Whether your organization is growing from 1 to 2 locations, 10 to 20 locations or 50 to 500 locations, you are in transition and there are many factors involved in whether you will be successful with this growth. Many elements of your growth will create an emotional high of which there is nothing like it, but caution, there are many bumps in the road with growth of which some you will see, recognize and react to quickly and some that you will miss or not be prepared for.

The future of your organization depends on the pillars you have set up. The pillars may grow taller as you grow, but keeping them strong without crumbling is the challenge. Below are the five biggest growth challenges that you may face.

Capital and Financial Stability

In order to grow your brand, you have come up with one or many ways of raising the money you will need. This may include self-funding, independent investors, banks, private equity or a combination. You have big plans for your growth. Is this plan realistic and have you raised enough money to support it? In a perfect world, you would be dealing with a cookie cutter budget to work with. This would mean having AAA real estate with the exact same square footage costing you the same dollar per square foot with construction and other new store opening costs being the same for each location and all projections running on time. You would have no trouble hiring or training, your guests would line up from day one and your sales projections would be right where you had expected from the beginning and stayed that way forever. Unfortunately, projecting growth does not work like that and you have to plan for those twists and turns along the way. What you can’t be is under-capitalized as this will create pressures that affect the whole organization.

Financial stability of the company can’t be compromised by being under-capitalized with your growth. The restaurant locations that you have open must be able to be managed properly with no cutting of corners including vendors being paid on time. Your restaurants must continue to look sharp. One of the biggest growth issues is declining sales from existing locations simply because they are not being maintained properly and in general, because eyes are so much on the future that the present is not being focused on properly.

Real Estate/Site Selection

This appears obvious, but are you under pressure to grow at a pace that may not be realistic? This may cause you to choose locations that do not fit your standard for demographics, size prototype, dollar per square foot, landlord buildout support, construction costs (union vs non union), labor availability and cost of labor and so much more. You also have to factor in the added cost to your operations when you spread out to multiple markets.

One bad location will need four good ones to make up the needed bottom line.  It is critical to have a real estate specialist on staff or work with an external restaurant real estate company. In either case, they need to know the markets extremely well and be under the microscope to find you the standard that you have come up with. They need to have the connections with the landlords and development companies and understand all the parameters of what will provide you with successful restaurants. Every location will not be perfect. You will have some that exceed expectations and some that will fall a bit short, but the key is to avoid choosing the wrong markets and the wrong sites. Make sure you have a qualified real estate professional working on your behalf.

Infrastructure/Internal vs External Support

Growth requires the right people pushing the buttons. Along the way, no matter what the size of your company, there will be people wearing multiple hats. You need hybrids in every organization, but as you grow, you need specialists who have areas of expertise that will be critical to your success. As you grow, things become more complicated. You may have been a distributors dream in the original market that you started in and your buying power as a small regional chain may have been good. You may have been negotiating your own deals and developing the menu items that made you a success.

You may have picked your own real estate and was actively involved in each new store opening. Now you have to make some big decisions. Do you hire internally or do you bring in short term or long term specialists to make sure that you have the knowledge and expertise to make sure stay on the path to success. Typically it is best to do a combination of both. The crucial part of this is to be prepared. You need to continue to have a plan on the stages of when you need to add this support.

Systems and Consistency

Preparing for growth usually starts with the three areas above. You may have the money, locations and even the people to make it happen, but are you ready? Yes, you love your brand and you believe it is better than everyone else. You can’t wait to get it into different markets and confirm this, but are the systems in place to protect your brand? Without over the top detail, your brand will begin to look different from place to place. You have put your stamp on the design and layout of the locations. Now you have to do it from the restaurant set-up, training and operations. The team involved in the hiring and training of your restaurants staff will create the culture of your new restaurants. Yes, there needs to be clear training materials that are very visual in what the specifications of products are, how they should be prepped, how they should be served, how to store products and clean the restaurant, but you can’t put passion on a piece of paper. There are a lot of options for labor in today’s market.  Without good people who believe in your brand and who will execute your message, without you there, inconsistency will begin and your brand will slowly erode.

