Food cost gets all the attention and supplier terms get almost none, which is backwards. Your food cost percentage moves a point or two with real work. Your payment terms can move your cash position by a week of revenue with one conversation.
Here is what is actually negotiable, and what to ask for.
The three things you are negotiating
Most operators think of this as price. It is three things, and price is the one with the least room in it.
Price. Some room, mostly on volume and mostly on the items you buy most of.
Terms. When you pay. This is where the real money is for a small restaurant, and almost nobody asks.
Service. Delivery days, order cut-offs, minimum orders, substitution policy, and how credits are handled. This decides how much of your week the supplier consumes.
Why terms matter more than price
An illustration with the assumptions stated. A restaurant buying $18,000 a month of food and drink.
Negotiating 2% off the price saves $360 a month. Real money, and it took several conversations.
Moving from payment on delivery to net 21 does not save a cent — it gives you roughly three weeks of purchasing, about $12,600, as working capital you did not have before. For a restaurant that is occasionally tight before a slow week, that is worth considerably more than $360, because it is the difference between comfortable and borrowing.
Terms are also easier to get than price, because they cost the supplier less. A distributor's margin is fixed; their cash flow is flexible.
What to ask for, in order
Net terms. Net 7, 14, 21 or 30 depending on the supplier and your history. Start by asking what they offer rather than proposing a number. Many have standard terms they do not volunteer to small accounts.
A discount for early payment. Often 1% or 2% for paying within ten days. Worth taking if you have the cash, and worth calculating: 2% for paying twenty days early is an excellent return if you can afford it.
Volume or consolidation pricing. If you are buying the same category from three suppliers, consolidating it into one is worth a price conversation.
Price protection on your core items. A fixed price for a quarter on the ten items you buy most. This is more valuable than a lower spot price, because it makes your cost predictable and your menu pricing defensible.
A named rep and a direct number. Underrated. The difference between a credit resolved in ten minutes and a week of emails.
The terms that quietly cost you
Read these before signing anything.
Minimum order values. A high minimum forces you to over-order, which becomes waste. It is also the mechanism by which a "cheap" supplier becomes expensive.
Delivery days and cut-offs. A supplier who delivers Tuesday and Friday with a 4pm cut-off two days ahead is dictating your prep schedule. Know this before you build a menu around perishables.
Substitution policy. Whether they can send something different and charge for it. This is where a lot of unexplained invoice variance comes from.
Exclusivity. Common with drinks. Sometimes worth it for equipment or support, often not, and it removes your ability to price-check the category. Read the term length carefully.
Equipment tied to supply. A free cooler or coffee machine usually comes with a purchase commitment. Sometimes a fine deal. Always a contract with a duration.
Auto-renewal. With a notice window you will forget. Put the date in a calendar the day you sign.
Check the invoices, because the price you agreed is not always the price you pay
The single most common leak in restaurant purchasing, and it is not usually dishonesty. It is price drift — an agreed price that quietly returns to list, a substituted item at a different rate, a delivery charge that appears.
The practice that catches it:
- Someone checks the delivery against the order at the door, before signing. Signing an unchecked delivery is signing away your right to dispute it
- Weigh the expensive items. Meat and fish, specifically
- Once a month, compare the invoiced price of your top ten items against what you agreed
- Chase every credit. Suppliers do not apply them automatically
That monthly comparison takes twenty minutes and it typically finds something. Restaurants that do it find it once and then find it much less often, because the supplier notices you are checking.
Do not run a single supplier
Even if one is cheaper on paper.
A second supplier for your main categories gives you a price reference, a fallback when something is out of stock, and leverage in the terms conversation. A restaurant with one supplier has no idea whether its prices are good and no options when a delivery fails.
The cost is a slightly higher order minimum in both. It is worth it.
How the conversation actually goes
Ask directly and be specific. "What terms can you offer on an account doing about $6,000 a month with you?" is a question with an answer. "Can you do anything on price?" is not.
Bring your numbers. A supplier is much more responsive to a restaurant that knows what it buys and pays on time than to one that does not.
And pay on time. The whole basis of getting good terms is being the account that never has to be chased. That is the actual negotiating position, and it takes a few months to build and one bad month to lose.