Purchasing Strategies that Increase Your Buying Power

Seven Fundamentals of Purchasing for Independent Operators

An audit of month-end inventory sheets for a regional chain of five family restaurants, all with the same menu and prices, revealed major inconsistencies that affected food costs and product consistency. Restaurant managers and purveyor sales representatives are not always evenly matched when it comes to purchasing and ordering knowledge. The audit revealed that different brands and grades of products were being used and their prices varied for identical items between purveyors. Further, prices were not consistent for identical items supplied from the same purveyor.

Needless to say, this infuriated the unit managers who were not getting the lowest prices. "Why shouldn't we all pay the same low price?" My reply was that we should and we can if we consolidate our purchasing clout and negotiate a price for the company rather than each separate unit. Sales representatives have limited authority on the prices they can quote. We had to take away the autonomy of the unit manager in the purchasing decisions. That responsibility was assumed by the corporate office, which spoke with the clout of all five units behind it.

In the old system, the experienced managers were able to drive a better bargain with their respective vendor sales representatives and the more experienced sales representatives were able to have their way with the less experienced managers. The fact that the sales representatives earned at least part of their pay via commissions kept them from giving their very best price unless they were about to lose an order to a competitor. Subsequently, managers who did not inquire about price paid more than those who monitored price.

By going to the sales manager rather than the sales representative and negotiating for all the units, we became what is called a "house account." This eliminated the need to have a different sales representative call upon each of our locations. We had the sales manager as our contact for problems and prices. We negotiated lower prices for all units and made them one of our official suppliers. This eliminated price and quality inconsistency between units and lowered our overall food costs by 2 percent. The approved suppliers benefited because our purchases increased by 25 percent over our previous billings.

This is just an example of the purchasing challenges and opportunities as you expand your restaurant enterprise from one to two or more units. While you might have only a few units, you can employ some of the strategies and techniques used by the large chains; however, it will require that you begin looking at your operation differently from when you were running a single restaurant.

The following basic advice, of course, applies to the single-unit operator. That said, once you run multiple units, it can mean the difference of thousands of dollars of income, and increased consistency across the concept. Wherever you are right now, either opening your fourth unit or just dreaming about number two, you might consider adopting these seven strategies today.