Advisory Aug, 08 2009

Replacing over charging vendors

A franchisee takes a franchise to put his money to good use and gain profit. Being overcharged by company vendors is a situation that is witnessed by a large number of franchisees. So if you are a franchisee, and you feel that your money is being swindled

By Neha Malhotra
Sub Editor, Franchise India Holdings Limited, Web Division
Replacing over charging vendors

In a franchise arrangement, the franchisee is required to buy merchandise from vendors specified by the franchisor only. This is done to uphold a level of touchstone. But in certain cases, some franchisees feel that these vendors at times over charge for certain supplies which are available in market for a lesser price. In such a situation, the franchisee feels that he is not putting his money to good use. Some franchisees also feel that the franchisor should allow them to make purchases from other vendors offering a better deal, but as the franchisor needs to maintain standardisation across his outlets he may not permit this to happen.  So, what can be the probable solution in such a situation?

As a franchisee, you can at such times suggest the franchisor about availability of same quality products at a better price with another vendor. Instead of waving off the idea, the franchisor can act upon it. The franchisor can deploy an inspection team to visit the named vendor with the franchisee who has made the proposal. The team can then ascertain if the supplies made by the vendor meet the requisite company standards. In case they do, the company may allow you to carry on the purchases from the vendor, or else you may have to continue to procure from the vendor recommended by the franchisor. If the rates and the standard of goods by the suggested vendor bear  advantage, the franchisor may allow all his franchisees to buy products or services  from him. This in a way will be beneficial to the franchisor also.

When we asked Pawan Gadia, Vice President Ferns N Petals about such a situation, he said, “Absolutely, why not! If we can get the same product and quality at a cheaper price than what is being currently offered by the company vendor, then we shall definitely adopt a pragmatic approach towards it. Such a deal is favourable for the franchisee, the company and the customer.” He further said, “If your competitor can provide better price, then what’s the fun of doing business?” Ferns N Petals has also been in such a situation where they did change a vendor on the suggestion of a franchisee. Ajay Saini, COO, Yo! China, opines, “It is not very easy to change a vendor every now and then as a lot of things need to be considered before making such a decision. However, there is no hard and fast rule, that it cannot be done at all; just that the probability of such a situation is five to 10 per cent. Franchisors need to be flexible and such a thing is definitely possible.”

Forcing such decisions on the franchisor or not talking about them at all is not the way to solution. The franchisor should be given ample time to work out details and act on them. Just wait and watch to see if it was meant to be or not.

Related: Partnering with budding franchisors

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