You need to put in checks and balances with continual corporate training and systems, but avoid cookie cutter openings when it comes to culture. You also must make it clear as to where there is no flexibility and where there is flexibility and what that means. Some things such as your proprietary products must be at every restaurant and your distributors must have them available even for your first location in a market, but it is not realistic to expect every ingredient to be the exact at every location. For instance, you may have a spec of a 14-18 ct Applewood smoked bacon from Smithfield for your locations, but in a new city where you are opening your first location, the distributor does not stock Smithfield for this item, but has two others with same spec. You should be cutting multiple products in advance and approving alternates. Once you build up volume, you can move to the original manufacturer.  Every location you open must feel like it is the only one. The focus needs to be on your standards so your guests can be wowed. By creating the systems and standards early, this can be accomplished.

Balancing Emotion in your decision making

From a company’s first location to their 500^th, restaurant brands all feel that their food, beverages, design, layout, menu and concept in general are the best and needs tweaking, but no real change. Restauranteurs have passion and are artists in their own way. Early success tells them that their critics (their customers) love them and will always love them. At the beginning, the founder and creator was in the restaurants a lot and spent time with their guests. They watched the quality of the food, they made sure the restaurants were clean and they could count on many relationships they created with vendors and their staff. As you grow, you begin to count on others to follow your lead and execute much of what you used to do. The food, service and cleanliness are assumed to be as great as ever and you assume that your customers will come to you forever. Is it possible that they love your burgers and come for that, but never liked your fries? Do you have fish n chips that are a big seller and you are using cod because you like cod, but your guest does not even know? You also will assume that your vendors and other outside relationships are the best and that your pricing on items is better than anyone else.

The first thing that should be clear is that your vendors and anyone else that you count on your business will always look out for themselves first and then you. There are things that you do not know that may not be as transparent as you think. If you feel a deal is too good to be true and so much better than others much larger than your organization, it is most likely not. As you grow, there are very important decisions that need to be made that allow you to keep your organization consistent, but growth may not allow you to do some of the things that you have always done in one region. Key initiatives such as local, organic, scratch, cut fresh must be maintained but not on everything. You need to be concerned about availability, labor, food safety, guest credit and so much more. Do you really need to make fresh guacamole in a restaurant that is primarily Italian? Do you really need beautiful hot house tomatoes for chopping and placing in your salsa? Does your guest really need for your burgers to be ground in each location and do they notice the difference? There are so many questions like this to be pondered as you grow. Ask lots of questions and stand by certain things and create alternate plans where you can. Make the decisions at your convenience as opposed to when you are forced to…..

There is nothing better than taking a brand and growing it. Understanding the challenges early in the process and doing the heavy lifting at the right time will make the chances of your success far greater.

Restaurants are known for their razor-thin profit margins. That notion holds particularly true among affordable fast-casual and quick-service concepts. Add on pressures like rising real estate costs, unpredictable food prices, and minimum-wage hikes across the country, and operators are left with even less of a financial safety net.

In this climate, every penny counts. One often overlooked factor into your monthly costs comes from your utility bill. While something like a utility bill may seem like a fixed, somewhat inelastic cost, there are changes and improvements to your restaurant that can save you money and increase your bottom line. To help, we’ve asked an expert at SIB Fixed Cost Reduction to identify ways restaurants can lower their utility bill and save themselves money in the long run.

Make Sure You’re Using the Right Light Bulbs

If you are still using incandescent bulbs in one or more of your restaurants, it’s time to make the switch to LED. This is the fastest way to lower the electricity bill. Switching to LED bulbs can lower your costs by 50-75% per fixture.

The transition will require some upfront costs that take time to show results, but in the long run the ROI for a switch to LED will pay off.

For example, let’s say you have lights in your parking lot, and you replace one of the heads on those lights from incandescent to LED.

The initial cost may be around $300, but you save 10% per head per month, so in 3 years the project will pay for itself.

In addition, a cleaner and more well-lit parking lot attracts more customers to your business, which will help to accelarate the the break-even cost of switching the heads in the first place.

Upgrade Your Old HVAC System

This can be a drastic change, and a fairly large financial undertaking in the short term, but upgrading old and inefficient HVAC systems can do wonders towards energy efficiency, and ultimately, your savings on monthly utility costs.

