Full Transcript for Start Supply Planning Before You Sell Franchises With Lee Plotkin

agent standpoint, anyways. 00:02:48.960 --> 00:03:05.360 And I always think the earlier you can get the the purchasing team involved in any kind of process, the more visibility you're gonna have into the market, the better opportunity to get great pricing, uh, streamline product uh availability and things of that nature. 00:03:05.360 --> 00:03:18.719 When you're specifically talking about uh building out a system for franchise growth, um it it's become my experience that it's incredibly important to start early. 00:03:18.719 --> 00:03:42.719 Uh, for example, um, if you're looking to bring on new franchisees, if you're early in that development process, you know, we typically like to get involved as soon as we can to be able to build out that structure in a cost-effective uh manner and establish good foundational programs. 00:03:42.719 --> 00:03:54.400 The financial foundation is one aspect, and then making sure the right people are in place from the supply team, uh, that distributor to facilitate growth. 00:03:54.400 --> 00:04:00.879 If you've got a great rep, then you've got a great uh program and a great company that's taking care of you. 00:04:00.879 --> 00:04:15.520 We like to jump in early in that process, and we can also get into some of the whys and the hows uh of doing that and what we're doing right now for a couple of uh franchise operations. 00:04:15.919 --> 00:04:16.399 Sure. 00:04:16.399 --> 00:04:26.160 Well, Lee, I I realized here, I I want to take a step back and have you helped define what this planning is. 00:04:26.160 --> 00:04:29.519 So what what it what is supply chain planning? 00:04:29.519 --> 00:04:30.959 I guess I should have started there. 00:04:30.959 --> 00:04:32.399 That should have been my first question. 00:04:32.399 --> 00:04:32.720 Yeah. 00:04:32.720 --> 00:04:34.639 Uh so let's start there. 00:04:34.959 --> 00:04:36.079 Yeah, so great question. 00:04:36.079 --> 00:04:50.399 So so supply chain planning, uh, especially when you're looking at at growth, is is look first of all, looking at the the products that you're you're using, uh and and making sure you've got the quality products in place. 00:04:50.399 --> 00:04:59.120 And so now you know uh your supply person can go back to the manufacturers and start negotiating manufacture deals. 00:04:59.120 --> 00:05:23.920 Um, when you're talking about um your distributor programs, we want to make sure that you're able to consolidate as much as is feasible on a broadline truck, or if you need a dedicated produce deliver uh distributor, then how does how do you put that in place where that program can grow across the country? 00:05:23.920 --> 00:05:35.920 So everything that we do is with an eye to how do we reframe things uh to get product across the country as your concept grows. 00:05:35.920 --> 00:05:38.560 The earlier the you can do that, the better. 00:05:38.560 --> 00:05:49.920 Give you an example for uh one of our uh recent clients uh has two locations in the Midwest and is bringing on new franchisees. 00:05:49.920 --> 00:05:55.759 They just signed up a uh a franchisee agreement for five locations. 00:05:55.759 --> 00:06:02.079 So we've got about eight, nine months before um that brick and mortar store is open. 00:06:02.079 --> 00:06:04.160 So we're gonna consolidate product. 00:06:04.160 --> 00:06:08.000 Uh the the framework is pretty fragmented right now. 00:06:08.000 --> 00:06:10.240 So we're looking to consolidate product. 00:06:10.240 --> 00:06:15.839 We're bringing on a chemical program that's going to streamline things so you have contract pricing around the country. 00:06:16.319 --> 00:06:18.560 Can I I'm sorry, I'm sorry to interrupt you here. 00:06:18.560 --> 00:06:26.000 Um can uh and this may just be my uh lack of some of the fine details of understanding your your business. 00:06:26.000 --> 00:06:36.639 So when you when you were talking about with this example with this franchisee that bought in a new multi-unit uh operator, uh this this is a food service business, right? 00:06:36.879 --> 00:06:43.279 Is that okay it's a restaurant, it's a restaurant, yes, it's a restaurant, and we're actually working for the franchise. 00:06:43.920 --> 00:06:44.240 Okay. 00:06:44.240 --> 00:06:52.319 And so when you say it the the product or such is is fragmented, what what what's included in these fragmented pieces? 