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
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
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.
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.
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!