These are savings you will begin to notice immediately following the upgrade. To ensure that your HVAC system is running at it’s most optimal, consult with a trusted contractor about what’s the best fit for your location.

Protect your investment by establishing a sound maintenance program.

This includes regular cleaning and inspection of your HVAC equipment by a qualified professional.

Add Tints to Exterior Windows

Adding tints to exterior windows is an effective way to save on heating and cooling your business, especially in the summer season.

The window tint acts as a barrier between the sun and your business, blocking out ultraviolet light and keeping the interior of your business cooler.

This will allow you to save on running the air conditioning, cutting down on the electric bill.

In the winter month’s the window tint can help to keep heat in. In addition to lowering your energy costs, this addition will also save wear and tear on your HVAC system, keeping your business at a more steady temperature.

Know Your Electricity Market

In the U.S, there are 2 types of electricity markets: regulated and deregulated.

In a regulated market, the utility company owns all of the infrastructure around electricity. These companies then sell directly to the consumers at fixed rates. The rates are set by a state’s public utility commissions. In regulated market there are different tiers, so it is important to ensure that your restaurant is being charged the correct rate. There are different industries rate structures.

For example, a restaurant’s rate structure may be different than that of a hotel or shopfront.

On the bill there is a code that says whatever rate structure you’re on.

You will have to call the regulated utility provider and tell them you’re doing an audit or confirm online that you are on the correct rate. 68% (34 states) are in a regulated electricity market.

In a deregulated market, private competitors buy and sell electricity by investing in power plants and transmission lines. Generators sell the wholesale electricity to retail suppliers, who then sell to consumers. In a deregulated market, the retail suppliers set the prices for consumers.

Areas with deregulated markets are: California, Connecticut, the District of Columbia, Delaware, Illinois, Massachusetts, Maryland, Maine, Michigan, Montana, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Texas.

If you operate in one of these areas, comparing bids from multiple brokers to ensure that you are getting the best price is an effective strategy to cut down your utility bill and save your business money.

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While there are some restaurants that have built a solid reputation and extreme success by staying faithful to their tried-and-true menu such as Sweetgreen, a farm-to-table salad concept that has grown to 91 locations in 12 years and is valued at more than $1 billion, many require relatively frequent updates. It seems to be a byproduct of the current changing trends and foodie reviews that have potential clientele checking out what restaurant is serving the latest edible algae ten minutes after spotting it on a post or tweet.

So, just how are restaurants redefining and modeling their menus under this state of constant flux, with many making daily changes? Enter the world of technology.

Digital Restaurant Menus

This interactive experience allows guests to order straight from tablets delivered to their table. Many of these tablets also offer payment methods including credit card readers and even the ability to pay using mobile apps such as Google Wallet and Apple Pay.

This digital technology also allows for daily menu changes that include mouth-watering photos. When Iowa State University researchers placed a rotating digital image of a salad on a menu for campers at a YMCA, there was as much as a 90 percent increase in salad consumption among the kids. They also found that the more vivid and realistic the moving photo was, the greater the response. A digital menu is the best and easiest way to implement this technology and even steer your guests toward dishes with the highest profit margin.  

Restaurant Kiosks

Today’s technology has created personalized service without the people. Artificial Intelligence (AI)-powered platforms allow kiosks to react like humans and some can accomplish this through facial recognition. Once recognized, the kiosk then searches its database, finding past orders and making suggestions based on this knowledge. I know, a little creepy and cool all at the same time.

While facial recognition is not yet the norm, it is definitely on the rise. BurgerFi, a South Florida-based chain, is using these types of kiosks at 22 of their 108 locations. Wow Bao in Chicago is also one of the trend setters.

Self-order restaurant kiosks have been on the rise for some time with McDonald’s leading the way in 2004. Restaurants such as Panera Bread have had this technology for years while some new kids on the block include Subway, Taco Bell and Wendy’s.

A nice side effect is this: It appears that people may feel a tad uncomfortable ordering more food than society deems appropriate. A study reported in Modern Restaurant Management found that, in addition to increasing sales, those that used self-service kiosks ordered, on average, 21 percent more, resulting in about $5 more per transaction. Not bad.

