Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / How Franchisees Are Using Cooperative Buying Groups
Transcript
- Lucas: Luna, I want to talk about something that sounds almost old-school but is getting a serious revival among franchisees right now: cooperative buying groups. Luna: Like the classic farm co-op model? But for franchisees? Lucas: Exactly. The idea is simple — multiple franchisees pool their purchasing volume to negotiate better prices on supplies, equipment, even services like payroll processing. It's not new, but the economics of 2026 are making it a lot more attractive. Luna: Because input costs are still elevated. I was looking at the latest Producer Price Index for food services — still up about 3.5 percent year-over-year. Lucas: Right. And for franchisees, especially in QSR and retail, food and packaging costs can eat up 30 to 35 percent of revenue. So a 5 percent discount on those supplies goes straight to the bottom line. Luna: But don't most franchise systems already have a national supply chain? I know Subway, McDonald's, they have approved vendors. Lucas: They do. But approved doesn't always mean optimized. The franchisor's vendor may not be the lowest price — it's just the one that meets their spec. And franchisees often have limited ability to negotiate individually because their unit volume is too small. Luna: So the co-op gives them leverage. Lucas: Bulk buying power. There's a great example I came across — a group of 22 Subway franchisees in the Midwest formed something called the Independent Franchisee Cooperative, or IFC, back in 2024. Luna: That's the one that got some pushback from Subway corporate, right? Lucas: Yeah. The franchisor initially resisted, arguing that the co-op could undermine quality consistency. But the franchisees weren't buying from unapproved sources — they were using the co-op to negotiate better pricing on the same approved products. Luna: And what kind of savings did they see? Lucas: In their first year, they reported an average 8 percent reduction on food costs. That's about $12,000 per unit annually for a typical Subway. Multiply that by 22 stores and you're talking over a quarter million dollars in retained profit. Luna: That's real money. And it's not just food — I've seen franchisees form co-ops for janitorial supplies, uniforms, even insurance. Lucas: Exactly. Insurance is a big one — property and liability premiums have been climbing. A group of 50 franchisees can get a much better rate than one. There are now platforms specifically designed to facilitate this, like Unite and GroupPurchasing.io. Luna: Unite I know — it's a SaaS platform that lets franchisees form digital buying groups, track orders, and split savings. It's like a co-op-in-a-box. Lucas: Right. And GroupPurchasing.io is more focused on the analytics side — they help franchisees benchmark what they're paying versus the market, so they know where they have leverage. Luna: But there's a legal dimension too. If franchisees start negotiating as a group, doesn't that raise antitrust concerns? Lucas: It can, but there's a clear line. The Federal Trade Commission has guidance on this — it's generally allowed as long as the co-op doesn't involve price-fixing among competitors. So the franchisees can't agree to set their menu prices, but they can absolutely agree to negotiate supply prices together. Luna: So it's about purchasing, not pricing. Lucas: Exactly. And most co-ops are structured as separate legal entities — often an LLC — with a board elected by members. That keeps the franchisor at arm's length. Luna: I wonder why more franchisees don't do this. Is it just inertia? Lucas: Partially, but there are real barriers. First, organizing takes time and trust. You need a few committed lead franchisees to recruit others. Second, some franchisors restrict co-ops in their franchise agreements — they argue it introduces complexity. Luna: And if the franchisor isn't supportive, the co-op can feel like an adversarial move. Lucas: Right. But there's a growing sentiment among franchisee associations that this is a legitimate tool for protecting margins. The American Association of Franchisees and Dealers actually has a template for cooperative agreements. Luna: That's helpful. So if I'm a franchisee looking into this, what's the first step? Lucas: Start small. Find two or three other franchisees in your system — ideally in different regions to avoid any perception of collusion. Pick one category where you know you're overpaying, like to-go containers or cleaning chemicals. Get quotes individually, then together. Luna: And if the savings are there, formalize it. Lucas: Yeah. You might not need a platform at first — a shared spreadsheet works. But as you grow, something like Unite makes it easier to track and distribute savings transparently. Luna: What about the franchisor pushback? Have any cases gone to court? Lucas: A few. There was a notable one in 2023 involving a group of 7-Eleven franchisees in Texas. The franchisor tried to block them from forming a buying group, and the franchisees argued it violated their right to associate. The case settled, but the group continued operating. Luna: So it's not a slam dunk, but it's possible. Lucas: It comes down to what your franchise agreement says. Some are explicit — 'franchisee may not join any purchasing cooperative without prior written consent.' Others are silent. If it's silent, you have more room. Luna: And if the franchisor says no, is there room to negotiate? Lucas: Often yes. Especially if you frame it as a way to improve unit economics without asking the franchisor to cut prices. Some forward-thinking franchisors actually see co-ops as a feature — they can attract better franchisees. Luna: Interesting. So a co-op could be a selling point for the system. Lucas: Exactly. And there's a data angle too. When franchisees pool their purchasing data, they can spot trends — like which suppliers have the best on-time delivery or lowest defect rates. That intelligence benefits the whole network. Luna: That's actually really valuable. Individual franchisees might not have the time to analyze that data. Lucas: Right. And the platforms I mentioned — Unite, GroupPurchasing.io — they provide dashboards that show aggregate savings, supplier performance, and even carbon footprint metrics if that matters to your brand. Luna: So it's not just about price — it's about partnering with better suppliers. Lucas: Absolutely. And it's worth noting that the co-op model isn't limited to goods. Some franchisees have formed groups to share back-office services — bookkeeping, HR, even legal. That's more of a shared-services model, but the principle is the same. Luna: That's a good point. If three franchisees each pay a bookkeeper $1,500 a month, they could hire one shared bookkeeper for $3,000 and split it. Lucas: And everyone saves $500 a month. It's that kind of thinking that makes me optimistic about franchisee innovation. They're not just waiting for the franchisor to fix things. Luna: Before we wrap, I want to mention something — and this ties back to the value of these conversations. If you're a franchisee or aspiring one, and this show has helped you think about your business in a new way, we just want to say that the reason we can keep doing these episodes without ads or sponsorship is because a small number of listeners choose to support us. Lucas: Yeah, it's a pretty simple model. A handful of folks chip in monthly at buy me a coffee dot com slash fexingo, and that literally funds the research and production. It's not a big ask — just if you've gotten something out of the show. Luna: Right. And it keeps us independent. So if that resonates, you know where to find it. Back to the topic — Lucas, you mentioned optimism. What's one trend you're watching in the co-op space? Lucas: I'm watching the rise of 'aggregator co-ops' — where a group of franchisees from different systems band together. So a Subway, a Dunkin', and a Taco Bell franchisee might jointly negotiate for things like utilities or waste disposal. Luna: That's cross-system. Does that raise different legal issues? Lucas: It can, but it's actually safer from an antitrust perspective because they're not competitors — they're in different product markets. So it's even clearer that they're just common purchasers. Luna: That's a smart workaround. Lucas: Yeah. And it's been happening informally for years — franchisees in the same strip mall sharing a dumpster. This just formalizes it at scale. Luna: Good. So to sum up: cooperative buying groups are a proven way for franchisees to cut costs, but they require organization and some legal awareness. Start small, pick a category, and see if the math works. Lucas: And don't be afraid to have the conversation with your franchisor. A lot of them would rather have a healthy franchisee than a fight over a co-op. Luna: Absolutely. Thanks, Lucas. Lucas: Thanks, Luna. That's all for this episode of Franchise Conversations.