00:06:52.319 --> 00:06:53.040 What does that mean? 00:06:53.040 --> 00:06:54.240 Is it the actual food? 00:06:54.240 --> 00:06:55.600 Is it the paper goods? 00:06:55.600 --> 00:06:59.120 Is it uh like you know what what's what's part of that? 00:06:59.360 --> 00:07:00.160 Yeah, great question. 00:07:00.160 --> 00:07:04.319 Thank you for for taking me a step back in that in that conversation. 00:07:04.319 --> 00:07:06.720 So so you're absolutely right. 00:07:06.720 --> 00:07:13.040 So this particular client is buying most of their food product from a broadline distributor. 00:07:13.040 --> 00:07:16.959 Their paper goods, their chemicals are coming from a paper company. 00:07:16.959 --> 00:07:28.079 They're getting uh some products from a local specialty supplier, and there's a couple of those specialty suppliers, and there's a produce company in the mix as well. 00:07:28.079 --> 00:07:33.920 So now we're we're taking that process and we're asking the questions: what belongs where? 00:07:33.920 --> 00:07:36.800 What belongs on the broadline distribution truck? 00:07:36.800 --> 00:07:40.959 Now we can maybe get manufactured deals for paypal and disposables. 00:07:40.959 --> 00:07:52.240 We can increase that supplier's uh delivery size, if you will, and we can reduce their margins uh accordingly and still make it profitable for that supplier. 00:07:52.240 --> 00:08:13.199 So now you have a program that might be more attractive financially to um potential franchisees as you grow, and you're looking at margin improvements right off the bat, you're uh lowering delivering fees, you're reducing

startup risks, and you have day one buying power. 00:08:13.199 --> 00:08:22.800 The fact that we're starting early in those processes allows us to uh structure that framework and get the right people in place. 00:08:23.279 --> 00:08:29.519 So, so then Lee, for for this example, are you when you get involved? 00:08:29.519 --> 00:09:03.120 Uh is it you're you're kind of acting as a uh if I understand correctly, I want to make sure I'm understanding this correctly, almost like the purchasing manager or uh buyer's or a uh the buyer's agent for whether it be the franchise or in this instance, maybe some franchisees that engage with you independently, and then you're essentially helping them uh streamline and figure out the most cost-effective way to get the products that they or goods that they're looking that that they would normally be using anyway. 00:09:03.360 --> 00:09:04.480 That that's exactly right. 00:09:04.480 --> 00:09:08.639 So, okay, so we are an outsourced department for them. 00:09:08.639 --> 00:09:16.480 We just don't carry the burden and the high cost of having someone full-time, especially at this stage of their growth. 00:09:16.480 --> 00:09:30.159 Um, and and we're we have that visibility and that experience to be able to step back and say, okay, let's customize this based on what your needs are, how to get product across the country. 00:09:30.159 --> 00:09:36.159 Do we want to uh entertain conversations with your distributor to consolidate? 00:09:36.159 --> 00:09:45.679 Are you at a point uh in your maturity where we can actually take this program out to bid and structure it the financial foundation that way? 00:09:45.679 --> 00:09:57.759 Uh for this particular client, we want to structure the programs first and build that volume and build that infrastructure before anything would go out to bid. 00:09:57.759 --> 00:10:05.120 So we're customizing things, we're turning it around a little bit differently, and then we're gonna look at produce programs. 00:10:05.120 --> 00:10:07.519 How do we have the same products across the country? 00:10:07.519 --> 00:10:13.759 Can we contract products with the growers uh that reach each one of those supply companies? 00:10:13.759 --> 00:10:15.679 What belongs on the produce truck? 00:10:15.679 --> 00:10:20.879 Are there specialty products that we could possibly add that that Cisco won't carry? 00:10:20.879 --> 00:10:27.840 And those are some of the conversations that we're we're having right now surrounding that. 00:10:28.879 --> 00:10:29.360 Great. 00:10:29.360 --> 00:10:49.679 So then one of the things uh I I think about is uh what you mentioned before uh uh about it really trying to give a cost savings to the ultimately to the franchisee in this instance or in and the franchise space where the franchisee would be have a saving. 00:10:49.679 --> 00:10:55.200 Do you do you is there a uh it, you know, I the food business always has tight margins? 00:10:55.200 --> 00:11:05.840 Uh it just it's always