Not only do these technology wizards increase sales and upsell every guest, they also make it easy to modify and add a new menu item or tweak an old one.

Restaurant Data

Modern restaurant management systems offer insights that restauranteurs of yesteryear could only dream of. This includes dining patterns and seasonal preferences, information that allows restaurants to schedule new menu items based on past success and comparative sales.

Branded Restaurant Mobile Apps

We are a generation on the go…and the restaurant industry is certainly one that has been forever transformed because of our current desire to eat on the run. In fact, since 2014, digital ordering and delivery has grown 300 percent faster than in-house dining.

If you haven’t developed a branded mobile app for your restaurant, now is the time. It allows your loyal clientele to place their to-go orders in a matter of minutes with no interaction required. These apps are also directly integrated with your POS system, and the digital menu platforms allow guests to pay in advance, making their experience seamless. Many include pairing recommendations as well as upselling suggestions while others integrate with your loyalty program. Choose accordingly.

POS Technology

The Point-of-Sale systems that are available today make changing a menu item and establishing an appropriate price for the dish relatively simple. Sales-data analysis provides you with the ability to make timely changes to your menu in order to keep sales moving in the right direction.

Menus are one of the more personable items in restaurants that both chefs and owners as well as employees can become attached to. Embracing change through technology allows for a fluid movement as it becomes clear which items are working, and which ones should go the way of the dodo bird. Change is not always easy, but it is inevitable—and the only way to rise is to take the next step up the ladder.

Anyone with even half a finger on the pulse of the restaurant industry is aware of the dramatic rise in carry-out, restaurant delivery, and off-premise dining.  Spurred on by cultural shifts (longer work hours, less emphasis on home-cooking, rise in whole food restaurant offerings), generational influence (Millennial and Gen Z individuals who spend an increased portion of their disposable income on food) and technology factors (a market flooded with easy solutions for placing, paying for and tracking restaurant orders), off-premise dining is becoming an increasingly significant percentage of total restaurant sales.  According to Technomic, off-premise sales now account for 44% of all restaurant sales, or $228 billion with expected growth of roughly 5.6% annually through 2019, compared to 3-3.5% growth for the restaurant industry overall.  Data collected by the Buyers Edge Platform supports this trend.

To-go packaging is quickly becoming one of the most important categories of items in a restaurant’s weekly order.  Not only do operators need to focus on the quality of the packaging and ensure that packages preserve the temps and textures of their dishes, but they must also develop processes and kitchen layouts that factor in the increasing quantity of packaged items that they will need to deliver.  Furthermore, packaging selection presents an opportunity for an operator to present themselves as an eco-friendly and earth-conscious dining option. Pactiv’s earthchoice line of carryout containers overs the perfect balance of an environmentally-friendly package that still maintains the integrity of dish during restaurant delivery.  Pactiv’s MFPP containers, specifically, offer plastic saving materials that are microwaveable, ‘click’ closed to indicate a secure closure and are stable and grease and moisture resistant.  These packages come in 7 popular sizes to fit a variety of to-go applications.

Many operators serve takeout and delivery business channels with the goal of converting take-out diners to eventually ‘escalate’ to become more profitable in-house guests.  (Conversely, off-premise business is a good way to keep regular patrons engaged, even on nights when they aren’t looking to leave the house.)  It is important maintain the same standards of excellence in the off-premise experience as guests expect when dining in-house.  This means that ingredients, condiments and even cutlery that in-house guests would not even normally see, suddenly become, for off-premise diners, a metric by which the restaurant can be judged.  If a restaurant sends a takeout chicken sandwich order with packets of generic-brand condiments, guests may rightfully assume that the restaurant regularly uses ‘lower quality’ ingredients in their recipes.  On the flipside, take-out accoutrements like condiments, cutlery, and soft drinks present yet another opportunity to ‘wow’ new and repeat guests alike.  The Buyers Edge Platform’s culinary and operational experts recommend delivering recognizable branded Portion Control condiments such as Hellmann’s Mayonnaise, Smucker’s Jellies and Peanut Butters and Dickinson’s Honey.  This branding for quality can easily be extended by offering the corresponding table-top condiments for in-house guests. 

