You business is not measured by your profit but by the difference between your profit and expenses, the only place to move forward from.
Small businesses have no rights
The basic rule if you are just starting out in the hospitality industry or if you are a small business is that you have no rights with suppliers. For them you are just one of the “small ones” and for you they will set the highest prices. They will also push new products you are supposed to buy and do them a favor. These are usually new products a company wishes to introduce to the market and suppliers must sell together with the main product.
But what’s in that for you?! You’re left with something you didn’t plant to have on your menu and that you can’t sell. It turned out to be just an unreasonable expense based on the supplier’s suggestion.
Advertising material (glasses, aprons, shirts, umbrellas) is a teaser. Summarize your year and calculate what it was that you actually received from your supplier compared to what was promised to you from the start: six out of 12 glasses, one apron, two shirts, and for the umbrella you must wait for new supplies next year.
Signing a contract
Each supplier insists that you sign a long term contract. They promise you best prices on all products until the expiration date. However, you have fallen into a trap and you are not even aware of it.
After you signed the contract, the supplier avoids any conversation on the possibility of overcharges. They give various reasons, recession, increased prices, increased transportation costs. Those are all possible reasons, but not often true. When signing a contract, it is important that you request from you supplier to notify you in advance of any change in prices and reasons for their possible increase.
Also, request that your prices increase as much as their wholesale prices have increased, for example 3% instead of 12% or 20%! In case they cite increased prices as the reason, you can easily check the facts by calling the company or the general distributor. It is your right and use it fully.
This way of offering low prices when signing the contract and raising them at the start of a season is especially predominant in seasonal establishments. Suppliers lure with low, sometimes unrealistic prices with a plan to raise them very quickly. Don’t let them do business with you in this way. Don’t make yourself obligated to deal with only one supplier in case they can’t guarantee you realistic prices. Leave an option to use other suppliers as well.
At the very beginning the supplier says that you will get a 20% discount if you sign a contract. And they usually ask you to obligate yourself to buying only from them. The questions is what prices are 20% lower since it happens many times that some other supplier gives a 12% discount but those prices are lower than the ones your original supplier is offering at a 20% discount.
Make sure you check! Take price lists of all the suppliers (they don’t give them out gladly) with proposed signing conditions and compare. Take your own prices and item by item calculate how much each supplier is offering for each product. By doing this comparison alone you will be able to save money for at least a summer or a winter vacation.
Of course, when signing a contract the supplier will say that delivery is not a problem. Not true. As soon as your business picks up their business picks up as well. They will start delivering important goods late and that’s when your problems begin, in every day work and in dealing with customers. This is a well known situation and very unfavorable if it happens during a summer season.
Drinks that were supposed to arrive at 8am arrive at 11am. They are warm and you don’t have enough time to cool them. This is a big problem. The only thing you can do is complain to the supplier, but you will only get familiar answers such as the traffic was bad, it will not happen again, there’s nothing they can do, all of their vehicles are being utilized, etc. It’s the same story every year.
There are a couple of solutions to the problem of warm beverages. Before the season starts, get ice (crushed ice is much cheaper). Get a big plastic barrel, fill it with water and ice and place your beverages in there for quick cooling. The expense certainly increases but the customer will get a cold beverage and will return. Even if they don’t order a second drink, they will return because they will know you always serve drinks cold!
You are left with the problem, what to do with drink delivery. Before signing a contract, ask around the existing cafes or restaurants what their experiences are. Ask the supplier how many vehicles they have, how many establishments they deliver to and in what radius. Insist that your goods are delivered at the agreed time. Try to set that as a condition in the contract: if the deliveries are not on time you have a right to break the contract.
Packaging pick up
It would be logical for the supplier to pick up used bottles and packaging every time they deliver new goods. At first, this will not be a problem, but as the business volume increases it will. They will begin saying they are full and have no room for return bottles, or they have to hurry off to the next location, or that they will come back for it. The amount of used bottles is now your problem. Stacks of empty bottles, beer kegs and syrup containers remind more of a pile of junk than a neatly arranged storage. The solution is to arrange with your supplier an exact time and day the return bottles are to be picked up.
Every time they don’t honor the agreement, call their boss and present the problem. In the end, you will pay the price because if sanitary inspection drops by it is highly likely you will get fined for improper storage of used bottles and packaging.
These were the basics of doing business with suppliers, from personal experience. One of the next subjects will be how to know what you are entitled to during certain companies’ advertising campaigns, how to get those marketing funds available for you, paid advertising events or free merchandise intended for your business.