How Your Restaurant Can Save on Food Costs by Niching Down
Those of us in the restaurant industry like to think that we have our arms around the costs within our four walls, and for many of those things, we do. Ask any experienced operator what they are paying currently for their New York steaks, 16-20 Shrimp, or asparagus, and they will probably be able to answer within 1 or 2 percent of their current price.
Sure, the lime epidemic of 2014 is well known by both restaurant owners/operators and those not employed in the industry. Mexican drug lords, soaring prices, and drama all equate to both public and private awareness. But what about those items that we all purchase that aren’t all that sexy?
You know, the prism picks, plastic wrap, and dried basil of the food purchasing industry? From a cost monitoring perspective, these red headed step children of our analysis take a back seat due to a tendency to focus on the “high ticket” items we purchase.
Here is where it is important to niche down. It is a well-known business practice on the supplier side of the equation to “give away” the shrimp, chicken, and brand name items in hopes of
extorting generating above average margins on the products that purchasers are less likely to be paying attention to. There are likely category specific suppliers in your market that focus on their one category (think paper & disposable products, spices, canned goods, organic produce, etc…) and do it very well. Would your customers’ experiences change one bit if you bought a different black beverage napkin for under their martini?
On a contract? Take a good look at it again. Sure, you may have a very favorable 4-8% markup on your fresh meats, seafood, and if you’re lucky, maybe even produce. It’s the 12-24% on canned & dry goods and paper & disposables that are sucking your money out the door like a vampire squid.
Your contract likely also states that you need to be purchasing at least 80% of your products from the vendor to receive those “favorable” markups. The good news for you is that this means you can likely still keep the favorable markup items with the vendor, purchase the higher category markup items from a niche supplier, and still be honoring your contract.
The “conversion game” is also not by coincidence. Let’s use a case of twelve 12oz jars of ketchup as an example. Company A quotes you $20 for “12 each” of the jars of ketchup. Company B quotes you $17 for 144 oz of ketchup. Which is the better deal? Multiply this conundrum across everything we all order and it’s no wonder we find ourselves asking “What’s the price of Mahi this week?” instead of “I wonder if my cost on deli containers has gone up….”
The moral of the story? Niche down where your current vendors are profiting the most off of you, and consider using a service like Kitchify.com to simplify your kitchen ordering process for free.
About the Author
Mark Schuwerk has co-owned restaurants since 2001and currently co-owns the Blue River Bistro in Breckenridge, CO and Vita Restaurant in Denver, CO. He is also the co-founder of Kitchify.com, a free online ordering platform for restaurants that brings multiple vendors’ products onto one online order guide for one click ordering and easy product/price comparison.