New Year, New Deals: How Smart Operators Keep More Profit

Running a restaurant isn’t just about crafting the perfect plate or creating an unforgettable experience for your guests, it’s about making money. And if you’re not treating every dollar like it’s yours to keep, guess what? It’s going straight into someone else’s pocket. Sure, your suppliers, vendors, and manufacturers are your partners, and some can even become your most trusted advisors. But behind the friendly smiles and occasional free merch is a strategy designed to make them as much money as possible. This isn’t a knock on them. Like you, they’re in this business to turn a profit.

The crime in our industry is that many operators (most operators) do not know how much power they have over their vendors. It’s almost a cover-up that starts in culinary school. Every year, culinary schools turn out tens of thousands of talented chefs who can create masterpieces on a plate, but many of them get blindsided by the financial realities of running a restaurant. These chefs might know how to source the finest ingredients, but no one’s taught them how to negotiate the price of those ingredients or keep suppliers from quietly eating away at their profits. It’s like training a pilot to fly but not teaching them how to fuel the plane or maintain it. They can get off the ground, but staying airborne? That’s a different story. Well, today we are going to explore some strategies to take some of that money out of your vendors pockets and put it in your pocket. This is an exercise that every operator should do at least once a year, and there is no better time to start than the start of a new year.

Where to Tap into Hidden Revenue

If you want to boost profits, the quickest way isn’t to raise menu prices or cut portions, it’s to go straight to the source of your costs: manufacturers, distributors, and beverage companies. Many operators believe they’re stuck with whatever deal they’re given, but that’s far from true. The reality is, these vendors make a healthy profit off every sale, and many are willing to negotiate if you know how to play the game. By leveraging your purchasing power and making vendors compete for your business, you can claw back significant savings. Let’s get started.

Stop Overpaying Your Distributors

In 2024, Sysco reported a gross profit of $14.6 billion, reflecting a 4.7 percent increase from the previous year. That’s great for them and their shareholders, but unless you own their stock, it didn’t put a single dollar in your pocket. The good news is there’s no reason you can’t carve out a little chunk of that $14.6 billion for yourself.

Sysco, US Foods, and similar distributors have multiple revenue streams, but in this article, we’ll focus on one of their biggest sources of income: margins. These companies add a markup on every product before it reaches your restaurant. Over my career, I’ve seen this margin reach as high as 20 percent. That means for every $100 you spend, $20 goes straight toward their bottom line. What many operators don’t realize is that this margin is negotiable, and it’s easier to negotiate than you might think.

Start by asking your distributor sales representative for a usage report covering the past twelve months, often referred to as a “Descending Dollar Usage Report.” Request this report first because if they know you’re planning to shop your business around, they’ll likely drag their feet. Once you have the report in hand, ask for a lower margin, aiming for something like 9 percent. If they refuse, and they probably will, shop your volume around to their competitors. Many distributors will adjust their margins when they see a customer who understands their value.

Be wary of common tactics. Sales reps may come back with a price comparison guide that shows lower prices on specific items. Don’t fall for it. Your goal isn’t just a few cheaper items; it’s a consistently lower margin across the board.

Unless your volumes are very high, a nine-percent margin might not be realistic, but that’s okay. Your goal is to secure the best possible deal by making distributors compete for your business. Once you have three or four offers, go back to your current distributor and give them the chance to match the best one. Switching vendors can be a hassle, but if your current distributor matches the best deal, you win without the headache.

Manufacturers: Lock in Your Pricing

You’ve already asked your distributor for your usage report covering the last 12 months. Now, focus on the top ten items, which are likely the backbone of your menu and would have the greatest impact on your food costs if their prices were to rise. With this list in hand, ask your distributor to introduce you to the manufacturers of these products and their top competitors. This step is not just about maintaining relationships; it is about creating competition to secure the best deal possible.

This is where things get interesting. Reach out to these manufacturers or their brokers and explain how much product you purchase annually. Let them know that you are willing to commit to using their product exclusively if they can guarantee pricing and or offer a rebate for the coming year. Some may be eager to lock in your business, while others might hesitate. That is when you bring in their competitors. By playing them against each other, you can push for better deals and improved offers.

Here’s an example from my own experience. At one of my concepts, we go through over 40,000 pounds of hamburger meat every year. With beef prices expected to rise significantly, I reached out to four manufacturers and asked them to bid for my business. Armed with multiple quotes, I returned to my current supplier, who matched the best offer. This allowed me to lock in pricing for the year, protecting my margins from sudden and unpredictable increases.  

Beverages: Unlock Hidden Opportunities

Negotiating with beverage companies like Coke and Pepsi can unlock a range of benefits beyond just better pricing. Over the years, I have spent my career pitting Coke and Pepsi against each other, and the results have been well worth the effort. Most operators do not realize how much leverage they truly have in these negotiations.

Here is an example. I recently switched to Pepsi after using Coke at one of my concepts for six years. Pepsi came to the table with a significant signing bonus, lower off-invoice pricing, a rebate 50 cents higher per gallon than Coke, and an annual marketing fund to help promote my business. On top of that, I upgraded all my beverage coolers and dispensing equipment at no cost. Pepsi even provided an allowance to update my menu boards, A-frame signs, and printed menus. These are perks that many operators overlook, but they are readily available if you know to ask.

The key is understanding your value as a customer and being bold enough to negotiate for more. Beverage companies like Pepsi and Coke are fiercely competitive when it comes to winning accounts. It is not always about high volumes; it is about taking business away from the other. Even if your volume is relatively low, you still have leverage. Whether it is rebates, equipment upgrades, or marketing support, these companies are often willing to provide added value to secure your loyalty. All you need to do is ask.

It is not about whether Coke is better than Pepsi or vice versa, it is about who is offering the best deal at any given time. Maybe next year we will switch back to Coke if they come to the table with something better. The point is to stay flexible and always keep the competition alive. Loyalty in this game is earned year after year.

Loyalty Is Earned, Not Given

Running a restaurant is a constant battle to protect your margins. Suppliers, manufacturers, and beverage companies are not here to do you any favors. They are here to grow their business. While they can be valuable partners, they should never get a free pass. Every year, they need to re-earn your business.

The strategies we’ve discussed are not just about cutting costs; they are about taking control of your bottom line. You put in the hard work to create a great experience for your guests, and it’s only right that you keep as much of the profit as possible. Whether it is locking in pricing with manufacturers, negotiating better margins with distributors, or squeezing extra value from beverage companies, the key is to stay proactive. Don’t let familiarity turn into complacency. Stay flexible, keep vendors on their toes, and remember that competition is your greatest asset.

In this industry, success belongs to those who recognize their power, act boldly, and never settle for less. So, as you kick off the new year, take the time to sharpen your negotiating skills and make every dollar work harder for you. After all, loyalty is not a given, it is earned.