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GPO 101: What are GPOs? How do they work? How can they help save on food costs?

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Restaurants are known for having razor-thin margins—and operators are always looking for ways to trim the budget, optimize labor and put in place other cost-cutting measures. Group purchasing organizations, or GPOs, offer restaurant operators the benefit of making purchases as a group in order to keep costs down, so they can be a highly appealing choice. But for operators who aren’t already in one, they can be a little confusing. What exactly does being in a GPO mean? How do purchases work? And how can being in one help to cut food costs? More than ever, restaurants are looking for ways to keep costs low to help ensure future success. Keep reading to find out how GPOs can help ease the stress of this pandemic, and gain helpful insights on how they can contribute to continued growth.

What is a GPO?

Simply put, a GPO is a platform that allows businesses to join as a group of buyers who are interested in the same services or products. GPOs motivate suppliers to offer competitive prices to their members, and the more members a GPO has, the bigger the discount. In short, being part of a GPO gives restaurant operators access to savings they wouldn’t otherwise qualify for.

How do GPOs work?

GPOs function through membership. Restaurants and other vendors join a GPO in order to purchase in volume. By leveraging the collective needs of the group, partners can get a better deal on products or services they would purchase anyway. By being part of a GPO, restaurants can take advantage of larger discounts without having to purchase larger amounts of items—purchase volume is combined from across the membership and all members have access to pre-negotiated discounts and rebates that are assigned to each individual line item.

To join a GPO, restaurants and other vendors can use a platform such as Buyers Edge Platform, which hosts and connects a network of specialized foodservice GPOs, best-in-class manufacturers and service providers with operators. Members can access Buyers Edge Platform’s software to view and normalize purchasing data, audit contracts, process rebates and more. They can also collaborate with other companies to share data and make referrals to ensure everyone is getting the best possible services.  The Buyers Edge Platform houses several group purchasing organizations that specialize in individual sectors of the foodservice industry, with Consolidated Concepts set up specifically to service multi-unit restaurants and emerging chains.

How GPOs help with supply chain and food costs

By being a partner in a GPO, a restaurant operator can use their GPO’s contacts, partners, experts and technology to reduce costs and streamline the supply chain. What’s more, GPOs can also help to ensure there are no hiccups in the supply chain. For instance, when the global COVID-19 pandemic first started hitting restaurants, GPOs were working hard on the frontlines to ensure operators would still be able to get the ingredients and supplies they needed. For operators going it alone, supplies may have been limited or unavailable. As part of a GPO, though, operators have more leverage to ensure they receive the foods they need to stay in business.

On top of ensuring no gaps in supply, specialized GPOs, such as Consolidated Concepts, are designed to identify where emerging, growing and established restaurants may have the best opportunities for savings. For independent restaurants, Dining Alliance is a specialized GPO designed to deliver savings and simplicity to independent restaurant operators. “There are a lot of working parts. We keep a lot of direct deals with manufacturers,” says Christina Donahue, president of Buyers Edge Platform, the parent of Consolidated Concepts, Dining Alliance and other GPOs. By keeping these direct deals, Consolidated Concepts and other GPOs are able to offer those deals to their partners.

GPO savings contracts are generally made up of two components: a deviated price, or discount, and a rebate. GPO contract specialists work with manufacturers to set these deviation and rebate levels in order to provide maximum benefits to operators as well as their respective distributors. Deviated prices are the price that the operator pays for each product, with a distributor markup added. When operators pay their distributor invoices, distributors usually “bill back” the manufacturer for the discounts.  Additionally, most items on a GPO contract also carry a rebate amount based on each case or pound of goods. For example, a case of plastic ramekins might come with a $3-per-case rebate that is paid to the operator as part of a quarterly or monthly rebate check that they receive directly from the GPO. GPOs such as Consolidated Concepts can conduct savings estimates for potential members that analyze a few months of distributors’ invoices to determine exactly how much rebate and deviated price savings the operation may be able to take advantage of if they do indeed join the group.

Want to learn more?

Being part of a GPO helps keep costs down while connecting restaurants and other vendors who are looking to purchase the same goods. Thanks to group purchasing power, available prices are more competitive, leading to cost savings for restaurant operators and safeguards in crisis or emergency situations such as what restaurants are dealing with now during the COVID-19 pandemic. What’s more, joining a GPO is simple. What’s not to love about an easy solution?

To learn more about GPOs or get more information about Consolidated Concepts, visit consolidatedconcepts.net.

This post is sponsored by Consolidated Concepts

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