Restaurant Profitability Blog

Food Costs Are Up. Fix it with a Quarterly Business Review

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The 9 Step Process Guaranteed to Put Money in Your Bank

Let’s face it, food costs aren’t going down.

According to the National Restaurant Association, they’ve actually shot up 25% over the last 5 years.

Price fluctuations? They’re even more common.

Sometimes, they change as often as every week.

These numbers wouldn’t matter (and we wouldn’t spend time writing about them) if food spend didn’t represent 30% – a full third! – of an average restaurant’s total budget.

Maintaining this piece of your business can literally be the tipping point between profitability and failure…

So don’t try and tell us that food spend doesn’t matter.

Because of this – and because we’ve got your back when it comes to running a more profitable restaurant – we’ve created the Quarterly Supplier Review process and template.

It’s built to help you hold successful meetings with suppliers, leading to controlled costs, lower prices, and higher margins.

When implemented, it’s a foolproof way to take definitive control of your food spend.

How It Works

The Quarterly Supplier Review process and template are built to spark meaningful conversations between you and your suppliers. With it in your hands, you’ll have the negotiating power to get the best deal on food and non-food items… Specifically, with items you constantly purchase.

No more will your complaints about surprise increases be met with a shrug. You are the (food pricing) captain now.

The Quarterly Supplier Review consists of specific steps, covering topics such as:

  • Scheduling supplier meetings
  • Calculating the spend on your most important items
  • Understanding your total spend for each supplier
  • Discovering price increases on specific items
  • Running a productive meeting

Conducting a Quarterly Supplier Review will allow you to understand where you stand with each of your suppliers on important topics such as total spend, customer service, and price increases.

You’ll also be able to see what prices each supplier is charging for the same ingredient so you can choose the best option.

Want to make it even easier to do?

The Orderly app helps automate this process for you. You can see your prices compared to local supplier pricing… You’ll get everything you need for your Quarterly Supplier Review with a fraction of the preparation.

With this process in place, you can save thousands of dollars a quarter on your food cost.

It’s simple… It’s effective… And it will make a practical difference in your business.

Step 1 – Put it on the Calendar

Organize, Plan, and Invite Suppliers to Meetings

First things first, get yourself organized.

On your personal calendar, block off a few days to use for these Quarterly Supplier Reviews.

Ideally, these meetings should take place every three months – and we recommend scheduling them at the end of the month when all of your accounting numbers are processed.

Also, try to put them on days of the week that are a bit quieter. That way, you can give the meetings your entire focus, instead of jumping in and out.

Life in a restaurant is never routine, so create somewhere you can.

Once the dates are on your calendar, get your suppliers in on the party. And don’t just tack this on to their weekly check-in… It’s important. It should be a separate, standalone meeting.

Participation from every supplier – not just your broadliners – is necessary.

Make sure you’re meeting with the rep you consistently work with – someone who’s familiar with your business, not Brian who’s been on the job for a week.

In addition, anyone with decision-making status at both your restaurant and the supplier company should participate.

Also consider adding an annual meeting to your calendar to review yearly changes with suppliers, bringing your total number of reviews to 5 (Ideally in January, March, June, September, and December).

Next, it’s time to check some numbers and prepare specific topics of discussions for these meetings. Bringing this information to the meeting will allow you to lead the conversation and justify changes you’d like to see implemented.

Step 2 – Do The Math

Add Up and Break Down Your Supplier Spend

Your first step in preparing for a Quarterly Business Review is to add up your total spend with each supplier. Only include spend from the past 3 months – or since the last time you met.

For annual supplier reviews, you’ll want to total your 12-month spend (duh).

Next, you’ll want to understand what percent each supplier contributes to your total food spend.

For example, consider the food spend totals and percentages here:

Restaurant Total Food Spend: $45,000

  • Supplier 1: $4,500 (10% of the total food spend)
  • Supplier 2: $12,150 (27% of the total food spend)
  • Supplier 3: $28,350 (63% of the total food spend)

In this situation, Supplier 3 contributes the highest percentage of food spend to the total. This may be because of something obvious, like the fact that you order the bulk of your food from this supplier.

But, maybe this supplier is hogging the majority of your food spend simply because of your own laziness.

Too many people just stick with a supplier because that’s what they’ve always done. But, if they’re overcharging, their loyalty is as gone as yours should be.

Step 3 – Know What’s Changed

Compare Your Spend to Previous Time Periods

You can’t see any discrepancies in your food spend without knowing its history.

You’ll need to compare your total food spend and each supplier’s individual spend numbers with the same numbers from the previous time period.

See how the spend has (or hasn’t) changed. If it increased or decreased, mark down by what dollar amount, and by what percent.

Follow the same process when comparing your annual numbers.

Step 4 – Focus on the Top 20

Take a deeper dive into the stats.

Now, it’s time to dig in and take a closer look at some of your trends…

Create a list of your top 20 items by spend. These will be the items you’ll focus on with your suppliers.

