Franchise equipment: plan before you expand

A company-owned operation may run with equipment bought at different times, improvised adaptations and technical support close to the founder. When you franchise, these conditions may not always be available. To expand consistently through franchising, turn your list of machines and tools into a standard investment package that someone else can purchase, install, operate and maintain.

1. Specify equipment by function, not just by brand

Start by listing the equipment essential to delivering your product or service. For each item, record its function, required capacity, installation requirements and the impact of a breakdown. Separate what is essential for opening from what provides convenience, backup capacity or scope for future expansion.

An equipment specification sheet can include:

• Required production or service capacity.
• Dimensions and requirements for power, water, ventilation or connectivity.
• Features needed to maintain quality and safety.
• Cleaning and maintenance routines.
• Warranty, spare parts availability and technical support coverage.
• Criteria for accepting equivalent models.

Specifying only a brand and product code leaves the future network vulnerable if the model is discontinued. On the other hand, allowing any alternative could compromise results. The solution is to define verifiable requirements and a procedure for approving substitutes.

If a particular machine is essential, document why. The justification should relate to how the business operates, rather than simply reflecting the preferences of whoever set up the first outlet.

2. Test capacity and total cost in the existing operation

Before making a purchase mandatory for franchisees, observe the equipment under real operating conditions. Assess peak periods, shift changes, cleaning and restarting after interruptions. The capacity advertised by the manufacturer will not necessarily match actual output in your day-to-day operation.

Also record bottlenecks between stages. A faster machine may not increase sales if customer service, preparation or finishing processes remain constrained. Oversized equipment ties up capital; undersized equipment can lead to queues, waste and premature replacement.

Compare alternatives by their total cost of ownership, taking into account:

• Purchase, delivery, assembly and installation.
• Necessary alterations to the premises.
• Energy consumption and other supplies.
• Preventive maintenance, spare parts and technician travel costs.
• Losses and downtime caused by faults.

For example, cheaper equipment may require technical support available only in another town or city. In that case, the purchase price does not reveal the operational risk. Make this comparison before recommending the model to prospective franchisees in different locations.

There is no universal quantity of equipment suitable for every franchise. Define the initial package based on tested demand and set objective triggers for increasing capacity, without presenting projections as performance guarantees.

3. Explain the investment clearly in the COF

In Brazil, Law No. 13,966/2019 governs business franchising and replaced Law No. 8,955/1994. Article 2, item VIII, requires the Circular de Oferta de Franquia (COF), Brazil’s franchise disclosure document, to state the estimated initial investment and the estimated cost of fitting out the premises, equipment and opening stock, as well as payment terms.

To meet this obligation in a practically useful way, keep a detailed breakdown of the equipment cost calculations. Record quotation dates, quantities and what each price includes. List any significant expenses not covered separately, so that prospective franchisees do not confuse the price of a machine with the cost of getting it up and running.

If franchisees must buy equipment from designated or approved suppliers, the COF must also address this requirement and provide a list of suppliers, as required by Article 2, item XII.

The COF must be provided at least ten days before the contract or preliminary agreement is signed, or before any fee is paid to the franchisor or a person or company connected with it. Prepare the estimates before providing the document. Have legal advisers review the COF and contract to ensure that purchasing obligations are consistent and clear.

4. Plan maintenance and replacement before opening

Buying the right equipment is not enough. Define who schedules servicing, keeps records, makes warranty claims and authorises replacements. Also check whether technical support covers the locations targeted for expansion.

For critical equipment, prepare a contingency procedure: which activities must stop, which alternatives are safe and when the franchisor must be notified. Do not recommend improvised solutions that compromise safety or quality.

Establish how to assess second-hand equipment, if it is permitted, and how to handle discontinued models. Future changes should take account of compatibility, the time needed to adapt and the financial impact, while respecting the contract and the information given to the prospective franchisee.

Practical takeaway: before franchising, have a validated equipment specification list, clearly documented quotations and a maintenance plan. The standard is only ready when future franchisees can understand not just what to buy, but how much it costs to keep the operation running.