As far as utensils and cutlery go, as off-premise dining continues to grow in popularity, carry-out cutlery will become an ever more prevalent restaurant cost.  Furthermore, as off-premise dining migrates from the domain of QSRs to include restaurants of all styles and cuisine types, cutlery is becoming an increasingly important element of the dining experience.  We’ve all struggled to cut steak tips with an inadequate knife, reached into a soup bowl holding our too-small spoon by our fingertips or broken a tong off of a cheaply-made fork.  Manufacturers like Georgia Pacific offer cost-effective products that reduce waste, storage, maintenance and labor costs while enhancing a restaurant’s image and food safety.  Smart operators can even save in the long run by investing in higher-quality cutlery dispensers that enable a reduction in waste and increases in sanitary safeguards. For cutlery, nothing beats the Dixie Ultra Smart Stock Wrapped Cutlery system which dispenses one piece of cutlery, with 60% less plastic wrap, at a time through a system that is preferred by 88% of fast food patrons over open bins of wrapped cutlery.

Clients of Consolidated Concepts have the ability to purchase all of the above items at reduce costs by taking advantage of the deviated prices and rebated savings that are available through our contracted manufacturer programs.

Whether your restaurant is a vegetarian’s delight, or you’re known for your oversized onion rings, knowing that you’re going to receive consistent pricing and quality from your produce vendors is key. A proper produce management program will ensure consistency in product, contracted pricing, food safety optimization and more.

Companies like Fresh Concepts elevate their relationships with local growers and shippers to bring you a premier managed produce program. Part of this management process is giving you peace of mind in your produce partner relationships. Fresh Concepts does that with their recordkeeping. They store a record of contact information and certificates of insurance for distributors and shippers, plus third party audit information. By keeping a tab on this information, they can easily manage next steps when food safety concerns arise, ensure traceability, and keep suppliers accountable on implementing best practices and their certificates. They also conduct second-party audits for certain distributors and shippers with high-risk items to make sure all brand standards are maintained.

Another important feature of a produce management program is their process of dealing with food safety risks. Fresh Concepts focuses on a three-prong approach to food safety management: second party audits of facilities to prevent food safety risks, a formalized process when outbreaks or recalls do occur, and a perfected communication alert system and process for getting you replacement product if needed. The foodservice industry is often filled with food safety risks and working with Fresh Concepts is one way to ensure you are properly protected against possible outbreaks and informed against recalls and other issues. They also focus on ensuring restaurant operators are informed of food safety precautions they can take in their operations. During the recent government shutdown, Javier Martinez, Food Safety Manager at Fresh Concepts, reiterated, “The actions taken at the operator level — in the walk-in refrigerator, in the kitchen, at washing stations — make up the critical “last mile” in the food safety chain. Following proper techniques for washing and prepping food at the restaurant level can help to ensure the highest levels of food safety. “ (source)

A produce management program can also be very beneficial in the irregularity of pricing in the produce market. Programs like Fresh Concepts work with shippers, growers, and suppliers to ensure you get contracted pricing that consists of set highs and lows that often protect you from the volatility of the industry while offering you savings. For example, throughout 2018 there were multiple romaine lettuce recalls that not only caused public panic, but affected the pricing on romaine lettuce and its other leafy counterparts. Fresh Concepts was able to give its customers an alert to price changes, an update on the outbreak within two hours of its notice, and a list of producers who they could order from that could offer the correct item to their specs. Andy Rosenbloom of Buyers Edge Platform says, “The produce market can experience crazy price fluctuations throughout the year for a whole variety of reasons: seasonality, weather, demand, or even politics.  Having a produce management partner in place ensures that your prices maintain stability, quality and safety.” Having this level of insight and accountability from your produce management partner is imperative to running your operations efficiently.

Interested in learning more about Produce Management programs we partner with? Visit us here and let’s chat.

At Consolidated Concepts, we pride ourselves on offering our clients much more than just rebates and buying power. We recently had the opportunity to foster a collaborative session between one of our most exciting clients, Pincho, with one of our most innovative and interesting manufacturer partners, Unilever.

