With inflation continuing to present fiscal challenges for businesses, it’s more important than ever for industry professionals to keep a close watch on their bottom line in 2024. Many caterers intend to raise pricing and book more clients in the new year, resulting in higher gross revenue. But reducing expenses is just as effective at boosting profitability, so as you work to bring in more money, consider also how you can save on rising costs.
Whether you’re considering a new food supplier or content with your current one, negotiation should be one of the most-used cards in your deck next year. While trustworthy providers have your best interest in mind, only you know the inner workings of your F&B business. So don’t be afraid to ask for a discount, adjust your orders, or try new approaches when ordering inventory.
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Take these six negotiation tactics into 2024 and watch the savings stack up by the end of Q1.
Understand cost structures
Food suppliers can charge you in several ways, and knowing the difference between these cost structures allows you to compare and select the most advantageous option. Here are the most common cost structures:
- Cost-plus fixed fee: This is the most straightforward cost structure, charging a flat fee in addition to the cost of your item(s). For example, you pay a fixed $25.00 fee on top of the cost of your order. This simple arrangement makes it easy to anticipate future costs.
- Cost-plus markup: With this pricing structure, you would pay a fixed percentage in addition to the cost of your item(s). So, if it’s a 15% markup, you would pay 15% on top of your order, whether it’s $100 or $1,000.
- Cost-plus margin: Typically the least advantageous for buyers, sellers charge a variable percentage per item(s) to maintain a set profit margin. Depending on the items purchased, you might pay a 10% fee on one order and a 25% fee on the next. In other words, this cost structure favors the supplier’s profit margins above all else.
If you aren’t sure how your current suppliers price their services, take some time to review your past invoices before the year ends. Then, if you’re not satisfied with the cost structure, discuss how you’d like to see it change in 2024 or take your business elsewhere.
Do your homework in advance
It’s hard to go to the negotiating table without bargaining chips, so you must prepare with market research. Go through your purchasing orders for the year and take a count of the items you buy most frequently. Then, start looking around your market to see if the prices match what your current supplier is charging.
A few places to look: grocery stores, co-ops, wholesale stores, local butcher shops, farms, and other food distributors. You can also ask around with caterers and restaurateurs to compare prices and get a better pulse of the local market. Then, when it comes time to negotiate with your suppliers, you’ll have the knowledge (and numbers) to back you up.
Buy in bulk when it makes sense
Buying goods in bulk is a cost-effective strategy, but only if you use everything you get. If you toss out half of your wholesale order, you won't save anything! So, as you plan your menus for the next purchasing period, separate food items by usage level and order only heavily used ingredients and non-perishables in bulk. Here are a few things worth considering:
- Proteins and produce you use regularly (e.g., chicken breast, carrots, apples, etc.)
- Salt
- Flour
- Sugar
- Butter
- Eggs
- Nuts
- Paper goods
Space is another key consideration when purchasing in bulk. Order only what you can store safely and properly to prevent food safety risks!
Schedule consistent deliveries
Recurring orders are good for a distributor’s business, so reach out to your supplier to see if they offer any discounts or benefits for getting on a consistent delivery schedule. You may need to adjust your orders to avoid overbuying, but it’s worth it if you can secure a retainer bonus.
Be open-minded to alternatives
There’s no need to remain tied to high-cost brand-name items when more cost-effective options are available. Of course, some generic products won’t cut it, but you won’t know until you try! Request samples from your supplier and see what you can replace with budget-friendly alternatives.
If you’re hesitant to mix things up, start small with some of your less-notable ingredients. (In other words, experiment with switching out your usual white vinegar before your go-to balsamic!) And when in doubt, ask your supplier for recommendations. They’re here to help!
Delegate negotiation to a GPO
You have menus to plan, kitchens to run, and people to manage. If negotiating food prices doesn’t make it to the top of your to-do list, consider joining a group purchasing organization (GPO) and letting them handle it for you.
By leveraging the purchasing power of thousands of companies, GPOs help their members by negotiating for better pricing than any individual can secure on their own. In addition, GPOs support by sourcing hard-to-find items, adjusting pricing structures, and consulting on market trends and fluctuations. The best part: GPOs are free to join, offering catering professionals a 100% return on investment.
As you head into the new year, ask this question often: “Am I getting the best value possible?” If the answer is no, adjust your purchasing process to trim the fat. Your bottom line will thank you. With that, here’s to a profitable 2024!
