The hospitality industry has a lot of overheads and other costs. However, food remains one of the biggest expenses. Therefore, building a successful hospitality business requires skills in negotiating contracts with the best food distributors in Sydney. One great method to cut food costs is to negotiate a premium vendor agreement with distributors of different items.
You can request a better deal in exchange for an exclusive business relationship. If you are in the hospitality business and finding it difficult to cut food costs, here are some tips to help you negotiate the best vendor agreement.
Estimate Your Needs
Having many food distributors in Sydney is often not a smart choice. It is best to deal with a single or very few distributors for most of your purchases. When you promise a broad-line distributor a continuous business, there is a high chance that they will give you a reduced fixed margin on your suppliers.
Your biggest bargaining point is the volume of products you are willing to buy off a distributor. Therefore, take the time to estimate the volume of food products you would need within a year. You can order in large volumes (wholesales) to get the best prices instead of ordering in bits.
Do Your Due Diligence
Research before you start negotiating with food distributors in Sydney. Talk to other hospitality service providers within your industry to know the distributors they use. Check with them on the prices their distributors charge on specific items and also ask about their services.
With the information you have gathered, you can begin to negotiate. It is recommended that you let the sales reps of the food distributor of your choice know upfront that you know the rates with other companies. This will ensure they are honest with you.
Explore Options of Vendors
Do not limit your option. Whether you are choosing your food distributors in Sydney for the first time or looking for new options, you should explore many options.
Also, let the sales reps know that you are checking with competitions to get the best prices. They must know that you are not at their mercy and you can walk away when you find a better deal.
Negotiate the Price Structure
food distributors in Sydney use two pricing structures – cost-plus-percentage and cost-plus-fixed-price. Cost-plus-percentage means you pay the food cost plus an extra percentage, while cost-plus-fixed price means you pay the food cost plus a static fee. It is recommended that you stick with cost-plus-fixed price because cost-plus-percentage means you will pay more as the prices of food rise.
Determine the Markup Percentage
If you run a small hospitality company, it may be difficult for you to negotiate a cost-plus-fixed-price structure. You do not have to fret about this because there are other ways you can control the cost. One of such ways is to specify the markup percentage upfront over the margin percentage.
Markup percentage is calculated based on the price of the supplier and from your perspective. Margin percentage on the other hand is calculated based on the price that it takes to a specific profit margin to the distributor. This is often from the perspective of the distributor.
Pay regularly and on time
If you want to earn the trust and good business deals from your food distributors in Sydney, you should try to pay regularly and on time. Distributors generally get anxious when it comes to payment. Giving longer payment periods would not sit well with them but when you agree to shorter periods, they become more relaxed and can even give lower prices.
There you have the important tips to use when negotiating with food distributors in Sydney. When choosing a vendor, make sure you put everything in writing and the contract signed. Do not do verbal agreement as people can forget things intentionally or unintentionally. So, lay out the terms clearly for reference.