Just like in the last step, you’ll compare the spend on these items to the same time last quarter and the previous year. Be sure to mark down the dollar amount increase/decrease, as well as the percentage.

In addition, check how these items have changed over time. Are they the same ones that made up the top-20 list three months ago? A year ago?

With that list completed, create two more lists:

  • Top 10 Items by Price Increase. What items’ price jump are making your head scratch? Write down the top 10… These items represent where the majority of your money is flowing, and are a perfect place to cut back.
  • Top 10 Items You Purchased the Most. What items are you purchasing over and over? By default, these items will contribute to a majority of your food spend. Calculate the price increases on these items from the past quarter and year. This can be used as a way to negotiate bulk pricing on these items when appropriate.

inventory for pizzerias

Step 5 – Get a Price Check

Price Compare to Other Suppliers

This could be the most important step in the Quarterly Supplier Review process.

Before meeting, you’ll want to find out what other suppliers are charging for those items you just listed. Do research both with suppliers you already use, as well as new ones.

Basically, do your homework. Don’t let your dog eat it. Because this is where you can save the most money.

Step 6 – Look Beyond the Money

Review Customer Service Issues

Before your meeting, take time to focus on your experience with the supplier. List things that are important to you when it comes to customer service, such as timeliness and consistency of deliveries or communication and availability of reps.

For each supplier, make sure you list notable highlights or other major problems from the past 3 months.

Mark down anything that hasn’t been addressed yet, like undelivered or wrong orders, credits owed, or un-processed returns. Be sure to get feedback from anyone at your restaurant who interacts with these suppliers.

This process should be thorough. Be specific. Being vague or general won’t do you any good.

Step 7 – It’s Meeting Time

Have the Formal, Face-to-Face Review

You’ve got the numbers. You’ve got the knowledge. Let’s get to the main course.

And don’t you dare show up disorganized.

Make sure your supplier shows up. This meeting should be face-to-face. Don’t do it by phone, or video chat, or email. This meeting is important. You don’t have important meetings over the phone.

Every piece of information you gathered should be in one central location. We recommend using the template included at the end of this document – but hey, maybe that’s just us.

During the meeting, go over each step you’ve researched as a part of the Quarterly Supplier Review. Write down comments, suggestions, and other notes for each section.

Step 8 – Reduce Your Costs

Ask for Price Relief on Your Highest Movers

You’ve got your stats organized. Now it’s time to ask for price relief.

This is where the pot gets boiling. Where the wolves separate from the sheep.

If you don’t step up and ask for price relief, you’ve wasted your time. The Quarterly Supplier Review process will be more useless than a well-done piece of steak.

Specifically, ask for relief on the items that are most important to your restaurant.

We also recommend asking for price relief on any item that has shown a high percentage of increase – typically 10% or higher.

Step 9 – Check the Results

Send a Post-Meeting Follow Up

Immediately after the (hopefully successful) meeting, send the completed supplier review documents to the supplier you met with. We recommend sending it as a PDF so it can’t be changed (sneaky ones, those suppliers).

Make sure any comments, suggestions, or promised changes are clearly noted. This includes any offered price breaks, bulk pricing, and customer service improvements.

If you can, we actually recommend printing this document while your supplier is still there. That way, the supplier can immediately sign a copy, and you can give them one for their records.

A handshake isn’t enough. Signed documentation is the only way you can ensure changes happen.

Conclusion: Everything Is Negotiable and You’ve Got The Power

To put this Quarterly Supplier Review together, we chatted with thousands of restaurants. Through our conversations, we learned that negotiating prices with suppliers is taboo across the industry.

It seemed to be because:

  • Restaurants don’t know negotiating is an option
  • If they do know, they don’t know how to properly negotiate with suppliers
  • Restaurants don’t know the extent to which they can negotiate prices

Overall, many restaurants felt the named prices were set in stone and there was nothing they could do about them.

This is false. The restaurants have the power.

As opposed to every other industry, there’s no standard pricing for restaurants.

Even national suppliers like Sysco and U.S. Foods don’t produce a standard pricing sheet for major cities. They don’t even reveal pricing regionally or nationwide.

Instead, it’s a case-by-case price based on the rep and the restaurant.

That means prices can ALWAYS be negotiated.

And that’s the reason we produced this Quarterly Supplier Review process and template… because you as a restaurant owner should be able to take steps and get the best price on everything.

Why?

Because this is a single digit margin business…

Food costs represent 30% of your operating budget…

And managing this one area of the business means thousands of dollars in your pocket every month.

And because, for some reason, we have to keep reminding you…

More money is a good thing.

Does this task still seem daunting? Maybe you’re worried you won’t stay organized?

We’ve put together a Quarterly Business Review Template for you to use.

It’s got space to write down every stat you need to find.

It’s got extra room for notes.

It even has detailed instructions to keep you from getting lost along the way.

And you can download it here, for free, today.

OrderlyFood Costs Are Up. Fix it with a Quarterly Business Review

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