tight margins, and any way you can save a a little bit here, a little bit there starts to add up by managing this thing and being a little proactive on it. 00:11:05.840 --> 00:11:11.600 So is there a typical range that you see cost savings fall within for what you're able to do? 00:11:11.600 --> 00:11:17.679 Is it hard to, you know, I don't want to put you on the spot and say, well, you know, I would, yeah, that's a great question. 00:11:17.759 --> 00:11:38.559 And and you know, I've been asked that so many times, and and there's no way to truly quantify that, but you know, you can look at even dropping uh 2% uh in your your food and packaging costs uh dramatically improves a new franchisee's cash flow their first year. 00:11:38.559 --> 00:11:47.360 I I don't think those are unrealistic numbers when you're looking to um either consolidate or take that program out to bid. 00:11:47.360 --> 00:11:58.799 I've seen greater and we've seen a little bit lower, but 2% um really makes a big difference and impacts your franchise community and your upcoming partners. 00:11:59.440 --> 00:12:49.840 Well, I I think it's interesting because I think you know, my viewpoint is that for the the franchise's job, it part of their job is to uh I always encourage clients and franchisors to think about how you can help your franchisees find savings through uh whether it be bulk purchasing, economies of scale, or having the ability to work, for example, with a group like yours and others, where if it to try, I'm always thinking as from the franchiseor mindset, I'd love to try to get the savings to my franchisee such that it essentially offsets the payment of the royalty so that so that that royalty becomes a non-issue with the savings and maybe even in an ideal scenario do better. 00:12:49.840 --> 00:12:53.759 So you're part you're part of this, I think, solution. 00:12:54.159 --> 00:12:54.799 Absolutely. 00:12:54.799 --> 00:13:08.639 So we do that with that's that's what we're we're we're we're structuring through these bid outs, or we're creating that that platform for that ROI to come back to their franchise community in a real effective way. 00:13:08.639 --> 00:13:27.519 And um another big aspect in that whole equation is how do you get product across the country if you have proprietary product, if you have custom blended seasonings and marinates, how do you do that effectively without impacting their bottom line? 00:13:27.519 --> 00:13:39.600 And so what we have found, be happy to share with you and your audience is we typically start with um a redistributor called dot foods. 00:13:39.600 --> 00:13:44.080 If you're familiar with them, I'm not quite sure if that name rings a bell. 00:13:44.080 --> 00:13:47.360 They are the largest redistributor of product in the country. 00:13:47.360 --> 00:14:06.000 And we'll go back, for example, with this uh franchise or who had uh custom seasonings, marinate, and we asked the question who in your manufacturer portfolio uh is has the ability to do custom seasonings that have low minimum order quantities? 00:14:06.000 --> 00:14:19.120 If we can have them produce one pallet and put it into the dot system, then we can average out freight across the country for all of their uh supply, uh their their franchisees. 00:14:19.120 --> 00:14:31.200 And all the Cisco's, the US foods out there, the GFSs, the performance food groups can buy one to two cases a week from these um redistributors. 00:14:31.200 --> 00:14:49.360 So not to get too much into the detail there, but it was on my bullet points to be able to bring up to be and help your community talk about how do you get that product across the country, how do you overcome those geographic challenges in a real cost-effective manner. 00:14:49.360 --> 00:14:59.120 To your point, Tom, that hits the franchisees' bottom line and brings more ROI back to cover those royalty costs. 00:14:59.840 --> 00:15:12.639 Well, uh what you just shared makes me think a little bit about uh some clients I've worked with over the years that have some kind of a unique or proprietary product offering. 