Franchising: organise supplies before recruiting franchisees

A business may run well because its owner personally handles purchasing, negotiates every price and resolves shortages with a phone call. Once franchisees join, that approach is no longer enough. Building a reliable franchise network means making supply arrangements repeatable, verifiable and sustainable, even far from the original site. Here is how to prepare your procurement system before offering it to your first franchisees.

1. Separate essential supplies from unrestricted purchases

Start with what your business actually buys, rather than the catalogue you would like to offer. Review products, consumables, packaging, equipment and spare parts. For each item, ask yourself: would a substitution affect the quality promised to customers, safety or the distinctive nature of the offering?

Then organise supplies into three groups:

• Brand-defining products: items or components essential to delivering your commercial promise and following the franchisor’s operating methods.
• Supplies with technical specifications: goods that can be bought from several suppliers, provided they meet documented requirements.
• Unrestricted purchases: materials that do not affect brand identity or the quality of the customer experience.

For example, a blend made to a specific recipe may require a particular source, while a cleaning product can be selected against compatibility and safety requirements. Ordinary stationery may need no restrictions at all.

This distinction avoids turning every purchase into an obligation that is difficult to justify. Record the operational reason for each restriction and consider whether a less restrictive alternative exists. Consistent results do not necessarily require a single supplier.

2. Check whether suppliers can support growth

A supplier that serves your shop well is not automatically ready to deliver to independent business owners in different regions. Before presenting it as a resource for the network, check its production capacity, geographical coverage, minimum quantities and ability to handle urgent requests.

Ask for written answers covering at least the following:

• standard order preparation and delivery times;
• areas served and any associated surcharges;
• minimum quantities per order and per item;
• payment terms and criteria for granting credit;
• procedures for damaged goods, defects and returns;
• availability of spare parts and support, where relevant.

Test a realistic order for a small franchisee, not just a bulk purchase by the franchisor. An attractive price may cease to offer good value if it requires excessive stockholding or frequent deliveries. Also check that the supplier is willing to open accounts for new businesses: the terms offered to your established business may not automatically apply to franchisees.

Finally, prepare a fallback for every critical supply: a second qualified source, an approved substitute product or a procedure for temporarily withdrawing the affected offering. Do not promise uninterrupted supply; define how you will manage disruptions.

3. Align purchasing obligations with the contract

In Italy, franchising is governed by Law No. 129 of 6 May 2004. The contract must be in writing, otherwise it is void. The franchisor must also provide the prospective franchisee with a complete copy of the contract and the required annexes at least thirty days before signing, subject to the specific statutory exceptions for confidential annexes.

Supply rules that affect the franchisee’s commitments must therefore be clear before signing, rather than emerging only when the first order is placed. Have a lawyer ensure that the contract, any commercial annexes and operating procedures are consistent.

Specify who sells and invoices the goods, which purchases are mandatory, how price lists are updated and who bears the cost of transport, returns and replacements. If minimum purchasing requirements apply, clarify the relevant period, how they are calculated and the consequences of falling short. Also distinguish the price of goods from charges for other services.

Exclusive purchasing obligations also require a review under competition law. Relevant rules include, where applicable, Article 101 of the Treaty on the Functioning of the European Union (TFEU) and EU Regulation 2022/720 on vertical agreements, as well as national legislation. Whether these obligations are permissible depends on the terms of the agreement and its context: a franchise relationship does not automatically make them lawful.

4. Create a procedure for orders and exceptions

Prepare an operational guide that takes each franchisee from identifying requirements through to delivery. It should specify the ordering channel, deadlines, confirmation of availability, goods checks and the contact for complaints. State what evidence should be retained, such as photographs, delivery notes and batch references, where relevant.

Above all, define how exceptions are handled. If an essential product is unavailable, who authorises an alternative purchase? What requirements must it meet? For how long? A substitution agreed verbally can lead to inconsistent practices and make it difficult to establish responsibility later.

Measure delivery punctuality and completeness, defects and resolution times. Gather feedback from franchisees too: a recurring problem may stem from minimum order quantities or delivery frequency, rather than how they manage their businesses.

In practice: before recruiting franchisees, map out your supplies, verify the terms genuinely available to new business owners and document alternatives for critical items. The system is ready when it works without relying on the founder’s personal phone calls.