This major key to success is the most commonly misunderstood, mishandled and abused area of cost control among independent operators.   It also represents the most significant area of disadvantage between independents and large chains.  Large chains typically pay thirty to fifty percent less (this includes rebates.) 

 

Believe it, it’s true

 

A typical response from an operator when asked about their purchasing price levels is, “I always get the best price available, I beat my suppliers up pretty well”

 

Or worse yet, “yes I go out to Costco (or some other big box retailer)to get my supplies”.   

 

 

Purchasing 101

 

An effective purchasing program (in food service) must start with menu planning and recipe development..  It must also include good business sense.  Ego, king of the mountain and other similar unproductive personality traits must be left at the door if the operator is to be successful in securing and maintaining the best possible purchasing program.

 

Issues to be considered:

• What is offered (menu)
• What can be charged and still be competitive
• Anticipated menu mix (relationship of items sold)
• Recipe  (ingredient specifications)
• Buying pattern  (average order size etc.)
• Buying system (on-site salesman, program ordering, etc.)
• Frequency of price shopping
• Degree and frequency of research (market trends, seasonal and etc.)
• Method of payment
• Relationship with suppliers (are they your partners or adversaries) 
• Consistency, consistency, consistency.  Never do purchasing (establishing quality specifications, selecting suppliers, negotiating prices, etc. when its time to order).  An effective purchasing program requires an individual’s complete, uninterrupted attention not less than every two weeks.  It also requires the undivided attention and expertise of a knowledgeable industry professional.  Not the self-serving antics of an over worked manager that needs to play “King of the mountain” in order to feel good about him/her self. 

 

Just as in the case of proper recruiting and hiring, in order to have a sound (highly competitive) purchasing program an operator must aggressively manage the program.  Stand alone time must be dedicated to the process.  It must be managed separate and apart from daily operational distractions.  This is the only way an independent operator can ever hope to compete with their major (national or local) chain competitors.   A great menu, good food, outstanding service and even a very convenient location aren’t enough to make up for a thirty to fifty percent disadvantage in purchasing prices.  The independent cannot expect to equal the chains advantages but, if they apply professional purchasing techniques they will significantly close the gap.  At that point the great menu etc. will work to substantially neutralize the chain’s advantage.  

 

 

If you are seeking professional assistance, please see our web page at Marshall & Associates - e-mail us at marsconsul@aol.com or by using the no obligation contact form

 

The above material is proprietary and copyrighted.  It has been made available here to assist you and for your personal use only.  Reproduction for resale and/or use in any manner other than for your personal use, without the expressed written permission of Marshall & Associates, is strictly prohibited. 

 

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