00:15:12.639 --> 00:15:30.879 And uh it always seems to be a pain point when maybe let's say this uh restaurant is franchising and they're in a specific region, and the supplier they find just happens to be local, and geographically they could maybe go a hundred miles or two hundred miles, no problem. 00:15:30.879 --> 00:15:39.039 But now all of a sudden you're starting to expand out of that zone, and there's this proprietary uh product. 00:15:39.039 --> 00:15:53.360 And I I remember years ago I had a client in the uh that had uh uh custom uh it was a meat type that that he had custom made for uh I think it was a Philly steak sandwich that he he made at his restaurant. 00:15:53.360 --> 00:16:05.519 Um, and he had to kind of source and figure out all of these, you know, way locally it wasn't a problem, but as he started expanding nationally, it became more of a more problematic. 00:16:05.519 --> 00:16:26.960 And I've seen instances where clients have had a proprietary product and the once uh let's just say, for example, someone's in the northeast and now they're opening in Texas, and then they've got and and now that they say, Oh wow, my cost has tripled because my supplier has to ship it or try to keep it cool or cold or frozen. 00:16:26.960 --> 00:16:39.759 Um so talk through how you work with these unique or proprietary uh products or even seasonings, sometimes seasonings and sauces that I hear clients talk about. 00:16:40.000 --> 00:16:40.720 Yeah, yeah. 00:16:40.720 --> 00:16:42.639 So great, great questions. 00:16:42.639 --> 00:16:48.080 So we'll we'll use this particular client uh as an anonymous example. 00:16:48.080 --> 00:17:01.039 And and so with their seasonings now cut through our introduction to these manufacturers, um, and we have a contact at dot foods that we actively work with. 00:17:01.039 --> 00:17:13.519 Um, we can identify potential

partners who now can sign NDAs and uh the customer can share recipes and now they can start the RD process. 00:17:13.519 --> 00:17:17.680 Uh that's a that's gonna take several months to go through. 00:17:17.680 --> 00:17:27.279 And during that time, if the product works out well, we can talk and negotiate about pricing, flat pricing across the country. 00:17:27.279 --> 00:17:45.680 And so uh as long as those customers are able to get a product with enough shelf life on it to be distributed around the country, for example, dry or frozen, now those products can be redistributed to the Cisco's around the world, the the country. 00:17:45.680 --> 00:17:57.440 We also look at um branded products, paper and and disposables, because that's something that is so key and important to franchisors. 00:17:57.440 --> 00:18:05.039 If what do uh potential customers out there in the market see when your product leaves? 00:18:05.039 --> 00:18:06.240 Is it the bag? 00:18:06.240 --> 00:18:08.640 Is it the the the logo cup? 00:18:08.640 --> 00:18:12.799 Um, do you have a uh a bowl that has your branding on it? 00:18:12.799 --> 00:18:18.079 Um what are they actually looking for that that identifies your concept? 00:18:18.079 --> 00:18:30.880 And so now we get a chance to go back to ask those questions with either the paper company um or uh dot foods manufacturers and and start that process again. 00:18:30.880 --> 00:18:52.000 Um and again, the the goal is to get the right product at the right price and make that price a flat price across the country so that if you're in the Northeast, like you said, and you're opening in Texas, your Texas franchisee is not adversely impacted by high cost. 00:18:52.000 --> 00:18:58.400 If you have flat pricing, it makes sense for everybody and they feel it's fair and equitable. 00:18:59.200 --> 00:19:08.559 So one of the things that I've seen happen, uh my career's been spent working with emerging franchisors and emerging franchise brands. 00:19:08.559 --> 00:19:20.079 And as uh the idea in general, the ideal best kind of strategy is to grow close to home, if you can, in kind of concentric circles, I ideally. 00:19:20.079 --> 00:19:39.279 Um now then reality hits, and uh a family member or an old employee relocated out of region or a long-term customer that you know, if you maybe there's a restaurant in Florida and uh somebody relocated and now they live in Ohio or they live out in Wisconsin or something, and say, I love your business. 00:19:39.279 --> 00:19:43.279 I've always wanted to open one of these and I'd love to run one here. 00:19:43.279 --> 00:19:48.160 And uh now they they get that up and and going. 