As a concept that relies heavily on bold flavors to wow their guests, Pincho focuses on providing exceptional sauces and marinades to make their dishes stand out.  The south Florida concept has grown rapidly to include 10 locations serving Latin-inspired burgers and kebabs such as the standout Toston Burger, served with 2 fried plantains as the ‘buns’ and their marinated chicken pincho, served with chimichurri dipping sauce.

Top Pincho executives, including their CEO, CMO and Culinary Director joined their Consolidated Concepts client managers for a day of culinary innovation and experimentation at Unilever’s US Headquarters in Englewood Cliffs, NJ. As one of Consolidated Concepts’ top direct-contract manufacturers, Unilever, producer of kitchen staples like Hellmann’s/Best Mayonnaise, Knorr Sauces and Bases, Le Gout bases and Lipton and PureLeaf teas, regularly invites clients to work alongside their chefs to develop new ways to delight guests and scale profitability. 

In preparation for Pincho’s visit, Unilever’s corporate chef, Chef JC Lopategui of Miami visited several of Pincho’s south Florida locations to taste their menu, explore their kitchens and work alongside Chef Adrian Sanchez. Chef JC then utilized that knowledge to collaborate closely with Unilever’s Chef Rob Wallauer of New Jersey to demonstrate how Unilever’s high-quality products and ingredients may fall in line with Pincho’s overall culinary offering.

The menu that Unilever developed for Pincho speaks for itself, complete with flavorful staples (Fried Chicken Sandwich with Pincho sauce, Smoked Shrimp Salad with Hatch Chili Dressing) to inventive takes on Latin classics (Lomo Saltado Poutine, Ahi Tuna Tostone, Intense Citrus Flan).  The collaborative spirit in the kitchen was palpable, as the three chefs combined their talents to create inspired sauces and dishes that were heavy on flavor, spice and ingenuity.

The ultimate goal of such collaborative events is to help Consolidated Concepts’ clients see how manufacturer-partners’ products can fit into their culinary mix and business strategy.  “Most of the time a spec sheet and price just isn’t going to be enough to make an operator understand the real value of a product,” said Mark Cimino, Consolidated Concepts’ VP of Client Relations.  “This is the second client that we’ve brought to Unilever,” he said.  “They both left with a sense of the amazing potential that Unilever’s products offer in terms of being customizable, scalable, and cost effective.”

If your operation has any plans that involve menu changes, menu expansion, regional expansion, Limited Time Offers (LTOs), allergen considerations, acquisition or other growth – a custom culinary innovation session may be right for you.  Get in touch with your client manager or account executive to learn more about what opportunities Consolidated Concepts may be able to arrange.

Today’s regional and national restaurant and foodservice chains are confronted by a surplus of business and organizational challenges, but none as critical as the direct and indirect impact of purchasing and supply management.

With over 30% of revenues being spent on food supply, restaurant operators are increasing focus and resources on developing more operational and cost-effective ways of purchasing, procuring and managing supply. This trend is the logical outcome of increased managerial concern to meet specific supply objectives of quality, quantity, delivery, price, service, and competitive improvement.

What’s more, negotiations with distributors is receiving increasing emphasis as opposed to competitive bidding, and longer-term contracts or master distribution agreements are replacing short-term buying techniques, placing special emphasis on strategies that ensure short- and long-term value for funds spent.

In an interview with Barry Friends of Technomic, a research and consulting firm servicing the food and foodservice industry, Barry describes the challenges concerning restaurant and foodservice operators, while providing solutions for managing master distribution agreements. Barry spent 24 years in executive leadership roles with three of the top five U.S. foodservice distributors — Sysco, US Foods, and Reinhart — making him uniquely qualified to share his insight on the complex issues associated with distributors and distribution agreements.

What are the biggest challenges facing regional and national restaurant and food service chains when it comes to supply distribution agreements?

Regional and national chains are flooded with distribution related problems. The nature of their problems and challenges vary wildly on their scale, maturity and business model. Most chains are growing, and their problems are growth related — resources — operations — capital. In most cases, growing chains don’t have supply chain resources, they don’t have a supply chain person (department), and if they do it’s cobbled together or it’s a shared role between purchasing and operations.

