Understand the purchasing rules before pricing the business

Find the actual requirement

Review the FDD and agreement for the products, services, equipment and suppliers the franchisee must use. Ask which requirements are fixed, which allow approved alternatives and how approval works. Do not assume a general promise of purchasing power establishes what your individual arrangement will cost.

Record required technology, payment processing or other services alongside physical goods. A purchasing system can affect several parts of the operating budget that do not appear under inventory.

Ask about the commercial relationships

Investigate disclosures about supplier relationships and benefits received by the franchisor or related parties. Have counsel explain provisions you do not understand. The presence of a commercial relationship is information to examine; it does not, by itself, determine whether a particular price or arrangement is appropriate.

Use written quotes and current terms to build your plan. Ask about minimum orders, freight, payment deadlines, price changes, substitutions and interruption. For alternatives, clarify the documentation, time and cost associated with seeking approval.

Test an operating exception

Imagine a required item is unavailable when needed. Ask which approved steps the owner can take, who authorizes them and how quickly the system responds. Reconcile the answer with the documents. The objective is to understand both the normal purchasing process and the choices available when the normal process stops working.

Put it on paper

• List all mandatory purchasing arrangements.
• Examine relationship disclosures and approval processes.
• Ask how shortages and price changes are handled.

Continue with the franchise research checklist, our FDD guide, and the research directory.