Get With the System

Measuring Up

Franchise systems can be tough taskmasters when it comes to vendor approval. At AlphaGraphics, products must be free of defects and delivered on time at the negotiated cost. In addition, product or service problems must be resolved immediately by the vendor. "We're in a custom manufacturing business," Carter says, "where there's a higher margin for error than in industries where products or services are standardized. When something goes wrong, we want to see to what lengths a vendor will go, regardless of who's at fault, to satisfy the store owner, our customer."

While not all franchise systems are as demanding, each expects quality and consistency, two requirements that can challenge a small firm when it's suddenly inundated with orders. The Doughertys went from producing 400 cheesecakes a week to 1,000 when they signed their initial contract with Steak-Out. "We had to buckle down," Diane says, "promote reliable people and ensure that quality control standards were maintained at all times."

Having the physical capability and financial resources to fill orders on demand can be more challenging than you might at first realize, Caffey cautions. "It might mean adopting product-handling, storage and preparation procedures that aren't required by your other customers," he explains. "In addition, there are upfront costs associated with becoming a specialty supplier to a franchise system."

The Doughertys invested $120,000 in new ovens, freezers and other equipment, and moved from their 1,800-square-foot site to a 16,000-square-foot commercial facility. They also increased their staff from four to 17. Fortunately, with the help of their signed contract from Steak-Out, the Doughertys persuaded the SBA to lend them money for the expansion.

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This article was originally published in the April 1999 print edition of Entrepreneur with the headline: Get With the System.

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