Why Price Transparency in Foodservice Supply Matters

In almost every industry, for almost any product, you can open up a web browser and find the best price. If you’re reading this blog post, you already know that’s not the case for independent restaurant when buying supplies.

Restaurant supply prices are hidden from operators for one reason: It makes it easier for distributors to charge restaurants, caterers, food trucks, and other small businesses more money for the things they buy.

Hidden prices create 3 huge costs to restaurants

1. Time Costs - It’s more time consuming to compare prices across distributors
2. Higher Supply Costs - Distributors can charge restaurants different (higher) prices for the same products based on what they think you’re willing to pay.
3. Opportunity Costs - Distributors can control what products you learn about, limiting your choices.
   

Time Costs - When comparing prices across distributors is painful, most restaurants won’t do it.

If there’s one thing big distributors hate, it's competition. Competition drives down prices and squeezes their margins (at your expense). When they can avoid competition they can charge restaurants more.

The big distributors know that the harder they can make it for you to uncover prices in the market and compare across distributors, the less likely you are to actually do it. They know many operators are time starved and just don’t have the time to call up 5 vendors every time they are looking for prices on new products.

That means the only price you know is the price they show, and they don’t have to bring their prices down to keep your business.

Higher Supply Costs - Distributors can charge restaurants different prices for the same products regardless of volume.

Even if you see a posted price after creating an account on a distributor’s website, the distributor rep might tell you something like, “Yeah, that’s our price, but I can work with you on that.”

So what does “work with you on that” actually mean? It means different customers get different prices. Your rep might tell you your price is based on how much you buy, but in reality it’s about how good a negotiator you are.

Distributors like being able to charge people different prices for the same products because it means they can maximize margin for themselves. 

We’ve been told by more than one food supplier that they have sat next to sales reps from big distributors while the distributor rep changes prices on the fly while sitting right across from a restaurant owner.

Opportunity Cost - Distributors can control what products you learn about, limiting your choices.

Big foodservice distributors know getting you to pay more isn’t just about hiding prices on the products you buy. It’s about controlling what products you know about. Many large distributors have products they stock, but that they don’t show you, or don’t tell you about.

Even if you think you have access to your distributor’s “whole catalog” you probably don’t. Most of the big distributors have a wide range of products that are “Closed Coded.” Closed coded products are products the distributor stocks if a customer demands, but hides from other restaurants and bars.

Distributors hide these foodservice items either because they would rather push the distributor private label product, or because they don’t think the supplier is giving them enough money to sell it. Regardless of the reason, restaurants and chefs are the one’s losing out on the deal.

How much are hidden prices costing you?

Depending on the category some restaurants are paying as much as 100% more for identical items. We’ve spoken to chefs and restaurant owners who have done the work to quote against their current suppliers and have saved as much as $18k per year in increased costs.

From. Just. One. Item.

We’re working hard with our members to make price transparency available to every independent food business, so you can make decisions quickly, with the best information possible.

If you’re not a member yet, sign up now. It’s free.