Franchise Basics

Five Pillars of Successful Franchises, Part 3: Scalable Supply Chain

What’s your biggest pizza pet peeve?

For me, it’s when my pie has unevenly dispersed toppings and too little cheese. Drives me insane. The entire meal is ruined in my opinion. Nothing worse than an anemic, unbalanced pizza!

But last year when I was visiting family in Encinitas, CA, my wife and I ate at Blaze Pizza for the first time. They offer hip counter service pizzeria that dishes up crispy, thin crust pies made with creative toppings and sauces. It’s fast, it’s affordable, and the staff is friendly and flexible.

More importantly, they use the perfect amount of cheese. And their careful placement of toppings was ninja-like in its accuracy and balance.

Fast forward to a few weeks ago, I learned Blaze Pizza is known in the franchising world as a brand with a scalable supply chain. If you read some of their press releases, their team has quality infrastructure and processes that enable amazing growth in franchise stores.

How scalable is your company’s supply chain? Is your business an unbalanced, anemic pizza?

In this series, we’ve been breaking down The Five Pillars of Successful Franchises, according to the internal framework we use every day:

  1. Unit Economics 
  2. Repeatable Operations
  3. Scalable Supply Chain
  4. Passionate Consumer Base / Brand Reputation
  5. Strong Executive Team

Today’s focus is on a scalable supply chain. We’ll explore this third pillar, along with a few examples of a few more franchises that you’re probably familiar with.

Let’s start with a definition, which we’ve tailored to the realm of franchising.

Scalable Supply Chain: Franchisees must be able to economically and reliably source material for a brand’s service or product throughout any market in which the brand intends to franchise.

If franchisees can’t source materials profitably, that can substantially change the economics of a franchisees business. Thus, it’s imperative for franchisees to seek strong relationships with key suppliers, find high quality materials, ensure timely deliveries and optimize inventory levels whenever possible.

A recent case study that comes to mind is Popeyes was running out of their chicken sandwich. Granted the demand nationwide was off the charts, and the free advertising they got from Twitter alone was worth it, but franchisees nationwide literally ran out of chicken at their stores. 

This story proved that sourcing profitably is part of the equation, but being able to have enough volume of supplies system wide is just as important.

Franchises that mitigate supply chain risk

Also keep in mind that not all supply chains are created equally. The supply chain can be the potatoes and “beef” for fast food restaurants, or treadmills and gym equipment that have brand specific decals (i.e. Retro Fitness). The point being is that different supply chains have different risks.  

Food supply chains can be impacted by weather destroying a harvest of potatoes, while physical products can be subject to geopolitical tensions if your manufacturer is outside the U.S.

You even have franchises with zero supply chain risk, such as education or B2B franchises. 

Examples of this include Mathnasium, which provides their franchisees with their math curriculum for students; and Sandler, which provides franchisees with their sales training methods for B2B sales reps. 

The “product” they are supplying franchisees are digitized, and the marginal cost of another franchisee is close to zero as it relates to their supply chain. That’s definitely one way to avoid the potential downsides of unscalable supply chains, don’t even have one! 

To quote the great Mr. Miyagi, “The best way to block a punch is to not be there.”

Scalability comes from Simplicity

One final point about scalable supply chains is the practice of consolidation. The more suppliers a franchise has, the more complex its supply chain becomes, and the more expensive it can ultimately become to manage. 

As a prudent small business owner, part of your due diligence will be making sure that your company doesn’t have too many suppliers. The downstream effects of that can be expensive and exhausting for the franchisee., the premier source of information about what's next in payments and commerce, published an excellent article about supply chain scalability through simplicity. Or as they like to call it, trimming the supply chain fat. Here’s an excerpt from their publication:

“Buck the status quo of relying on the same overloaded pool of vendors, and instead shrink and optimize your supply chains. Don’t be the retailer that has buying communities all around the globe, some of which are procuring the same product from the same vendor at different prices.”

Have you considered whether your existing supply relationships are truly optimal? If you’re having trouble scaling, perhaps it’s time to consolidate your various suppliers, eliminate ones that aren’t bearing fruit, or try a new business partner on for size.

Remember, scalable supply chains can economically and reliably source material for a brand’s service or product throughout any market in which the brand intends to franchise. Make sure you’re staying on top of every supply chain optimization strategy, from inventory management to digital options for reducing new franchisee costs, to consolidating vendor relationships that might be slowing down growth.

Without accounting for those supply chain variables, you run the risk of your business becoming an unbalanced pizza with poorly dispersed toppings and too little cheese.

Now I’m hungry, darn it.