How Distributors Maintain Profit Margins Four Times Higher than Restaurants

The typical restaurant profit margin hovers between 3% to 5%. Meanwhile, distributors Sysco, U.S. Foods, and The Chefs Warehouse are collectively currently rocking a 20% average profit margin.

Distributor profits should not be four times higher than those of your restaurant. Let's unveil some distributor tactics that are making their profits soar while yours struggle to take off.

Price Manipulation: Distributors may inflate prices, making it challenging for restaurants to maintain their profit margins. For example, a distributor might charge a restaurant $50 for a case of a specific product when the market rate is only $30.

Short-Counting: Some distributors have been known to provide fewer items than what was agreed upon in the order. For instance, if a restaurant orders 10 cases of a particular ingredient, the distributor may only deliver 8, without informing the restaurant.

Substituting Products: Restaurants may receive lower-quality or different products than what they ordered. For example, a distributor might substitute a premium brand of olive oil with a generic, lower-quality option without the restaurant's knowledge.

Hidden Fees and Charges: Distributors can add extra charges, such as delivery fees or restocking fees, without clearly specifying these charges on invoices. These hidden fees can significantly increase a restaurant's costs.

Exclusive Contracts: Some distributors may pressure restaurants into exclusive supply contracts, limiting their ability to explore better deals with other distributors. This can lead to higher costs for the restaurant over time.

Bait-and-Switch Marketing: Distributors might advertise attractive deals on certain products to lure in restaurant owners, but once the contract is signed, they may encourage the restaurant to purchase more expensive items.

Lack of Transparency: Some distributors may provide vague or incomplete invoices, making it difficult for restaurants to verify the accuracy of charges or identify discrepancies.

Overordering and Overstocking: Distributors might encourage restaurants to order excessive quantities of products, which can lead to wasted inventory that the restaurant must absorb as a loss.

Exclusive Deals and Rebates: Distributors may offer exclusive deals or rebates but attach complicated terms and conditions that may not be favorable to the restaurant. For instance, a distributor might offer a rebate only if a restaurant hits a high minimum purchase threshold.

Restaurants can take steps to level the playing field with their distributors, and one of these steps involves using software like Dashy Dash, specifically designed to assist restaurants in addressing some of these challenges.

Features Dashy Dash is currently providing for restaurants:

  1. Centralized database where restaurants can quickly and easily compare real distributor prices with real restaurants in the area so that you can always know what the fair prices in the market are.
  2. Fast, detailed, and accurate automated analysis of your contracts allowing you to catch more violations from your distributors and get refunded faster than ever before.
  3. Free, secure cloud storage of your invoices in an automatically categorized, searchable, filterable, and sharable database. You will never have to search through a stack of invoices again.
  4. An exportable list of every item you purchased in a given time period along with your total spend associated with that item giving you the full picture of your expenses across all distributors in one view.
Join Dashy Dash - Basic Membership is free

About Savor

Savor helps restaurants, restaurant groups, and chains of all types control supply costs with less work.

With Savor restaurants can manage invoices, track product price histories, and drill down into expense categories. We help restaurants...

  • Automatically catch rising prices before they spin out of control
  • Benchmark prices for supplies against those paid by similar restaurants and bars
  • Easily find alternative products and suppliers in their area
  • Capture credits by automatically auditing invoices for errors

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