As a restaurant owner/operator, you are pulled in different directions every other day. You have to attend to various tasks, including personnel training, staffing, menu creation, inventory management, among other tasks that are crucial to your restaurant running seamlessly and making profits. Comparing and negotiating the cost of supplies can also take up a lot of your time, but it doesn’t have to.
Partnering with a GPO can help you get competitive pricing on supplies for your restaurant such that its profitability increases and its purchasing process becomes more streamlined. Knowing that you are getting the best prices with minimal time and effort will enable you to channel your energy into other facets of running your restaurant. In this post, we’ll outline the different ways partnering with a GPO can help you save money.
But first, let’s define what a GPO is.
What Is a GPO?
A GPO (Group Purchasing Organization) is an organization that pools its members’ purchasing power to help get quality products and services at the best prices possible. These organizations negotiate prices on everything from payment processors to food items and uniforms. As such, partnering with a GPO of your peers can help you save a significant amount of money that you wouldn’t have been able to save had you been flying solo at the negotiating table.
5 Ways Partnering With a GPO Helps You Save Money
For restaurant owners, it can be challenging to negotiate ideal pricing and terms of purchase and maintain good supplier relationships. That said, partnering with a GPO will not only offer you a simple solution to these issues but also help you cut costs and increase your profit margins. Here’s how:
Reduced Pricing of Supplies
This is arguably the most attractive perk that comes with becoming a member of a group purchasing organization. The restaurant business is cutthroat. When you get your supplies at high prices, you will probably sell your food at higher prices in a bid to try to recover the cost of purchasing supplies. Doing so will most likely give your competitors an edge.
Fortunately for you, partnering with a GPO can help you get the best prices. These organizations negotiate with suppliers on your behalf when it’s time to purchase various supplies. The key negotiation point that they leverage is that they use the purchasing power that most businesses have. This purchasing power is obtained when businesses make large purchases occasionally, thereby raking in more profits for the suppliers. When businesses make such purchases, they are better placed to ask for discounts.
GPOs not only reduce the direct spending on the inventory that comes in from the supplier but also the indirect spending that accompanies the procurement process. As such, they help free up funds in the most unexpected places. These funds can be used to improve other aspects of your restaurant business.
GPOs Offer Supplier Rebates
Some GPOs include rebates for their members in their agreements with the suppliers. The procurement staff at these member businesses (restaurants) can optimize their spending to get rebates so as to increase their overall savings.
Many member businesses wouldn’t otherwise get these rebates or would receive significantly smaller rebates had the rebates not been included in the GPOs agreement with the supplier. That said, not all group purchasing organizations include rebates in their perks to member businesses. However, when the rebates are included in a GPO’s agreement with suppliers, they are often in the form of preferred manufacturer rebates or spend compliance.
Improved Spend Analysis
The analysis of spending or cost that is channeled towards procurement usually tends to be difficult to determine. This is especially the case when a restaurant’s procurement process isn’t restricted to a given type of product from a single supplier. When your procurement process is outdated, the data is generally stored in fragments such as long spreadsheets and physical files. As such, analyzing the spending using this data would be extremely daunting.
GPOs have modern procurement technology that they can use to accurately analyze the funds channeled by member businesses towards procurement. By doing so, they help their individual members benchmark their current prices and even compare and contrast prices with other vendors. Member businesses are therefore saved from the spend analysis task. They can therefore focus on finding potential saving opportunities.
Minimized Procurement Risks
The procurement function is no stranger to both internal and external risks—these risks can have serious implications when they occur. External procurement risks usually encompass unethical practices carried out by a supplier. This often happens when you decide to go with the less expensive option, resulting in you getting inferior quality products. The restaurant business demands that you use quality products when preparing meals and drinks. As such, you may have to make a fresh purchase if your supplier delivers low-quality products.
When a GPO is in the picture, such procurement risks can be minimized, especially since these organizations tend to recommend suppliers who charge reasonable prices and offer products of an agreeable standard. Moreover, GPOs ensure that the suppliers they recommend to their members are suitably vetted and found to be credible. Because of this, the risks associated with suppliers are minimized, and so are the costs that emanate from such risks.
Category management is a service provided by GPOs that entails introducing specific changes to an individual member’s procurement process to help promote cost savings. GPOs do so by identifying opportunities to cut costs in the agreement drawn up between your business and the supplier. They keep their members in the loop on any changes that take place concerning the goods or services offered by a supplier.
Besides that, GPOs carry out numerous reviews with various suppliers to grasp the approaches used by these suppliers to provide goods and services to their member businesses. As such, they make it possible for their member businesses to understand what a given supplier is offering them and whether they can get a better deal from a different supplier.
How streamlined the procurement process of your restaurant is plays a huge role in determining how successful it becomes.
Partnering with a GPO is one surefire way of ensuring that your restaurant’s procurement process is streamlined. A GPO enables you to pool together with other restaurant owners to negotiate better prices with distributors and national manufacturers. The buying power that comes with partnering with a GPO will enable you to cut down on costs and save money, as outlined above.
Partnering With ChefMod Can Help You Save Money
Partnering with the right GPO is crucial to your restaurant saving money, and ChefMod is that GPO provider for you. Unlike traditional group purchasing organizations, we offer user-friendly software and fully customized solutions for every individual member’s location. You can also depend on us to connect you to tens of thousands of items that meet your needs across different categories. Contact us today to learn more about how our GPO can help save you money.