Imagine that you have decided to go up against McDonald’s in India. The homegrown vada pav will go up against the mighty burger and come out trumps. And so you build a plan to have hundreds, nay, thousands of franchises all over the country. They will sell clean, hygienic and tasty vada pavs in the millions in the years to come.
What a great idea, and let us hope that somebody actually does this. But here is a quick question: should each franchisee purchase their own potatoes, or would you much rather have a centralised procurement team to do the task? You will quickly realise that there are two central problems to solve: price and quality.
Each franchisee conducting negotiations with potato sellers becomes a problem when it comes to price. The amount of potatoes that the entire business needs to purchase will be more than the amount of potatoes that each franchisee will need to buy. So, who do you think will be able to negotiate a better price? The centralised team, or each of the individual franchisees?