Consequently, there aren’t a lot of distributors to choose from that can do a great job for growing chains across a large geography. Depending on scale and density, most chains are stuck dealing with broadline distributors — a single window approach for sourcing all food and operating supplies.

However, the most critical issues that supply chains manage is disruption. Bottom line, in order to manage risk and avoid stoppage, the operator surrenders quality, quantity, delivery, price, and service to the distributor, subordinate to the broadliner’s capabilities, transparency, and responsiveness to fluctuating markets.

Moreover, Barry points out that the biggest challenge regarding the operator distributor relationship is that operators “don’t know what they don’t know.”

Barry explains that when “RFPing your business, you will get a number of offers, and you can choose the best one, but no matter how much you (the operator) know, the distributors know more; they have all the power, and they (the distributors) are excellent at making their customers feel like they have a great deal when that it not be the best they can have.”

What factors influence distributor costs?

There are many factors that influence distributor rates, but in most cases operators are not prepared to nor do they have the resources to analyze these influences.

To be clear, distributors do not raise costs, manufactures do. In general terms, costs are driven by the markets. For example, produce costs change daily while meat costs change weekly. Most distributors spreadsheet your supply by category and contract a fixed percent markup on top of their cost.

There are things that can be built into a distribution agreement to help smooth out price volatility, but costs are mainly controlled by the market. Once an operator comes to terms with a distributor, the distributor’s primary focus becomes delivering the service end of the agreement.

When does it become ideal for a chain to start thinking about doing a master distribution agreement?

In short, you should do a distributor agreement as soon as possible.Basically, the moment an account is big enough to command the attention of multiple distributors, is the ideal time to start negotiating a master distribution agreement.

The rule of thumb is if a restaurant or food service chain has a regional and/or national presence, it should be behaving like a chain with regional and/or national authority. The chain should be buying at the very least on an honorable cost plus percent markup agreement, and it should be negotiating special pricing on it’s most important value added items, for example french fries, hamburgers and butter.

As a unit of measure, most of large broadliners like Sysco consider a 5 unit chain and above a “chain account.”

How does an operator analyze whether they are getting a good deal?

Unfortunately, operators really can’t.

Even after operators get their 2 to 3 proposals, at the end of the day, there’s still a margin, and a backend markup that the chains are not privy to. What is the base price? What are the attached backend service costs, and how do you (the operator) analyze and compare? Aside from asking distributors how they make money, the operator is ill prepared and ill equipped to answer these questions.

The best way to know whether you are getting a good deal or not is to leverage the expertise, technology and buying power of Consolidated Concepts — the leading

purchasing partner in the US for restaurants and food service organizations. They work with hundreds of chains which allows them to benchmark and compare one distribution agreement with another.

What factors should an operator consider when terminating a 3 to 5 year distribution agreement?

Even if the broadliner agreement is sound and the service level is excellent, a chain experiencing significant growth should be checking the validity and currency of their agreement with some regularity. MDA’s have something called an “exit clause,” or common language that says with 60 or 90 day notice, for no cause, the operator can terminate the agreement.

For instance, a 25 unit chain on a 5 year MDA has grown to 50 units in the last 2 to 3 years and has doubled their purchase volume or added a third purchasing volume under their broadliner. In this case, there is no clause that forbids the chain from shopping their current MDA; in fact, Consolidated Concepts highly recommends shopping for new pricing with an agreement currently in place.

What common triggers cause an operator to renegotiate their distribution agreement? What sets them off?

There are many triggers that start the distribution agreement negotiation process. Usually this is triggered by something that causes the operator to lose trust in their incumbent distributor. It could be a matter of price or it could be how the distributor is administered.

Another factor that compels renegotiation is the chains own external state of affairs. Unfortunately, sometimes the problems associated with growing pains transfer to blame on current purchasing practices.

A great example is a 260 unit chain experiencing the pain associated with declining revenues, despite years of loyalty to their distributors, they were urged to turn to Consolidated Concepts for a more innovative solution to reducing purchase spend.

What is compliance and why is it important?

Compliance is designed to add strength to the agreement by assuring that both distributors and customers are adhering to the agreement. For example, if a customer doesn’t pay on time, or is not purchasing at the frequency or volume described by the key performance indicators in the agreement, the distributor has the right to call that customer to the carpet.

