Negotiating pricing is a common practice between suppliers and restaurant managers. What are the best practices? How do you define discounts and achieve the right supplier costs?
When ordering from suppliers, different practices like buying in bulk and organizing fewer deliveries should be part of your strategy to reduce costs. However, these are not the only ones and restaurant managers often need to ask their food vendors for a discounted price. It is often the case that you must fulfil some prerequisites before receiving a discounted price. Finally, below are some hints to know your way around negotiating with suppliers.
1. Identify your key ingredients
Before picking up the phone and reaching out to your restaurant suppliers, you should assess which goods represent your key ingredients. These can either be products that make up your best-selling menu items which you use in large quantities, or cross-utilize across your menu.
This should go along with determining the weekly or monthly volume of your orders of a certain item and understanding when this constitutes a critical cost for your restaurant. These pre-steps are necessary to decide on which products it’s worth negotiating a discount for.
Applying the basics of menu engineering can also help you maximize profits from your dishes and better evaluate which ingredients you should focus on when trying to decrease your supplier costs.
2. Do your research
A little bit of research is essential to define discounts before reaching out to your food vendors.
Remember that differentiation is key - therefore, call different suppliers, search for prices online, or ask other restaurant owners how much they pay for their goods.
When you’re getting in touch with new suppliers, make sure you’re explicitly saying you're requesting quotes from different businesses and that you will move forward with the one offering the most competitive bid. Keep in mind that suppliers usually use one of these two main pricing strategies:
- Cost plus fixed price means that you pay a fixed flat fee on your suppliers cost.
- Cost plus percentage entails that the price you pay varies in proportion to the initial food cost
Researching the commodity market price and asking food vendors for a market basket report are also good practices to determine the cost of your supply needs. All these efforts might take you some time, but they’re a fundamental prerequisite for your negotiation strategy. When checking on prices from other restaurant suppliers, don’t forget to take into account quality and type of service.
3. Leverage your partnerships with restaurant suppliers
The best way to reduce the costs for your restaurant supplies is to strengthen relationships with your food vendors. This involves different touchpoints like ordering a consistent quantity of products from them and doing it effectively, paying on time, or even offering larger deposits on your orders.
4. Be assertive
Now that you’ve done everything on the research and supplier relationship management fronts, you’re ready to get in touch with your restaurant suppliers. The trick for effective communication is being assertive - which means, you should communicate in a direct and unapologetic way, without being too chatty or giving too many details.
With a track record of good relationship management and your numbers ready on hand, you should be able to pitch and get a fair deal.
5. Keep in mind: it’s not just about price
While pricing is key for the sustainability of any business, remember that this is not the only thing you can or should negotiate. Other possible negotiation requests can include faster delivery with no additional expenses or warranty improvement.
6. Don’t give up easily
This is perhaps rule #1 of any type of negotiation: don’t give up easily. Understanding your suppliers' needs is important, but this doesn’t mean you must accept their first offer. As long as you can justify yourself with how much you’re willing to invest in a partnership, you should be able to keep the negotiation with your restaurant suppliers going and get a better deal for your products…that’s fair for both you and the supplier.