Conversations about negotiating a food purchasing contract.

The following is a discussion from the foodservice.com discussion forums on negotiating prices with a food purveyor or vendor, stemming from this question:

So how negotiable are the prices from my food providers? Whats the easiest way to go about it, contact other providers and price compare or are there easier ways. I really like my current food providers but I don’t want to pay more if I don’t have to. I really don’t want to contact another provider and get their hopes up that I might switch because I don’t want to switch, just use their quotes. Any thoughts?
Thanks

03-05-2007 , 08:04 PM


Babysitter -Are your food costs high? Are your menu prices competitive? Does your portion control match your plate cost designs? Is there food left on plates when the guests are finished? If so how much? How many gift certificates to you give away ? Do you use coupons? Do you discount menu items on certain days of the week? Do you turn at least 50% of your entire inventory weekly? Do you do a complete inventory at least once a month? Are you doing over 1 million in sales per year? Ask your self these questions – review the answers , and then ask yourself if your need for lower prices is the burden of your current supplier or of your staff. I think you will find most suppliers to be about the same if you average the costs over the per $1,000 in purchasing . Playing hopscotch to save a quarter here or a dollar there does not make you a better purchasing agent, it makes you a confused buyer and reduces whatever purchasing power you may have with a single vendor.My advice is this – concentrate on utilizing 100% of the product that your are currently purchasing and you will never need to worry about needing a new supplier.- H

__________________
Never underestimate the power of a sincere “Thank You.”

 

03-05-2007 , 11:54 PM


In a simplistic answer:Most vendors use a 5 tier system. Your tier is based on product and load volume, how much you spend, and your credit. You are free to speak to your rep about getting better prices. It does help to have some ammunition to back up your claims of “XYZ Company is only charging $x.xx per unit” when you are comparing notes.Or as an alternative, and one I personally don’t endorse, but works well for some, you can enter into a contract agreement. This is beneficial if you have a good history of purchases. (ie, you know you’ll be buying “x” amount of lbs of beef each week throughout the year.) Beware a contract, though. If you enter into an agreement when prices are high and they drop, as does produce from winter to spring/summer, you may be paying significantly more than needed.Ciao,

__________________
Red meat is not bad for you. Now blue-green meat, that’s bad for you! Tommy Smothers
Give ‘em what that want. Just make it better than they expected!

 

03-06-2007 , 03:52 AM


If you have a Costco or a Sams Club nearby, you can save a fortune,
Costco has a program where you fax them your order on whatever day, pick it up the next, they will load it in your truck /van. There are very few Restaurant items they DON’T carry. You can save a ton on spices at Sams, which has a better selection than Costco, although I much prefer Costco!BTW..Hello to all, nice to be here!!

 

03-06-2007 , 04:11 AM


Babysitter, Henry poses some very good questions. Purchasing and it’s relationship to food costing is a complicated equation. You can compare prices from other vendors all day long and find a lot of variation. You have to have a comfort level with your supplier that they are being honest, trustworthy and are providing the product quality and service you require.

 

03-06-2007 , 05:23 AM


And I will add another factor to Henry’s post.Your sales volume greatly contributes to your overall food costs. The more sales that you do will give you a truer picture of your actual food cost. I have never figured out a mathmatical forumula for this, but it is something that I have witnessed many times.One of the reasons for this is that you are using your entire stock…more often, giving you a truer picture of your inventory and actual food costs.I assume that when sales are down, you have more people choosing lower marked-up items and specials, thus lowering your food costs.It is also validated by slower sales usually end up in more mistakes and wasted food, thus lowering your food cost percentage.If your items are individual costed correctly, then I would work on increasing your sales…that will lead to a truer picture of your food costs.

Howard

 

