By Tracy Morin
Are you constantly wheeling and dealing with multiple distributors to obtain the best price on every last item, down to the penny? Do you often feel like you and your sales rep are more “frenemies” than true partners? Stop the cycle of suspicion—there are surprisingly simple ways to transform the operator-distributor relationship into a fruitful and mutually beneficial arrangement. And, as it turns out, the basic tenets that can make it happen aren’t all that different from the fundamental rules of romance.
—Ed Zimmerman, The Food Connector
Rule #1: Make a Commitment
Experts agree: Pitting distributors against each other in the hopes of greater savings is operators’ most common mistake. “Bidding out each item, playing cat-and-mouse—it’s a game operators cannot win,” says Ed Zimmerman, president of The Food Connector in San Rafael, California. “The distributor is solely focused on food products and markets; the operator is trying to negotiate with someone who simply has better information.”
Mike Rasmussen, owner of Rasmussen Tax Group and president of Eyenalyze in Conway, Arkansas, adds that independents with one or two locations can’t hold much clout with distributors when they’re dividing purchases between three or four suppliers; there’s no incentive for a volume discount. On the other hand, partnering with one distributor ensures more volume—and, therefore, better deals. “It’s not true that you can shop your way to food cost,” Rasmussen says. “You’re not going to. And when you shop around, you can’t expect consistency.”
The key to building a mutually beneficial relationship with distributors is trust, experts say.
The takeaway? Avoid wrangling with too many distributors. “The more you buy from a single salesperson/distributor, the more important you become. And the more important you become, the better service—and, in most cases, the better overall prices—you get,” says Bob Doherty, sales manager at Colony Foods in Lawrence, Massachusetts. “When a customer pits many distributors against each other, he may get good prices on some things, but because there’s no relationship there, the distributor is looking for a way to make up the profit loss on other items.”
Zimmerman uses this analogy: You charge $3 for delivery when someone calls for a pizza. But if he orders two pizzas, the cost for delivering each is cut in half; for four pizzas, it’s 25%. That’s how distribution works. So if an operator buys $1,500 worth of products vs. $500, the distributor is in a position to lower the markup on all items. In other words, “make a commitment to get the best prices,” Zimmerman advises. “A distributor isn’t going to carry every single thing that you need. You might need a specialty or backup distributor, perhaps for produce or unusual requests. But commit to one as your main distributor, providing the bulk of your items.”
—Mike Rasmussen, Eyenalyze
Rule #2: Partner Up
The most important aspect in building a positive and mutually beneficial partnership between a distributor and a customer is trust, Doherty says. “The customer must trust his salesperson/distributor that he will get the correct product in a timely manner at a fair price, while the salesperson/distributor must trust the customer that he will be honest and pay for the product he gets,” Doherty says. “Done right, it’s a true partnership, because the better a customer does, the better the salesperson/distributor does. This has been, and always will be, a relationship business.”
Zimmerman suggests this outlook: My distributor is my friend who can help me save money and come up with better products for my menu. “Many operators view that relationship as adversarial,” he notes. “But a distributor who sees you as a partner is going to do their best to keep you competitive.” And make yourself a positive partner too: For example, Zimmerman suggests, lower the distributor’s costs by being prepared with your weekly order (rather than forcing a rep to track you down with six phone calls) and pay your bills on time.
In turn, your distributor should provide plenty of value—not only in terms of costs, but in terms of business benefits. Rasmussen believes operators should work more tightly with distributors, not just to sell product, but to provide solutions. And Zimmerman adds that the time you save haggling over pennies will be better spent marketing your pizzeria in the community. “There’s no such thing as a guaranteed lowest price; price is a function of quality and service,” he says. “You can always get cheaper products, but that might not be what’s best for your pizzeria.”
Rule #3: Foster Communication
Avoid wrangling with too many distributors for the best price. The more you buy from one distributor, the more important you become to them.
Keeping the lines of communication open will do wonders for your relationship—and your business. “Food costs over the last few years have skyrocketed, but customers who have good relationships with their distributors can use the latter’s experience and knowledge to help control costs,” Doherty says. “They can provide ideas, such as lower-costed like items, new products to produce new menu items, and new ways to go to market.”
To get the most out of the partnership, Zimmerman recommends, be transparent with your distributor; tell them about your plans or upcoming promotions to see if they have ideas on sourcing or recommendations on the best times of year to feature certain products so you can schedule promotions accordingly. “Many distributors are offering online ordering, so place the bulk of your order online and then spend the time talking to your distributor sales rep about specials, promotions and buying opportunities,” Zimmerman suggests. “And ask them what’s hot; they’re servicing 50 to 100 restaurants, so they see trends that an independent operator doesn’t see.”
In fact, Rasmussen notes that what not to do—pitting distributors against one another—was once a necessity to “keep people honest,” but those days are gone thanks to a more transparent industry, with data so readily available and tools that help operators make smart choices. Consider technology a weapon in your communication arsenal. “Now you can have information at your fingertips,” Rasmussen says, “and those tools help people be accountable.”
Adopting these simple rules may very well revolutionize your relationship—ultimately creating a win-win for both parties. “One mistake customers make in dealing with distributors is thinking that we’re all the same, and we’re all out to take advantage of them,” Doherty concludes. “That’s because they have never really looked at a distributor as a partner in their business. For everybody to be successful, it has to be a partnership built on relationship and trust.”
|Our experts weigh in on the latest tools that can give you an edge when it comes to purchasing:
“There are some emerging technologies for buying—like spreadsheet pricing programs, where you put in an item to see the lowest prices. But that doesn’t always tell you about quality. However, more and more group purchasing programs are starting to become available to independents; they’re negotiating with large groups of independent distributors and manufacturers to get better deals for everybody, so the price is based on everyone in the group’s volume, not an independent restaurant’s volume. There are a number of group purchasing organizations in the industry.”
—Ed Zimmerman, president, The Food Connector, San Rafael, CA
“We’re working with a distributor to provide a tool with which their customers can upload products to a site and easily plate-cost. For example, we work with a pizzeria that enters invoices in this platform, exports to accounting, does plate costing, and matches everything up with sales reports to see that the distributor is performing. If not, the operator can match up different distributors’ ingredients to compare. This gives the operator control, and when you’re a little guy, it’s all about control. You know in the back of your mind that if your distributor isn’t serving you well, you have the ability to move.”
—Mike Rasmussen, owner, Rasmussen Tax Group; president, Eyenalyze, Conway, AR