Negotiating with Suppliers: How to Get the Best Deals

As a franchise owner in the fast-paced world of quick-service restaurants (QSRs), you know supplier costs can affect your bottom line. It might be a challenge finding suppliers you trust, at a price you like, with the quality standards you demand. In business, this can be a balancing act. Effective price negotiation techniques can be an important part of keeping this balance. Let’s look at how you can get the best deals from your suppliers to help your franchise thrive by providing the quality customers expect.

Understanding the Stakes

Supplies are a common cost to open a sandwich shop or any business. From food to paper products and promotional fliers to employee uniforms, you’ll likely need suppliers for all these different products. It’s a cost that can easily add up.The National Restaurant Association, in research published in August of 2022, estimates food and labor account for 33 cents to every dollar a restaurant makes. Other expenses—from supplies and utilities may account for approximately 29% of sales. As the research indicates, supplier expenses constitute a significant portion of business costs; managing all of these costs is critical to the overall potential success of your business. However, opting simply for lower-quality, less expensive products could ultimately lead to greater expenses.

Quality and Cost Balance

Research published by PYMNTS in August 2023 shows despite inflation and financial hardships, food quality is one of the last things consumers are willing to sacrifice. Their data shows only about 17% of millennials, 10% of Gen X, and 2% of baby boomers say they ate at restaurants with lower-quality food due to higher costs. This research suggests people are willing to pay for quality—a crucial factor that restaurant owners should note.

When trying to negotiate better contracts, it’s important to never lose sight of quality. Communicate the importance of quality to your suppliers and find a balance. Paying a little more for a much better product helps keep customers coming back for more.

Price Negotiation Techniques

Mastering the art of negotiation is crucial for securing the best price; let’s explore effective techniques to help you negotiate with confidence and success.

1. Establish a solid relationship: Suppliers may be more likely to offer better terms to clients they trust and view as long-term partners. Some ways to maintain a strong relationship include paying bills on time, communicating clearly, and showing genuine interest in their business.
2. Create a ‘win-win’ structure with suppliers. Your vendor partners need to make money selling products to you. Defining the relationship as purely transactional (for example, only obtaining the best price) is a losing proposition in the long term.  You can generally always find something cheaper. However, when situations arise that mandate you have a strong relationship (see #1), for example, when the supply chain was disrupted because of COVID, solid ‘win-win’ relationships can help ensure you continue to obtain products while other brands may find it more difficult to do so.
3. Do your homework: Knowledge is power. When you’re knowledgeable about the products, you can negotiate for a price that’s fair to both parties. In addition, having prices and quotes from multiple suppliers can be a powerful leveraging tool, as long as you’re intimating price is only one component of the contract negotiation. Relationship and availability being two other key components.
4. Volume discounts and long-term contracts: When you’re negotiating, you may want to ask about bulk/volume discounts or long-term contracts. Sometimes, suppliers are willing to lower prices this way. Typically, if prices are extremely high, it might make sense to go shorter on the contract period.  If prices are unusually or historically low, negotiating a longer-term contract makes more sense.

Let Others Negotiate and Harness Collective Buying Power

Negotiating can be a great tool to lower costs, but the time it would take to research, negotiate, build relationships, and find quality suppliers may be more of a headache than a money saver. The franchise supply chain can be complex with the various types of products you need. At Penn Station East Coast Subs, we negotiate and find quality suppliers for our franchisees that match our values. Partnering with a franchise like Penn Station can help take negotiation off your plate so you can focus on running your restaurant and doing the things you love. We make sure our suppliers hold our standards across all Penn Station restaurants. These criteria are set to uphold the brand’s reputation, meet customer expectations, and potentially secure better pricing for franchisees through collective buying power. You may be able to use those price negotiation techniques for other ventures.

Franchise with Penn Station East Coast Subs

Finding a franchise that gets the best deals on suppliers can help your bottom line and keep the stress of using the best price negotiation techniques off your mind. Finding your own prices for supplies can be a time-consuming and complex process. One of the benefits of owning a franchise is the help we give you every step of the way. At Penn Station East Coast Subs, we provide comprehensive training and support for our franchisees, including guidance with:

• Site selection
• Restaurant design and construction support
• IT and online ordering
• Operations and training
• Marketing
• Financial reporting

Request information about our business opportunity today and get started on your franchising journey!