03-06-2007 , 07:23 AM


You can also enter into a purchasing contract based on cost+ buying, not only locked-in price buying. This is basically an agreement between yourself and your purveyor that they will charge you a determined percentage above their cost in each of their purchase categories. You agree to purchase at least 80%, sometimes 85%, of your total purchases from them. Most purveyors will give you better prices with a contract than without. Without the contract, your sales person has the ability to raise or lower individual item prices. Technically speaking, they have the ability in any situation, and have to be watched to keep them honest. Much like employees, purveyors are only as honest as you make them be.As far as negotiating a pricing tier, it is usually done based on all the factors already mentioned, total purchase dollars, trips per week, drop size, etc. While purveyors have their criteria they use to classify you into a purchasing tier, there IS always the opportunity to negotiate. EVERYTHING is negotiable, but that doesn’t mean you aren’t already getting good pricing, and it doesn’t mean you can get better pricing than what you’re getting. Whether you can get better pricing really depends on what you’re paying now. If you’re not being overcharged, there simply isn’t that much opportunity to get better pricing. If you’re not ready and willing to change purveyors completely, you really have no leverage to negotiate yourself into a better pricing tier anyways. In any negotiation, leverage requires you have the willingness to walk away from a deal.If you are comfortable with your existing purveyor, and aren’t willing to change, you’re pretty limited in what you can do to get better pricing. Knowledge is the most powerful tool in a negotiation, and talking to other customers of your purveyor in your area will provide you with a lot of knowledge as to what your purveyor is capable of doing with pricing. Simply talking to your sales rep and letting them know you are watching prices with other customers of his, and other purveyors, will help keep them honest. Also, have your purveyor help you verify the accuracy of your inventory prices every three months or more often. This helps them know you are aware. Do NOT demand prices on certain items. There may be a reason why another business pays less for one item than you. DO ask your purveyor WHY they are paying less. A good sales rep will set up pricing so his/her customers pay less on their highest volume items and make up the difference on their lowest volume items. They may explain this to you to justify the other business paying less on that item, which may not get you better pricing on that item, but it WILL let your sales rep know you are focused on pricing and aware of others prices. This alone will help keep them honest.Gather information from other businesses, arm yourself with knowledge, build a strong relationship with your sales rep, make him/her aware of your knowledge, ask for their input on how to keep your prices as low as possible, then do all the things Henry and others already suggested. It’s entirely possible your prices are fine and excessive time spent concentrating on it could just be wasted.

__________________
Brandon O’Dell
O’Dell Consulting
phone: (316) 361-0675
email: bodell1@cox.net
web: http://www.bodellconsulting.com
blog: http://www.bodellconsulting.wordpress.com

 

03-06-2007 , 08:22 AM


Quote:
Originally Posted by Brandon94275
You can also enter into a purchasing contract based on cost+ buying, not only locked-in price buying. This is basically an agreement between yourself and your purveyor that they will charge you a determined percentage above their cost in each of their purchase categories.

We are on a contract, and have had good results cost-wise. However, they are no guarantee against price increases, only % mark-up increases. Even so, unless you are a national chain or doing a huge amount of business (multi-million) there is little chance that you will be allowed audit privileges to check their product cost and mark-up. There has to be trust.

 

03-06-2007 , 01:48 PM


For a long time I was only using 1 supplier since my other guy didnt come around. They gave me a new rep and I saw where the guy I was giving 100% of my business was gouging me. Some items I was paying just a few dollars a case more but He was charging $10 or so more on cases of cheese. I would shop around.
03-06-2007 , 02:02 PM

Default Controlling Food Cost

Babysitter
You’ve asked the million dollar question!
Congratulations… you win nothing (excep a little knowledge from me)
There is a 2 component answer to your question.
Part 1 is knowing the right questions to ask
Part 2 is understanding costs throughout the supply chain from grower/harvester/fishermen all the way to packaging/freight and distribution and everything in between. (and many other complexities)The big broadline distribution companies do what no one else can…deliver you everything on short notice, just about anywhere.
But, you pay for it in excessive markups and complete lack of transparency into costs.The smaller regional players might not have the purchasing power to competetively procure your ingredients but they are more transparent (generally)Back to Part 1…if you don’t understand the commodity markets that produce what you buy, you can’t negotiate with any leverage.Part 2 is more complex as it might included several unknown components (eg brokers, hidden rebates etc)Don’t trip over dollars to save dimes. Spend $10,000 to save $150,000 on your annual spend and hire a purchasing consultant to do it for you and teach you how to do it yourself forever.

The Cat Man
www.CatManOnline.com

Quote:
Originally Posted by Babysitter
So how negotiable are the prices from my food providers? Whats the easiest way to go about it, contact other providers and price compare or are there easier ways. I really like my current food providers but I don’t want to pay more if I don’t have to. I really don’t want to contact another provider and get their hopes up that I might switch because I don’t want to switch, just use their quotes. Any thoughts?
Thanks

 

Old 03-07-2007 , 10:16 AM

Default Earning your biz?

Just wondering what the sales rep that you currently have has done to earn your business?Does he go above and beyond for your or just show up, take your order, collect the check and leave?Lately I am seeing a lot of my competitors going into accounts with a level of arrogance and laziness that astounds me. What also astounds me is the lack of respect from customers for the reps that are worth something. Most reps (except for the newbie’s) work on commission. You need to decide if your business is being earned or just taken for granted. Don’t get me wrong – some people do just want an order taker. But I am learning that may be because they didn’t know there were any other options. You need to remember that price should only be one part of the equation when you decide
who to do business with.Quick story – I visited a brand new restaurant 2 weeks ago. Upon entering I was informed that all three companies would be receiving a copy of the order guide. Whoever came back with the best pricing would win. So there were 3 reps involved, all experienced, all paid on commission. Each one of the reps took a very different approach to the new customer.Rep #1 took the price list home – priced it out and dropped it off. Upon leaving the price guide they informed the customer that they priced it high – just to be on the safe side. This theory confused the buyer as much as it did me!Rep #2 took the price list home – put it in the computer, printed it out and then returned it to the customer. Only problem – they didn’t include pricing. What good is a price guide without pricing the new customer asked me? I again was at a loss.

