How To Grow To 100 Units: Let’s Make a Deal
Restaurant chains offer their profitable strategies for working with their suppliers.
By Maya Norris, Managing Editor -- Chain Leader, 11/1/2007
Small restaurant chains usually don’t have the purchasing power to get the best prices from their suppliers. But an emerging chain can still strike a bargain, especially because manufacturers and distributors know that small but growing chains provide them with future business. Chain Leader spoke to some chains about how they go about developing a profitable relationship with their suppliers.
John Nelson, director of purchasing and distribution, Taco Del Mar, Seattle
An important tool is to get your purchase data from your broadline distributor. Once I have that, then I can go to those manufacturers and ask for pricing.
Start with the top of the list, of the most dollars or the most cases. Group them by manufacturers. And sometimes there’s an opportunity to consolidate because it’s the total relationship that the manufacturer is going to look at. So if you happen to have packaging items from four different suppliers, maybe you can buy everything from one supplier in that category. Then you’re a more important customer to them, and that can translate into significant savings.
Harry Bond, president, Monical’s Pizza, Bradley, Ill.
We work a lot with what can we do with products that [suppliers] already have that are standard and not go in and say, "We need you to make this for us special." Because a lot of times when you’re buying their standard products, you’re going to get just about the same price as a large vendor like Wal-Mart’s going to get because these guys are just running a big line. And it costs them no more money to run one more product off the end of that high-volume line for you. So there’s value there.
Dino Lambridis, co-founder, Evos, Tampa, Fla.
We knew that we were going to need the help of our distribution company when we open up in different markets. They proposed a master services agreement, where we agreed to purchase the majority of our products through them. So they bring in all these specialty products for us and help us open in new markets. And also it would allow us the ability to lock in a price structure and the option to do audits over time to make sure that we are getting proper pricing. So the master services agreement helps us accomplish something that would be very difficult to accomplish being the size we are—just four units growing in new markets.
Kelly Anderson, director of purchasing and distribution, Maui Wowi, Greenwood Village, Colo.
We do quarterly business reviews with [our suppliers]. We know that today we have x amount of units, and we know that tomorrow we will have 20 more, 50 more. We’re always upfront and honest with our suppliers so that they know where our growth pattern is. If we’re growing more than we had projected, we can go back to them and say, "OK, this is the type of customer that we are today. What can you do to help us and be a better partner?" Some suppliers may say, "You’re right. Maui Wowi has been a good partner for us. So let’s go ahead and lower your price, or let’s give you more money at your annual conference, or we can do this for your rebate program."
Thang Nguyen, vice president of operations, Salsarita’s Fresh Cantina, Charlotte, N.C.
We start out by talking to our vendors [about] our growth plans. And being part of a franchise is good because we can show them that we do have franchisees that can commit to open stores. So before we even have 100 stores, we have franchisees who are committed to opening that amount of stores. So we can use that as leverage toward the negotiation.
Gerald Johnson, vice president of purchasing, Fatz Cafe, Taylors, S.C.
Before you can strike a bargain with your suppliers, you need to set up a contract with your broadline distributor, so the broadline distributor is simply a distributor of boxes vs. your distributor of food.
For example, right now we are working on moving to higher quality mixers. So I’ve got a contract with the company that I want to buy these mixers from, and I’ve coordinated with our broadline distributor to be able to set up an item number and buy that product for us. And they will deliver that product to [the distributor] at the contracted price, and then [the distributor] will mark up that product based on the deal that we’ve got with them. We eliminate all the middle people that can get involved in all that.
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