Distributor Negotiating 101
When is the last time you renegotiated pricing with your Distributors? It's one of the best ways to decrease your expenses so you can realize more profit in your restaurants. Keep in mind that everything is negotiable to a point. However, it would be best if you are prepared before you climb into the octagon.
1. Sell you and your business as a must-have account
Distributors are just like any other business owner. They want to sell as much products as they can, and they value the accounts that help them reach that goal. When negotiating with distributors, make sure they know you are someone who is in the relationship for the long term. You should have at least the last six months of purchases in a report you can share. Help them understand what to expect from your account.
2. Think outside the box, price can have many components
If the distributor doesn't budge on price, you can still negotiate for other things that will help lower your expenses. For example, longer payment terms, drop size incentives, and private label incentives. Certain days of the week are more at a premium than others, ask where they need help filling out their trucks. What about night-drops? This becomes the give and take of the process.
3. Consider shifting all your business to the one right distributor
If you've been giving your business to multiple distributors, consider transferring all of it to one distributor or supplier.
4. Talk to multiple distributors and suppliers
To encourage competitive pricing, if possible, talk to at least three distributors. Make sure they all know you are taking competitive quotes. Let the distributor know this is a "best and final offer," they will not be called back if they are eliminated from the review process. Explain to them that you will go with the distributor that offers you the best overall value, not price alone. Keep in mind quality is always a decision consideration.
5. Don't accept the first offer
The rules are the same when dealing with a distributor as any business negotiation, never accept the first offer. On a call back let them know they are close and ask them to “close the gap” with your other offers. Be ready if they ask you where they "need to be". Don't be greedy and ask for an outlandish reduction, keep your counteroffer reasonable. You are working towards a long-term partnership.
6. Be someone suppliers want to do business with
It doesn't matter how much business you give your distributor, if you're a problem customer, you may not get the best deal because it's too much work to do business with you. It's essential to maintain good supplier relationships by remembering that while they need you as a customer, you need them, too. Be sure to pay your bills on time, maintain open communications, and treat the relationship as a partnership, where both of you get what you need.
7. Get it in writing
I can’t stress this enough, get your deal in writing! An agreement forces you and your distributor to resolve all the ambiguities, consider the worst-case scenarios, and address them explicitly. Trust is a wonderful emotion that has nothing to do with the agreement.
Negotiating with suppliers doesn't have to be difficult, but it does pay to be prepared and have a plan before entering the octagon. If you need some assistance in getting your review rolling or
looking to outsource the project, please give SC2 a call at 303-883-3355 or mark.hampton@comcast. net
Mark Hampton is a successful “C” Level Executive with 40+ years of progressive experience managing the diversified and extensive supply chain and corporate restaurant functions. Mr. Hampton started his firm in December 2017. He quickly developed and built the business from start-up to generating 6-figure sales annually within the first year; established a strong account customer base of NRA’s Top 200 restaurant owners and private equity clients. During his career, he managed the 7th largest full-service restaurant chain in the US, managing all Supply Chain functions with a total annual spend of 500M per year with eight restaurant concepts, three manufacturing facilities, 700 locations, 11k SKU’s in 12 Distribution Centers, in 46 states and Guam. www.sc2.guru