Resolution: Choose Your Vendor to Cut Food Costs

Choose your Vendor to Cut Food CostsWith the New Year, perhaps you’ve made some resolutions. One of your resolutions should be to choose your vendor to cut food costs in your restaurant.

It’s time to overhaul your purchasing process and reduce the number of vendors you use and choose them wisely in order to boost your bottom line. If that seems to go against the grain, it’s important that you keep reading rather than dismissing the idea as hogwash.

As an independent restaurateur or pub owner, perhaps you believe that the best way to purchase wisely is to ask for lots of bids, compare them, and choose the lowest. That approach yields to a lot of deliveries… a lot of small deliveries that take time to receive, verify, and stock. That process takes a lot of time and effort – time and effort you should probably be spending on higher-yield activities. Worse, it’s an unending cycle.

According to RestaurantOwner.com’s “The Easiest Way to Cut Your Food Cost 10%,” chain restaurants are two to three times more profitable than independents. The independent owner yields about five percent profit before federal and state taxes where the chain operators appreciate a figure of about 12 to 15 percent before corporate overhead and income taxes. Although the disparity between pre-tax profitability can’t be completely chalked up to food-purchasing processes, it likely plays a large part.

Using a Prime Vendor

You know that your repeat patrons are your best ones. The same thing is true with your relationship with suppliers. Your suppliers also appreciate and reward loyalty. Consider what goes into supplier pricing: product cost, administrative costs, delivery and handling cost, and profit margin.

First, the more your supplier can buy, the better the price they get will be. They want to move a lot of product and lower their product cost by doing so. Secondly, just as it costs you time to review and pay a lot of invoices, it costs the supplier time and administrative oversight to create them. Third, it costs you supplier as much to deliver one case to your back door as 100 cases. Finally, smart suppliers know that they can make more on your account with higher volume than a higher mark up.

Bill Marvin, Restaurant Doctor, states, “Every time I’ve moved a client to a prime vendor, his food costs have dropped by ten percent overnight, and no one has ever looked back.” (Quoted in Restaurant Briefing,Why Prime Vendor Relationships Can Save Money – and Valuable Time.”

Prime Vendor Benefits

Besides a reduction in foods costs, there are other benefits to using a prime vendor. For starters, you’ll save hours every week with fewer invoices and receiving documents to review. You didn’t open your restaurant to deal with paperwork.

When you become a larger customer for a vendor, you can expect better service. You know who your best patrons are and likely make a point to greet them personally when they enter your establishment. Your prime vendor will treat you the same way. It pays to be a bigger fish.

With deliveries coming from a single source, you can also expect better product quality and consistency. If a delivery turns out to be sub-par, when you call to discuss it, you’re likely to get satisfaction.

The large chains don’t play the competitive bidding game. Typically, they use one prime vendor to supply 80 to 100 percent of their food products. They wouldn’t continue to do so if it didn’t positively impact their bottom lines. So for 2104, resolve to choose your vendor to cut your food costs… and save time and boost your own bottom line.