00:19:48.160 --> 00:19:53.759 And so now you have, you know, maybe five or six restaurants and they're kind of scattered about. 00:19:53.759 --> 00:20:04.079 So, how how do you help a brand that might find themselves in that situation where you don't have this concentration in one particular area, or does that not even matter? 00:20:04.079 --> 00:20:06.000 It just kind of got me thinking about it. 00:20:06.240 --> 00:20:08.559 No, no, no, it it matters a great deal. 00:20:08.559 --> 00:20:15.599 So um it it's something that I think is now becoming part of a lot of franchise owners' conversations. 00:20:15.599 --> 00:20:22.880 And to your point, you're gonna have uh the onesies and twosies that pop up in different parts of the country. 00:20:22.880 --> 00:20:34.000 Uh so understanding that the more you're able to saturate a market, the the better economics you're gonna have, the better ability to get product across the country. 00:20:34.000 --> 00:20:59.519 Um, so when those kinds of questions come up, it it's a great time to entertain conversations with your distribution partner once you level set that foundational piece and talk about where you're looking to open and identifying what products are truly important to uh to your brand uh and and what's realistic. 00:20:59.519 --> 00:21:16.319 At that point, you may have to identify some alternative products that this lone wolf can be using, if you will, um in Texas and in the Texas market until that saturation occurs. 00:21:16.319 --> 00:21:20.880 Um or using um Hormel bacon, if you will. 00:21:20.880 --> 00:21:24.079 Everybody stocks Hormel bacon, for example. 00:21:24.079 --> 00:21:38.240 Um, if you have a breakfast and lunch concept, you know, is it is it time to look at um a product that the Cisco or US foods or your distributor stocks across the country, that it's a national branded product. 00:21:38.240 --> 00:21:46.319 Um we look at it as what's a realistic alternative, and we try to get way ahead of that that that foundation. 00:21:46.319 --> 00:21:54.799 Um if we have to sometimes, and if it's a dry product or if it's a paper product, um, we can do auto shipments. 00:21:54.799 --> 00:22:05.200 And those can be you know through dot foods or from a From a manufacturer to the distributor, but that adds cost to the equation. 00:22:05.200 --> 00:22:09.759 Um, but it's a but it's a conversation that happens quite a bit now. 00:22:09.759 --> 00:22:20.000 Uh I know with this particular customer, uh they have five units that were sold, and and three are gonna be in one area and two are gonna be in another area. 00:22:20.000 --> 00:22:27.279 So they're starting to build out those areas for future growth, knowing that they're only gonna open with one. 00:22:27.279 --> 00:22:42.079 Um and and then those locations have to be in close, uh they are in close proximity to the franchise locations, but they're gonna run into that situation, and we're gonna have to approach that as we as we get closer. 00:22:42.079 --> 00:22:44.960 Great, great questions, great points. 00:22:45.839 --> 00:22:46.720 Very good. 00:22:46.720 --> 00:23:04.480 Well, uh Lee, something uh just as a uh, I guess a question uh for someone that that ends up listening in, you know, how does this process work, you know, for a franchise or maybe a franchisee

listens to this and their franchise or is not signed up, but they're looking for some support. 00:23:04.480 --> 00:23:07.279 Uh, can you work uh I guess let's start with that franchisee. 00:23:07.279 --> 00:23:12.000 Can you help that franchisee on a one-off basis, or does it really need to run through the franchise or? 00:23:12.400 --> 00:23:20.240 Well, it has to run through the franchise or we're always there to give uh information, happy to share and pay things forward. 00:23:20.240 --> 00:23:34.319 Um, the franchise or has the um uh the contractual uh arrangements to uh um have the specs in place and and who that franchisee is going to be using. 00:23:34.319 --> 00:23:36.480 So the benefit will be to the franchisee. 00:23:36.480 --> 00:23:49.119 So typically our work is with the franchise or we we start as early as one, two locations that start having the conversation, and then um you know we go up from that point. 