Restaurant Contract Management, Supply Chain Management & Franchise LawBy James Blake on
Restaurant supply chain management and contract management is paramount for multi-unit restaurant profitability, whether it’s a local brand, regional restaurant chain, or national franchise. It’s also important to understand how contract law and franchise law impact supply contract management. Individual restaurants, franchisees, corporate restaurant chain offices, and franchisors all play an important role in supply chain management and contract management, and may use supply chain and contract management to leverage financial performance and to build restaurant brand value.
Restaurant Franchise Law & Supply Chain Management
Federal and state franchise laws require franchise restaurants to disclose supply chain requirements in their franchise agreement. Franchise laws applicable to restaurants require that supply chain transactions comply with the franchise agreement and any terms regarding rewards or commissions. A restaurant in compliance with franchise law may benefit from supply chain management in the following ways:
• Consolidated purchase power enables better overall supply contract terms, not just better supply contract prices.
• Consolidated supply contract management allows restaurants and franchisees to focus on core competencies.
• Reduce price volatility with long-range supply contract agreements, hedging against weather conditions, disease outbreaks, political and trade issues, etc.
• Consolidated supply contract agreements can stock all locations with consistent inventory quality.
Contract Law & Restaurant Supply Contract Management
Contract law applicable to supply contract agreements between restaurants and vendors requires diligent monitoring. Restaurants and franchisees must check inventory & deliveries to ensure supply contract agreements are not in breach of contract. Restaurants and franchisees must also have system to account for money owed to the restaurant or franchise due to incomplete inventory deliveries or early payment rebates. Failure to do so can hurt restaurant cash flow, and can let supply contract fraud escalate over time.
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