In other cases, a red flag may be raised against a distributor who doesn’t call out a customer who is not in compliance with their key performance indicators. For instance, a distributor accepting 100 cases when 150 cases are in the agreement is an indicator that the distributor figured out how to profitize that business to their satisfaction without the 150 cases. This can be a sign that the operator is paying for something they may not be aware of and did not agree on. This is why compliance is important for both sides.

What qualifies a chain to ask for additional incentives?

The number one thing that qualifies a chain to ask for incentives or an improved deal is when a chain starts consistently out performing or overachieving the parameters of their agreement.

An good example of a chain that deserves a better deal is a 10 unit chain (paying cost plus 2 dollars and 40 cents a case with a requirement of 80 cases minimum order and 4 million dollars worth of supply per year) that grows to 15 units (paying 7.5 million dollars a year and 124 cases per order during the term of their agreement. In this case, the operator should reach out to the distributor to negotiate better pricing.

At the end of the day, the distributor will be competitive in situations that make sense. It’s your job as the operator to get the distributor to think of you as a 15-unit chain with 7.5 million dollars in business. They won your business once; make them win it again.

Interested in learning more about Master Distribution Agreements? Download our Free Master Distribution Agreement E-Book.

At Consolidated Concepts, we know that whether our clients are health-conscious fast-casual chains or highly-focused burger concepts, food safety is always paramount. Choosing the right vendors and distributors for your meat, dairy, and produce is integral to keeping your restaurant safe from inevitable food recalls and outbreaks. In relation to food safety and produce, Consolidated Concepts chooses to partner with Fresh Concepts. Fresh Concepts is a produce management program with trusted relationships throughout the produce supply chain that negotiates the best produce options for operators. Their close relationships with grower-shippers, integrity-focused business practices, consistent distributor vetting, and innovative tracking systems and technology make them a strong partner for our clients.

Consolidated Concepts recently took a few clients out to Salinas, California for what Fresh Concepts calls, the Account Executive Conference. The annual conference gives Consolidated Concepts and our clients a chance to meet grower-shippers, walk the fields, explore new farming technology, and test innovative products. The Fresh Concepts team meets with growers year-round to examine contracts, conduct food safety audits, attend food shows, and host training sessions, but the Account Executive Conference goes beyond offering operators the chance to experience the full value of Fresh Concepts partnership. “With each visit, our appreciation for those responsible in producing our country’s fruits and vegetables grows. Everyone we bring to the fields has a new perspective the next time they order a salad, it’s a refreshing and humbling experience,” says Chris Rheault Director of Operations at Fresh Concepts.

Mark Cimino, Senior Vice President of Client Relations at Consolidated Concepts, who attended the conference this year, noted, “I was just amazed at the level of sanitation and safety that they practice. I think if people who are buying that product knew what goes into washing their produce they would certainly feel comfortable continuing to purchase from these growers.” Some of the other topics discussed during the conference were the advancements in harvesting technology, the safety measures and technology put in place for the laborers, and what the current political climate and economic climate is doing for laborers and growers in general.

The industry is facing many labor challenges due to a reduction in workforce and rising costs. Rob Mater, an account executive in the casino sector at Fresh Concepts noted that “The amount of work it takes to get a head of Iceberg or Romaine to your local grocer for .99 to 1.29 is astounding.” Growers are creating programs to retain quality workers, including affordable housing and profit sharing in some cases.

Fresh Concepts continues to improve their produce procurement program by having a genuine care and concern for their clients, that esteems client interests better than their own, and puts all their guiding principles into practice.

As Cost Reduction Specialists for restaurants, we at Consolidated Concepts have a team of culinary and purchasing specialists who find our clients ways to reduce costs and cut waste on common menu items. Did you know you can optimize your salad ingredients to reduce your produce and labor spend? Check out our CC101 infographic to find out how to save on your salad costs!

101 is a process and analysis completed by Consolidated Concepts which offers more insight and information about the products that restaurants are currently ordering. We look at current ordering tendencies and uses of current products. CC101 then offers alternatives that better fit the specific purpose of the product as well as offer better pricing on these items. This increases consistency with the final product and reduces costs!