Now Rep #3 (that’s me!) took the order guide home, priced it out at current and fair market prices, broke the case prices down so that the customer could see what it was really costing them (i.e – per slice of bacon cost, etc.) picked 3 or 4 quality options where necessary and returned the price guide. Then #3 made arrangements to sample over 80 items. Sampled those 80 items and the customer was able to make an informed decision.

When the customer had made their decision rep #3 took everything home one more time and proceeded to break down the menu and cost it out for them. When order day arrived Rep #3 was there when the truck arrived and helped the customer with organizing a very large order.

The day after the order arrived Rep #1 called the customer. Not much left, but a small order was placed. Two days later Rep #2 popped back in and was visibly upset and angry that they would not be ordering from him.

Did I get paid to price out the order guide? No
Did I get paid to spend a day in the kitchen sampling? No
Did I even get paid to price out her food cost? Nope.

I got paid when the food hit the door.
Did I earn it? I think so.
Will I continue to earn it? Yep

I tell my customer that I am NOT here to save them money, I am here to MAKE them money!

Any old “order taker” can save you money – move you down on quality and poof – you just saved some money.

If your menu is priced correctly and you have the right mix on your menu then your biz should be making a profit.

If your sales rep is doing their job – then they deserve to be paid to do it. If you make it all about price so will your sales rep. I don’t have 3 hours to spend costing out a menu for somebody that I might make $20 commission on. My customers are my menu. If you had an item on your menu that didn’t make you money then it wouldn’t be worth having on your menu. Same thing goes for the sales rep/customer relationship. If I have a customer that nickels and dimes me to death and they don’t think I deserve to make a paycheck then I need to “take them off my menu” On the other hand if you have an “order taker” for a sales rep and they never do the little extra then maybe it is time to “take them off your menu”

One way to look at is this – Look at your sales rep as one of your employees. Interview for the position. Find the one who will EARN your business, not just expect it. Just like any other employee – if they stop doing their job then maybe it’s time to “hire” somebody else, or if they excede at their job you make sure you take care of them so they stick around. You do pay his paycheck, you just don’t sign the check.

A reliable & knowledgeable sales rep, when utilized to their full potential is one of the best assets any restaurant owner could have.

Just my “rather long” 2 cents worth!

__________________
- – - – - – - – - – - – - – - – - – - – - – - – -
. . . . Think outside the cube! . . . .
- – - – - – - – - – - – - – - – - – - – - – - – -

 

Old 03-07-2007 , 10:41 AM

Default

Great input. A prime example of why it is so important to make companies compete for your business. The cream will rise to the top. Though price is important, obviously it’s not everything, and making friends with your rep, keeping them in the loop, and constantly asking for input on how to save you, or make you, more money is key to the process of proper purchasing. Not making companies compete, and blind trust are a good way to get taken advantage of. A good rep doesn’t mind showing you why they are better.

__________________
Brandon O’Dell
O’Dell Consulting
phone: (316) 361-0675
email: bodell1@cox.net
web: http://www.bodellconsulting.com
blog: http://www.bodellconsulting.wordpress.com

 

Old 03-08-2007 , 02:04 AM

Default welcome back food rep

for some restaurants a good food sales rep is part of the team and does take some of the burden off of management.Beth

__________________
Food Write
The Responsible Serving of Alcoholic Beverages

 

Old 03-08-2007 , 02:23 AM

Default

Quote:
Originally Posted by leespizzahouse
Anyone in CA use Saladino’s ?

My second job through a messy divorce ( not my second job ever but my second job after working 8 hours going to work for 7 more) was at a Take and Bake pizza. We used Saladino’s.Their product was fine and ordering wasn’t a problem. They didn’t always have what we needed but this was 11 years ago so things may have changed.I notice the truck at the old shop once in a while so the new people are still using them. BUT I also see Sysco there. After I left ( two years of utter exhaustion) and took my wonderful pizza making abilitys with me they sold the place. It’s changed hands 4 times since then.
I am at the edge of the foothills Central Valley. Where you at ????

__________________

http://www.myspace.com/thereallunchlady

Life may not be the party we hoped for, but while we’re here we should Dance…….

