Initial franchise stock: plan quantities before expanding

The stock held by your first franchise unit should not automatically mirror that of your original outlet. An established unit has consumption records, repeat customers and refinements made over time; a new one starts with uncertainties. Before expanding your franchise network, make the opening stock purchase a decision you can substantiate: which items are needed, in what quantities and under what replenishment criteria.

1. Separate opening stock from routine stock

Initial stock needs to cover the launch and keep the business running until the first replenishment deliveries are available. That does not mean buying everything the unit might sell over the coming months in advance.

Start by classifying items into three groups:

• Essential: products or supplies without which the core business offering cannot function.
• Complementary: items that broaden the range but are not necessary for basic operations.
• Experimental: new lines, variations and products with limited evidence of demand.

For each item, record the unit of measurement, minimum order quantity, shelf life, space required and delivery lead time. In service businesses, include consumables used when serving customers, keeping them separate from permanent equipment.

Also distinguish goods intended for sale from materials used for demonstrations, testing and training, and allow for expected wastage during staff preparation. This prevents stock from looking sufficient on paper but running short before the first paying customers are served.

The result should be an opening stock list with supporting reasons, not simply a list of products chosen by the founder.

2. Calculate quantities based on consumption and replenishment

Use records from the existing operation to estimate consumption by product, service or customer visit. Do not simply extrapolate from total turnover: two units with similar revenues may sell very different mixes of items.

A useful planning approach is to estimate consumption between opening day and the point when the first replenishment stock is actually available, add a justified buffer and account for any quantities needed for display. Avoid counting display products twice if they can also be sold.

Check this calculation against practical constraints:

• Does the shelf life allow the batch to be sold or used safely?
• Is there enough space for the quantities without disrupting operations?
• Does the minimum order require you to buy more than you need?
• Can the supplier deliver frequently enough to match demand?
• Are there pre-approved substitutes if an item is unavailable?

Work through low, expected and high demand scenarios. In the low-demand scenario, look for slow-moving stock; in the high-demand scenario, identify shortages that would prevent sales or service delivery.

If the minimum order quantity is unsuitable for a new unit, revise the product or service mix, or negotiate staggered deliveries. Buying too much simply to secure a discount can increase wastage and tie up funds needed to run the business.

3. Test the list before making it standard

Run a simulation in the existing operation, separating the proposed opening stock either physically or in your records. Track consumption, shortages and surplus stock over a period that reflects replenishment cycles.

This test will not perfectly replicate a launch. Record relevant differences, such as an established customer base, staff experience and promotional activity. The aim is to check the reasoning behind the quantities, not to promise that every unit will achieve the same sales.

Monitor four simple indicators: stockout incidents, quantities of items with no sales or usage, losses due to expiry or damage, and the frequency of emergency purchases. Also assess how concentrated sales are: a long stock list may conceal the fact that only a few products are truly essential.

At the end of the test, approve a dated version of the list, with guideline quantities and adjustment criteria. Define who can authorise changes and what evidence is needed to justify them. A smaller unit, or one with a different service capacity, may need different quantities without changing the brand’s core offering.

4. Present the investment clearly and meet legal requirements

Brazil’s current Franchise Law, Law No. 13,966/2019, requires the franchise disclosure document, known as the Circular de Oferta de Franquia (COF), to state the estimated cost of initial stock and its payment terms, alongside estimates for premises fit-out and equipment. This law replaced Law No. 8,955/1994.

To support this information, keep quotations up to date and make clear which items the estimate covers. Identify freight, storage expenses and other applicable costs, stating where they appear in the total investment to avoid omissions or double counting.

Any requirement to buy from designated or approved suppliers must also be disclosed in the COF in accordance with the law. The operational stock list should not introduce purchasing obligations that the disclosure documents have left unclear.

As a general rule, the COF must be provided at least ten days before the franchise agreement or preliminary agreement is signed, or before any fee is paid to the franchisor or a person or company connected with it. Have the documentation legally reviewed before making the offer.

In practice: only standardise initial stock once you can explain every quantity, demonstrate its cost and define how it will be replenished. A well-planned opening purchase protects operations without turning uncertainty into unsold stock.