Your suppliers are running a business, just like you, and facing the same pressures of rising costs, uncertain orders, competition and staffing issues. Plus one that most hospitality businesses don’t face: bad debts.
Many restaurants run their price negotiation on a weekly or daily basis, but this is not the way to get the best long-term deals.
The price that suppliers charge you is a combination of three things: their Cost of Goods, plus Admin and Distribution Costs, plus their Profit Margin. There’s often room to move with that middle item – Admin and Distribution – so the savings can be passed on to you.
Here are a few ways to start some negotiating, courtesy of Profitable Hospitality:
Order larger quantities, less often
Ask how you can eliminate delivery surcharges. But weigh this up against the pilfering and spoilage problems that come with carrying excess stock. Order in the pack sizes that the supplier receives, so they don’t have to break them down, and guarantee a minimum quantity that you will buy over a 6–12 months, allowing for seasonal factors.
Simplify the order process
Can it be done electronically? Most suppliers aren’t great with this, so put on the pressure if that works for you. Agree to order well in advance – the best deals will come when it’s not ordered the night before!
Allow delivery at an off-peak time
Could deliveries come in the afternoon? We recently heard of a club that now gets a three percent discount on their fruit and vegetables because they have it delivered at 3pm instead of in the morning – it just takes some reorganising. You’re also in a much stronger negotiating position if you agree to pay more quickly, and at least on time.
Forget about fancy supplies for the staff
Don’t worry about uniforms, aprons and knick-knacks. Just ask for a good price. But there are some services that will be genuinely useful: training with coffee, cleaning chemicals, HACCP record keeping, new liquor products – leveraging these is a subtle but important way to build the relationship with your supplier. This may also include promoting the supplier’s brand, but do it discreetly – not like some coffee and alcohol suppliers that seem to take over completely. Put a value on the promotion that you will give in return.
Turn a supplier’s product into cash
They may not be ready to give a further discount on coffee, but will throw in a pallet of mineral water that you can sell. Or they might support your charity promotion with free product in exchange for a mention in your email marketing or on social media.
Finally, the big one: give the supplier all your business for an agreed period. You will get a much better deal on vegetable orders worth $200,000 per year than if you only give them $100,000 and another supplier $100,000. This is where major benefits can flow.