If you are a multi-unit restaurant group and do not have an agreed-upon distribution agreement, you are very likely paying too much. FSIC has developed some tips that you can use to lower your food and disposables costs.
Following are our top five:
- Contract Direct:
Many operators are not aware that a tremendous impact can be made on their COGS (Cost of Goods) if they work on their own to contract pricing direct with the manufacturer. This would be pricing BEFORE the distributor puts its margin on the product, so in essence, you (the operator) are controlling landed cost. This is something you can negotiate.
- Read the Fine Print:
Distribution agreements typically have many pages and a lot of language that operators find difficult to navigate. What may be left out, however, are potential incentives that could be added that would add deep savings to the overall program. One example of this is Drop Size Incentives. Operators miss opportunities like this, not knowing the distribution agreement landscape. Make sure to read the fine print and see what you’re missing.
- Monitor Your Specs:
Specifications are very important to operators, and particularly chefs. If your operation has many locations in many different regions, it is possible not every store is using all the correct “specs.” As a result, the alternate or substituted specs very likely are costing you money and, of course, consistency in product. You should monitor specs closely across all locations.
- You’re Entitled to Restitution:
It’s a terrific advantage to have products contracted directly with manufacturers before distributor margin is added. However, you must ensure the contract price is adhered to. If you have a signed manufacturer agreement and a signed distribution agreement/agreed upon margins and the price isn’t adhered to, you are entitled to restitution on manufacturer contract overcharges.
- Consolidate Distributors:
Many factors go into how a distributor develops his cost-plus margin above landed cost. One important factor is your drop size. Distributors closely monitor their Gross Profit per Drop. Consolidating distributors—and especially deliveries—will greatly enhance your ability for lower margins on your distribution agreement.
We hope these tips are helpful to you…they can save thousands! If you have questions, please feel free to reach out to Rich Palagano, VP East Coast, FSIC, call our corporate office at (719) 576-3264, or visit our website, http://www.fsici.com
About: FSIC is a Professional Service company that utilizes experienced supply chain professionals and its own proprietary technology (IntelliSpend™) to provide supply chain support. FSIC helps clients purchase the exact products needed to operate their business at the least possible cost and monitors invoice data to ensure that each unit is receiving the right products and charged the right price. This typically represents massive savings. FSIC helps clients manage every step of the supply chain starting with negotiating direct deals between restaurants and the manufacturer, all the way to monitoring every item on every invoice for spec and price compliance.