistency.
- Innovation and Research – Larger buying co-ops may have the resources to research and introduce new products or services that individual franchisees might have yet to discover on their own.
- Promotional Benefits – Suppliers might offer exclusive promotions or deals to a large buying group, which can further reduce costs or provide additional value to franchisees.
- Quality Control – Centralized purchasing through a buying service can ensure that products and services meet the franchisor’s quality standards. This ensures that all franchisees offer the same high-quality products or services.
- Risk Reduction – By centralizing purchases, a franchise system can reduce the risks associated with supply chain disruptions. A buying service might have multiple suppliers for essential items, ensuring that a problem with one supplier doesn’t disrupt the entire system.
- Streamlined Operations – Franchisees can benefit from streamlined ordering and delivery processes. A buying service can coordinate bulk shipments, manage inventory levels, and even establish consistent relationships with suppliers.
- Support and Education – Many buying services also provide training and educational resources for franchisees. This can help them get the most out of the products they purchase and ensure that they are using them effectively.
- Unity – A buying service can foster a sense of unity and camaraderie among franchisees. It creates an environment where franchisees work together for mutual benefit, strengthening the overall franchise system.
In summary . . .
By providing a buying service, a franchisor can ensure consistency across the brand, improve the purchasing power and profitability of franchisees, and enhance the overall strength and resilience of the franchise system. The results are powerful, because you’re able to improve the profitability of your franchisee by lowering the cost of goods. At the same time, you’re able to create greater consistency throughout the system.
Evan Hackel, a cooperative buying expert, twice led keynote speeches at the National Cooperative Business Association and has managed multi-billion-dollar buying groups. He has also consulted with many franchisors on their buying efforts.
As author, speaker and entrepreneur, Evan Hackel has been instrumental in launching more than 20 businesses and has managed a portfolio of brands with systemwide sales of more than $5 billion. He is the creator of Ingaged Leadership, is author of the book Ingaging Leadership Meets the Younger Generation and is a thought leader in the fields of leadership and success.
Evan is the CEO of Ingage Consulting, Delta Payment Systems, and an advisor to Tortal Training. Reach Evan at ehackel@ingage.net, 781-820 7609 or visit www.evanhackelspeaks.com