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R&IEditorial Archives2005February 1 — Business

Good Buys Are Hard to Do
But independents and noncommercials can be smarter purchasers.

Smart purchasing extends to the loading dock: Check all deliveries for accuracy and quality.

Like consumers’ resolutions to shed pounds, many operators’ determination to cut food costs this year through smarter purchasing tactics already may be losing steam. The problem isn’t lack of desire or failure of will but absence of time.

“Purchasing isn’t complicated; operators can do it if they want to dedicate the time to it,” says James Covart, president of Bedford, N.H.-based Hospitality Services Group (HSG), which handles purchasing for more than two dozen independent New England restaurants. “The issue is consistency. It’s no good comparing prices today if you’re not going to do it tomorrow and every day.” But for most restaurateurs, he adds, time is the commodity in shortest supply.

Size has privileges, and restaurant chains, multiconcept operators, healthcare organizations, contract-management companies and other multiunit organizations reap benefits in purchasing food, beverages, equipment and supplies. Their higher volume earns lower prices and rebates often unavailable to independent restaurants and small noncommercial operations. “Distributors say their volume comes from chains, but their profits come from street [single unit] business. That should tell independents something,” says Covart.

Romancing Prices
That doesn’t mean smaller operations can’t reap benefits from smarter purchasing, however. Outsourcing buying functions to purchasing agents such as HSG is one solution. Increasing clout by pooling resources through a cooperative purchasing organization is another option, already popular in the noncommercial segment and gaining favor among restaurateurs.

Operators who refuse to limit their independence but are willing to dedicate the time required to closely oversee purchasing also can trim costs. Technology—including purchasing-management software and Web-site ordering—“has made it possible, if not simple, to track price changes, but it takes dedication,” Covart says.

Dedication is a requirement for success as an independent restaurateur, says Gabriel Viti, chef-owner of Gabriel’s Restaurant and Miramar Restaurant, both in Highwood, Ill., and purchasing is too important a function to cede to others.

As always, start with customers, advises Viti. Know what they want and then work closely with suppliers to secure the best products. Once top-quality core food and beverage items are identified, volume purchasing of key items can produce rebates for independents just as for chains. But dedication to quality above price is what sets independents apart, he says.

Viti, who recently added 4,000 bottles to the 10,000-bottle cellar his restaurants share, says wine purchasing is more nuanced than food. “A leek is a leek. You insist on quality and then it’s price per pound. There’s more romance with wines; wines are not commodities. You want to taste them, and we’ll do blind tastings with the whole staff before we buy.

“But the rule for wine purchasing is the same as with food: Buy what you know you can sell, and buy at the right price,” Viti says. “You work with your vendors on quality and price. You pound them on that. You never skimp on product quality but you work to get the best prices.”

Independence Days
Schools can find themselves at the bottom of the food-buying chain. With tight budgets and shopping lists that include few high-end items, manufacturers and distributors often show school bids little respect. But join schools together in a cooperative buying organization and they gain the kind of clout multiunit chains enjoy.

At its Child Nutrition Industry Conference last year, the Alexandria, Va.-based School Nutrition Association heard about co-ops’ power from Jan Risi, president and CEO of Independent Purchasing Cooperative (IPC), a nonprofit corporation operated by Subway restaurant franchisees to handle food, packaging and equipment buying. Her message: Mass equals might. Co-ops can leverage their scale to get the products they want with volume rebates.

Chef-restaurateur Gabriel Viti says his rule for wines and food is to buy quality and buy what he can sell.

Securing those advantages was the impetus for the creation nearly eight years ago of the Northern Illinois Independent Purchasing Cooperative (NIIPC). “Before, we had to take products from where we were told to get it. Now we find what we want through a single distributor,” says Micheline Piekarski, foodservice director of Oak Park and River Forest (Ill.) High School, who was an NIIPC founder and has seen it grow from 11 school-district members to 43.

“Our goal was to be able to go directly to manufacturers with our top 10 items” and negotiate better prices, Piekarski says. “Because of NIIPC’s size, we got that. With our distributor we’re bidding only on shipping and handling. In doing that, we’ve seen major savings.” Volume rebates meant savings from 2% to 50% per item, she says.

“New members’ primary interest is always pricing. We tell them the other advantage is time saved. One person is doing the bidding and managing rebates for the group,” she says. “There’s also increased networking. When you’re an independent, you don’t have a headquarters; you’re on your own. We can share ideas on cost savings.”

HSG’s Covart says co-ops can have enough size to force distributors to carry desired products or brands, but that gaining consensus on which brands the group will buy can be difficult. “Some foodservice directors don’t want to give up that independence,” Piekarski concedes, and losing familiar brands can be a problem for districts when they first join the co-op. However, cost savings are a powerful force for bringing agreement.

“I can’t imagine why a district would not want to join,” she says.

Buying Tips From a Pro
Build strong professional relationships with vendors and distributors, advises James Covart, president of Hospitality Services Group, but making money rather than making friends is a business’s goal. Among other tips he shares on becoming a better purchaser:

  • Don’t take relationships—even longstanding ones—for granted. The truth is that salespeople, like operators, have their own best interests in mind.
  • Always ask suppliers for item prices before placing orders. It signals you care about costs.
  • Have two acceptable suppliers for each item and request bids from both. This helps with prices and availability.
  • Make two phone calls to suppliers: the first on pricing, the second to place an order.
  • Keep suppliers’ costs in mind. Two $600 deliveries per week instead of three $400 deliveries cuts a supplier or distributor’s costs and can yield price breaks.
  • Always check deliveries. If an item is sold by count, count it; if sold by weight, weigh it. Even honest mistakes cost money.
  • Understand that prices paid and services received are affected by an operator’s willingness to pay within the terms agreed to.

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