Prime Vendor Agrement

Hello TT! Long time lurker who would like to thank everyone for all the questions & answers I have learned from over the years.

I own a independent pizzeria & I am going on 5 years in operation. This entire time we have been working with mainly two different distributors. Both specialize in pizza and are quality operations. We have over time slowly shifted the majority of our ordering to one of the operators who we see more as a partner in our success.

This year after expo we thought it was finally time to work with our main distributor on a Prime Vendor agreement. We just met & the offered us a basic cost plus scenario which is where my question comes in.

My question for the tank is they offered a percent mark up on different categories rather than just a blanket across the board mark up. So rather than a flat 10-15% across the board they offered (10% on Cheese, 12% on Dairy, 13% on Meat, 12% on Dry Grocery, 13% on flour, 12% on Pizza Sauce, 12% on Boxes, & 15% on beverages.)

Do any of you currently work on a prime vendor agreement & is this standard? What do you think of the mark up numbers & would you try to adjust them & if so which ones?

(Our Store is a delco with a small dinning room & counter service. We are a fairly high volume location & will probably do about 1.7 million in sales this year. We will easily be ordering over $400,000 in food this year.)

my question then would be how would you know the cost? Cheese is pretty easy but what about the other things, you are just at taking there word for it.

Hmmmmm, prime vendor… I’m a single vendor business, for a number of reasons. We have no written ‘agreement’. While we’re nowhere near your sales level, between stores we do spend $250K/yr. Our vendor gives us a great price on core products, cheese/meat… and I don’t really care what they charge on paper stuff. My reasoning? You save me $20+ on a case of wings, and I could care less if you charged me 25cents more for a case of paper. The big guys make money ‘moving’ cases, and most drivers are paid via the same method. Sure, there is a standard mark-up across the board, and I don’t know what it is, say 10 percent. I prefer the way I’ve been doing it, versus, a standard ‘yes’ charge me 15% on top of everything. Distributors love guys with your volume. Study your costs over the past year and determine what they’ve actually charged you historically. Then compare your ‘core’ product costs versus other stuff, like paper goods. Paying $20+ more per case of wings is a lot more expensive than saving a nickel per case on paper goods. Now you’re in a better position to see what ‘real’ savings are available.

Good luck and congrats on the great business!!

There are way too many moving parts in the price model for me to get comfortable with these kinds of agreements. To start with there is money available at the broker and also at the vendor level… where is the incentive for your distributor to get those dollars for you if they are locked into a markup? For that matter, there is actually a reverse incentive! If they get you a price break it costs them money!

No thank you. I do not trust these companies at all after 15 years. I price shop them every week. I ask them to go to the suppliers and brokers and get me price breaks they can pass through.

As I was doing my weekly online grocery shopping (I live in a small town so selection is weak) it got me wondering if anyone here buys groceries online…I quickly looked at some of the prices on www.walmart.com and I am sure there are some savings over a food service supplier…Not sure if it is worth the effort but might warrant taking a look…

Ask to have cheese to be a markup on the poundage, maybe $.05 or so per pound.
The reasoning is you will have a high usage so they should get less per piece but the overall % is what they
are going to receive.
You need to have a base price to start with. Ask for pricing for your items you want. You should be able to back out the % markup and that is their “landed” price.
The less of an item you use the higher markup. Also there is usually a higher% on frozen and refrigerated because they require more overhead costs to keep. Warehoused items should be the lowest % markup.
Think twice about signing an agreement with a company that can change pricing at their whim. Sometimes not being guaranteed something keeps you on your toes.
Consider just using him “as needed” weekly and keep an eye on their practices.

I shop my core products each week. I get my paper goods elsewhere. If I was only saving a nickle or a quarter per case like pizza2007 than I would gladly order these things from my distributor. But it’s not even the same ballpark… 15-30.00 more per case and I’ll just stock up once a month elsewhere.