00:23:49.119 --> 00:24:00.000 So this franchise or has two locations, and and now we're building out the infrastructure for for that for that company to be able to grow effectively. 00:24:00.000 --> 00:24:07.440 So really um we're we're happy to have those conversations at any point in the the franchise ore's growth. 00:24:07.440 --> 00:24:25.039 If a franchisee has questions, we're always going to refer them back to the franchise or to make sure that things are in contractual compliance, but we can also give them some um questions to ask uh and be able to guide them if they're running into some situational problems. 00:24:26.160 --> 00:24:26.720 Great. 00:24:26.720 --> 00:24:34.960 And for that franchise or Lee that that listens into this or hears what's going on, someone says, okay, uh Lee, you caught my attention. 00:24:34.960 --> 00:24:39.519 I've got an interest in at least starting a conversation or learning a little bit more. 00:24:39.519 --> 00:24:40.720 Uh, what are the steps? 00:24:40.720 --> 00:24:42.160 What should somebody do? 00:24:42.480 --> 00:24:45.359 Well, the first thing they could do is reach out. 00:24:45.359 --> 00:24:54.720 Uh just uh reach out and and you know, the information that that they probably want to have is, you know, how many locations do you have now? 00:24:54.720 --> 00:25:03.039 Um give us an idea of what your annual volume is or your annual uh food and beverage sales and your food costs. 00:25:03.039 --> 00:25:12.559 We can back it back it out from there and we can start a conversation with that um that franchiser at whatever stage they're at. 00:25:12.559 --> 00:25:20.960 I'd be happy to share my cell number uh on this call if if that was of interest to uh to you uh and my my email. 00:25:20.960 --> 00:25:26.640 And I think you guys will have that on your your your uh podcast. 00:25:26.640 --> 00:25:27.359 Is that correct? 00:25:27.599 --> 00:25:28.160 Yeah, yeah. 00:25:28.160 --> 00:25:30.960 We can we'll make sure we list your contact information. 00:25:30.960 --> 00:25:35.519 And is there what's the best website for someone to go to that they might be able to pull up? 00:25:35.519 --> 00:25:37.599 And we'll include that in the show notes also. 00:25:37.839 --> 00:25:42.960 Yes, it's my name, uh www.leplotkin.com. 00:25:42.960 --> 00:25:44.720 Perfect. 00:25:45.039 --> 00:25:45.759 Perfect. 00:25:45.759 --> 00:25:59.359 Um, well, Lee, uh, I I guess as uh as we're uh drawing near to a close here, is there anything you really want to make sure that you were able to share or get across that you haven't had a chance to yet? 00:25:59.839 --> 00:26:03.519 Yeah, I I I mean I just read would reinforce you know several things. 00:26:03.519 --> 00:26:06.960 I uh you know, establish that core foundation for yourself. 00:26:06.960 --> 00:26:20.319 Uh if you're um a franchise or you want to lock your specs in early, what's very important to your brand and how much can be consolidated realistically and at what point in in your growth? 00:26:20.319 --> 00:26:29.599 I think those things, if you if the franchise or starts with those key points, uh I think that's a really good basis. 00:26:29.599 --> 00:26:34.880 And they'll become able to come up with some good questions for the next steps. 00:26:36.400 --> 00:26:37.119 Perfect. 00:26:37.119 --> 00:26:37.759 Perfect. 00:26:37.759 --> 00:26:41.119 Well, Lee, thank you so much again for being here. 00:26:41.119 --> 00:26:49.519 And as you said, it's Leeplotkin.com to contact and get some information, at least get a conversation started. 00:26:49.519 --> 00:26:52.240 Uh, we will share that in the show notes. 00:26:52.240 --> 00:26:59.039 And for those of you listening in live, or we would will have this published shortly on our podcast and YouTube channel. 00:26:59.039 --> 00:27:04.960 And Lee, just want to say thank you so much again for being here and for sharing this information today. 00:27:05.200 --> 00:27:06.400 Yeah, my pleasure, Tom. 00:27:06.400 --> 00:27:07.200 Thank you so much. 00:27:07.200 --> 00:27:08.000 I appreciate it. 00:27:08.000 --> 00:27:11.039 Hope you and your audience have a great day. 00:27:11.599 --> 00:27:12.160 Thank you. 00:27:12.160 --> 00:27:14.720 And thank you to everyone for tuning in. 00:27:14.720 --> 00:27:18.400 Uh, we appreciate your time and we look forward to having you back on the next one. 00:27:18.400 --> 00:27:19.279 Thank you so much. 00:27:19.279 --> 00:27:20.880 Have a great day.