 

Old 03-08-2007 , 09:46 AM

Default

Great stuff guys. And yes, the rep should do more than just take an order and leave. My rep is a good one, helped me price my menu and hes great for bouncing ideas off of. He always offers to help in any way. But, I still don’t want to pay more than whats Fair. I don’t want to replace him, just make sure the pricing is good!
Thanks everyone, great feedback

 

Old 03-10-2007 , 06:16 AM

Default

Babysitter -Just thought of one thing after reading your last comment. I do understand wanting to make sure you are being treated fairly. One warning though – I know a lot of reps who will go into a new account, lowball them to get the biz and then whack when you turn your back!If you want to – list about 10 key items and I can give you an idea where they would fall – keep in mind I am another region and some of your pricing could be based on use levels. An easy one to price is fry oil – just remember brands and type.Thanks

__________________
- – - – - – - – - – - – - – - – - – - – - – - – -
. . . . Think outside the cube! . . . .
- – - – - – - – - – - – - – - – - – - – - – - – -

 

Old 03-13-2007 , 12:06 PM

Default Food Purchasing Contracts

Has anyone had success with buying groups or co-ops? A buddy (fellow restrateur)
was considering joining one. He says it works al ot like a prime vendor agreement without
the contract. They do have audit privelages and at least more leverage with the distributor
because they represent multiple operators. You also get manufacturer rebates
on preferred manufacturers. He figured with everything he could save almost 5%
and not have to bird dog his purchasing or worry if he’s getting the dealAnybody have any thoughts or experience on this? He is in Georgia.Pizza Dude

 

Old 03-13-2007 , 12:32 PM

Default there is no incentive

the problem with a co-op is that they want deliveries to individual restaurants, and with fuel at $2.50 and above, there is no incentive for a distributor to give a discount.Now, if the co-op has deliveries to a central location and then your buddy picks up, that would be a different story.Have him read the fine print. I bet there is a gas rider in there somewhere.

__________________
Food Write
The Responsible Serving of Alcoholic Beverages
03-13-2007 , 01:48 PM

Default Don’t let ‘em take you for granted.

We will switch things up a bit, to let our current suppliers know we are price and quality conscience, and interested in new stuff. If a new salesman comes in with a good quality product, we will usually try it. Now their foot is in the door. Problem seems to be that after a while, they (the BIG name companies) seem to start trying to slip in inferior crap.Basically, we are loyal to our stable of suppliers, but they know to keep an eye out for new products we might be interested in. I started making a big happy fuss over our paper supplier when he actually brought us a new sample. Now, he makes a point of showing us new stuff. (And I continue to gush and fuss over him.) If your suppliers know you are paying attention to cost and quality, and are interested in them, they will pay attention too.

__________________
The early bird gets the worm, but the second mouse gets the cheese.

 

Old 03-13-2007 , 03:45 PM


i used sysco in florida, and was ecstatic. tried them here, in ga. and was let down greatly.
i was using sysco, sams, and u.s. at the same time.. one day the sysco guy walked in and saw u.s. boxes, and got real mad. he said we had to use him exclusively. well, he refused to take any other orders from us after that. dropped us like a hot potato! no notice at all!!!!!!!
we were in a huge bind, and it cost me plenty of money out of pocket. we were selling some items, that were exclusive to sysco(like ‘herschel walker’s chicken strips[he has alot of family here] ). and to make matters worse, we had spent tons of dough on advertising these products. t.v. commercials, radio, newspress, direct mailings, tons of money, over thirty thousand! i was really steaming, at sysco. i called my rep’s boss, and his boss and his boss, and i got nowhere. they backed up his decision to drop us, because we werent ordering exclusively, and that we didnt spend at least 1million per yr, which was all total crap. every sysco employee we talked to treated us like crap. that made me more mad. one even called me a ‘cherry picker’ for using more than one company. hey, its my right, and plain and simple, if one company wants 25 dollars for a case of catsup packets, and another company will sell the same brand, same case, for 14 dollars, am i going to pay 11 dollars extra, for a nicer suit????
the recovery from that fiasco was long and drawn out, but thanks to u.s. foods, we were able to revamp our menu, and continue to stay alive. ( to this day, i still have a sour taste when i see that name….no….lol… not herschel….)
i finally gave up on trying to find someone at sysco to listen to me and understand my view. i didnt want another stroke…..(had 6 already)back to the thread…… my present day rep(great person) (u.s. food) has been preaching to me for some time, (and warning of price increases), that i need to raise my prices/ that is what i am doing right now. raise, or crumble.
About these ads

About bodellconsulting

Food service consultant and owner/operator of a home chef service in Kansas City and Wichita

Posted on February 23, 2008, in Conversations and tagged , , , , , . Bookmark the permalink. 3 Comments.

  1. Thanks for posting these questions, answers and tips. I learned quite a bit and will be back for more.

  2. Bottom line, your in the restaurant business to make money, not to make the salesman your friend. Pay close attention to your suppliers prices & stay in business.

  1. Pingback: The biggest mistakes restaurants make, and why they have a high failure rate | O'Dell Restaurant Consulting's Blog

What do you think?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 1,826 other followers

%d bloggers like this: