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How to decide if a group purchasing organization is the right choice

Photograph: Shutterstock

Group purchasing organizations (GPOs) for restaurants facilitate the flow of data, rebates and other communications between operators, manufacturers and distributors. Operators benefit by receiving access to manufacturer-sponsored price discounts and rebates, insights into employee perk programs, marketing opportunities and more.

Tina Donahue, president of Dining Alliance, defined the company as “a group that leverages the buying power of a lot of local operators and smaller, midsized and emerging chains. We then use this leverage as buying power to negotiate contracts with everything from local distributors to produce vendors, meat vendors and large national companies like Tyson, Georgia-Pacific, Pactiv and Unilever, all with the goal of helping local operators generate significant savings, lower their food costs, run a better operation and ultimately be more successful.”

So how can restaurant operators determine if their operation could benefit from the programs available to a GPO member?

Take charge of purchasing

Whether they’re operating a single restaurant location or managing the purchasing for a multiunit chain, it’s important for operators to find a GPO that fits their needs and is focused on operators like them. Dining Alliance is a group purchasing organization focused on operations with one to 10 units, while larger GPOs like Source1 Purchasing focus on the hospitality and college and university segment. No matter the chain size, the GPO is likely to impact a company’s bottom line, find cost savings and get competitive pricing on everything purchased. A good GPO fit will provide everything from assistance in purchasing decisions and supply-chain management, as well as access to a wide network of resources that can help restaurants grow successfully. 

While GPOs are designed as a cost-saving venture, helping an independent restaurant make these vital choices is an important aspect of the GPO-restaurant relationship. Navigating the vast supply chain is a challenge for even the largest of corporations. For an independent restaurant, it can be overwhelming. In addition to better price points, larger chains also have access to higher-quality products—a benefit that can significantly affect customer satisfaction and return rates.

Learn about ways to save on the bottom line

If cost savings are important, operators should look for a GPO that offers rebates on a wide variety of items.

Working with a GPO can help streamline an operation, and it gives an independent restaurant the same competitive edge as big multi-chain establishments, which have entire teams of accountants and other specialists focused on cost and quality. Two categories in particular that offer the most savings are paper products and produce.

According to Donahue, paper products is a high-margin category that has embedded costs a GPO can expose. Consolidated Concepts uses its $10 billion in purchasing power to negotiate specific pricing for its members on paper products, and it helps them get better margins as a GPO member than they may get on their own.

The other category that sees large savings is produce, which experiences greater fluctuations due to its seasonality. GPOs can see huge savings for their members when they focus on better produce pricing. For example, on the East Coast in the first quarter of the year, when the area’s produce supply is diminished, Dining Alliance is able to find the highest rate of savings for its members. Its leverage enables it to monitor markets on a 12-month basis and develop extensive contracts with growers and shippers.

To learn more about whether—and how—a GPO can help, visit buyersedgeplatform.com/.

This post is sponsored by Buyers Edge Platform

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