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When is the Right Time to Switch Franchise Suppliers?

Industry experts discuss when and why companies choose new vendors to work with.

Why waste time in an unproductive relationship? This philosophy often applies to franchising, where vendor contracts are constantly changing. When should companies consider switching to a different vendor? 

The reason behind finding a new supplier for part of your operations varies depending on the industry, company and need, explained Red Boswell, president of the IFPG and former franchisor at IntegriServ and Pet Butler.

“Franchises decide to switch when they realize that the supplier is not meeting the needs they have, or if they get prospected by a competitor and are tempted by alternatives,” Boswell said.

One great way that businesses can ensure suppliers are meeting their needs is to set key performance indicators (KPIs) for their vendors and evaluate them often. Patrick Meehan, a franchise broker at TEC Resource Center, says to look at the relationship once a year at least. He works with hundreds of franchisees and assists them with vendor selections. 

“I usually train the people I work with to look back at those KPIs annually and ask, ‘Is the relationship healthy? Am I still getting good pricing? Is it still economically feasible for the business? Is the product the quality it should be for my business?’” said Meehan. “If you're not measuring, you end up in a bad relationship with a vendor, and you don't know it until it's really bad.”

Monitoring vendor performance is critical now due to supply chain issues. Pricing is high, delivery times are extended, and inventory access is low.  

“Those are the key things, and if they're impacting their business in a negative way, either through financial reasons or logistics reasons, the company needs to talk about changing vendors or adding redundancy to their vendor pool. They may have a primary and secondary or maybe even a tertiary one, so if the company runs into a problem, they do not have to shut their doors,” said Meehan.

When franchises want new suppliers, they often find them through various franchising networks, like IFA conventions or IFPG retreats. The IFA’s website has thousands of suppliers categorized by type, which helps companies who may need their services find them. Social media is also a hugely powerful tool for connecting with other vendors, as are referrals.

“When you’re in this world, you’re making friends and getting to know a lot of other franchise professionals. So, ask them who they use, and get referrals from people you trust,” Boswell said. But he also cautions against throwing away a long-term relationship for a “shiny new object or the next loud salesperson.”

“I encourage that impatient entrepreneurial franchise executive not to give up too soon if you've got a good supplier. View them as a partnership with you in success, not just a vendor, and get to the bottom of why you're not achieving the results,” said Boswell. “You've got so much invested into it. You don't want to start over.”

And sometimes, franchisors mandate that their owners use a certain supplier, so there is no option for switching. In these instances, it will be written into the franchise agreement which vendors they are to use. Larger-scale companies do this for quality control and buying power purposes. 

“Many times, it’s even the Franchise Advisory Council, the group of the leaders of the franchisees, has decided they want to mandate a certain supplier to get better deals for everybody,” Boswell said.