One of the main benefits of franchising is to leverage group buying power, often benefiting franchisors as well as franchisees. In fact, there are plenty of franchisors that earn all their income from supply arrangements. But there are also plenty that undervalue the power of the group and miss out on many of the benefits. We look at the opportunities you may be overlooking and ways to make more of your relationships with suppliers.

One franchise CEO I know has just returned from ten days in Spain, courtesy of the business’s main supplier’s incentive programme. Another doesn’t need to worry about collecting royalties from his franchisees because his suppliers pay him enough annual rebates to make him a wealthy man. Yet another uses supplier discounts to offset most of her franchisees’ royalties so she never gets complaints about the high cost of being part of the franchise.

Of course, your franchise may have been set up purely as a channel to market for your own products, in which you may think none of this applies to you. But what about your franchisees’ other suppliers and service providers?

Or you may already have supply and service agreements in place. But are you focused on price, and if so, are you extracting true value from your relationships?

Or you may think your franchise is too small, but might your suppliers be as impressed with your vision for the future as your first franchisees were?

I said above that one of the main benefits of franchising is to leverage group buying power, but one of the biggest mistakes franchisors make is to stop there. The most important question to ask is: What other value could my suppliers offer that make be worth more than mere price?

Today manufacturers and suppliers are becoming something of a threat to franchising as they make a shift into franchise-like services to add value to their products and build customer loyalty. Soft drink and coffee suppliers have done this for years by providing their resellers with coolers and coffee machines. Many years ago in New Zealand, Scott Panel and Hardware (now part of Fletcher Building’s Laminex Group) disrupted the kitchen-making market by providing their customers with services designed to help them grow their businesses - and subsequently, their orders. And now some big names – even the likes of KONE and IBM - have moved so far into providing services that they’ve got out of manufacturing altogether.

The franchising industry needs to understand that its relationship with suppliers is a two-way partnership adding value both ways. Recognising that the more you give, the more you tend to get, smart franchisors work closely with suppliers on market intelligence, customer feedback, product development and innovations - and in return may benefit more from suppliers’ marketing, new products and service offerings.

Aside from lower prices and rebates, these franchisors can benefit from: