Even for the best reasons, switching can be pretty tough on the nerves.
When California Tortilla’s primary distributor ran into financial trouble a couple of years go, the chain had to make a choice: stick with the distributor, who despite its problems was still viable and with whom the chain had a great relationship, or jump ship. Bob Phillips, president of the then-16-unit franchised restaurant group, followed his gut and advice from a supply-chain management firm: He signed on with a new outfit, Rockville, Maryland-based Saval Foodservice.
“Changing distributors is nothing to take lightly. But we started seeing our service levels impacted by our distributor’s financial woes,” Phillips says. “They were no longer making the appropriate investments in our inventory. As a franchisor, we have a responsibility to make sure that when that truck shows up, the products our franchisees need are on it.”
Poor service—not getting what you want, when or how you want it and/or at the agreed-upon price—is just one cue that it may be time to shop for a new distributor. Other considerations: Are you outgrowing your distributor’s capacity to service your marketing territory? Does the distributor have the sophistication to provide you with the information and value-added services you need to manage and grow the business? Have you been buying from specialists and need to consolidate to gain efficiencies? Are you getting enough attention? Do you like the people?
“The top reasons operators change are communication and people,” says Harry Harrison, who recently joined U.S. Foodservice in La Mirada, California, as vice president, purchasing and merchandising. Previously, he was director of purchasing and distribution for 82-unit Black Angus Steakhouse. “You have to have a comfort level with the people, and there have to be strong, open channels of communication. A simple personnel change could cause an operator to change.”
A switch also may be in order to better accommodate growth. As more units are opened, greater efficiencies and better systems are needed. “As [operators] get to two, three, five units, they start to realize they need to consolidate their buying and have access to more data with which to manage their business,” Harrison says. “They often find they need a larger distributor with more sophisticated technologies and tighter systems.”
At the chain level, where multi-year contracts leave little wiggle room, distributor changes are rare. They’re too difficult, time consuming and costly, according to Harrison. “There would have to be a huge issue, with the distributor failing to adhere to the contract or really screwing up somehow for a chain to make a change. Switching distributors is a nightmare administratively and it’s very disruptive in the field during the transition.”
While at Black Angus, Harrison did make a change for strategic reasons. “Our contract had expired with McCabe’s Quality Foods. We were bidding it out and took the opportunity to look for someone who was more centralized and could handle our business across multiple states with contract pricing. We switched to Sysco.”
Phillips adds that making a change is tough in part because of product mix differences. “We used paper towel A our new distributor carries paper towel B, for example. We had to switch over all of our dispensers. Our recipes are based on the products that our old distributor had. We had to do a lot of testing to ensure consistency and cost control. And we had to re-educate about 100 managers on who to call, how to use the new distributor’s computer system, what the pack sizes are.”
As an emerging chain, future growth was also a major concern for California Tortilla, which has doubled in size since switching to Saval. “That was a huge discussion point,” Phillips says. “We’re confident that they’re able to accommodate our growth in our primary mid-Atlantic market. We also have one unit in Florida, and they helped arrange a distributor in that market for us.”
He adds that when shopping for a new distributor, price is a naive place to start. “Prices change constantly. If you don’t have a strong program and a great relationship, you could pick the cheapest guy and six months later he won’t be the cheapest guy.” He advocates spending time at the distributor’s facility, meeting with multiple levels of management, doing lots of product cuttings and contacting several current customers for referrals.
Harrison suggests doing dry runs. “If you’re ordering 100 boxes from distributor A every week, order those same 100 boxes from the new distributor on a dummy invoice basis a few times to verify pricing. And before you hit the switch, have the new distributor deliver one of everything on your order guide to a unit so your chef or manager can check each item. Inevitably, a few will not be what they expected and those kinks can be worked out.”
Whatever the reason, changing shouldn’t be a knee-jerk decision. “If the time comes when an operator has a legitimate reason to seek a new distributor, we’re in the bullpen and we want their business,” says Paul Saval, president of Saval Foodservice. “But we don’t want it to be a snap decision. There’s too much at stake on both sides. Snap decisions, after all, have a way of snapping back at you.”