Have No Fear

Product Standards

The genius of franchising is the delivery of consistent products or services by sometimes hundreds of independent businesses licensed to operate under a single business name. If you think about all that's involved, it's somewhat remarkable that a Big Mac sandwich purchased at a McDonald's in Atlanta tastes the same as one bought in Australia. What's more amazing is that McDonald's Corp., the franchisor, does not manufacture or sell any portion of that sandwich--all the sandwich components are provided to the McDonald's system by unaffiliated, third-party suppliers.

Franchise agreements address the question of supplying materials differently, depending on how much control the franchisor has. In some systems, the franchisor manufacturers the system's product line, and the franchise itself is a "product franchise" through which independent franchisees distribute the line.

In contrast, most business format franchise systems require you to purchase goods from suppliers that have the company's prior approval. If you want to buy products from an unapproved supplier, you need the franchisor's permission. This way, the franchisor assures its product standards will not be eroded through poor supplier selections made by franchisees (often driven purely by price considerations).

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This article was originally published in the December 1998 print edition of Entrepreneur with the headline: Have No Fear.

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