Friday, January 23, 2015

Foodservice Chains Build On Performance Conclusions

Your cost improvement strategy is on solid ground if based upon restaurant profits and brand positioning relative to the competition. 

The purchasing supply-chain contribution to your business should be driven by activities that contribute to the cost positioning of your chain. 

Ideally, the involvement of purchasing and R&D, working with marketing and operations in part of your performance management process.  This interactive dynamic sets the stage for overall spend and menu success. 

If you don't have the resources on staff, consider outsourcing as a tremendous and affordable solution to drive your business to the next level of efficiency. 

The really great restaurant chains excel at the Value Improvement Process and you can too!  

Start with these 4 basic steps:                                             
  1. Identifying key areas of investigation    
  2. Set appropriate cost targets                                    
  3. analyze options in each area                                                 
  4. secure resources to complete the work
The process we use with emerging chains or franchising organizations is to form small groups knowledgeable about specific areas of the business. Then, during monthly meetings or via online webinars, ideas are discussed and the best are presented to senior management.

If you would like to discuss the challenges facing your foodservice business or would like to learn about our Free spend analysis, give us a call today....It's Your Money!

To Higher Profits!  Fred                                                                                                                                                                                                                                                                 
Fred M. Favole, is Founder  & CEO of Strategic Purchasing Services (SPS) the industries most experienced consulting firm specializing in "outsourced" purchasing management. Office: (912) 634-0030,   

Thursday, January 1, 2015

Things To Come - Foodservice 2015

Supply Chain Matters
Welcome to 2015, the year that moderate energy prices increased consumer spending; even as the millennial generations' craving for junk food gives way to better food choices.  Keep in mind, they just learned via Twitter that testosterone replacement therapy has been perfected and life expectancy is now 87.45 years!  

Depending on your industry segment, your competitor’s changes in menu or service style to gain the profit or competitive advantage can be subtle; like fast food restaurants hiding the condiments, your favorite pub downsizing the personal size pizza or that national bar and grill chain adding a take-out charge to your take-out order. Expect more of the same in the New Year.

As industry consultants we are lucky enough to work several "hot" emerging chains with unique menus and trend setting concepts.  We work with them to source new items, develop contracts and manage the supply-chain process. Future restaurant chain leaders will find 3 basic ways to reach the teen to twenty something age group; social media, healthy offering and olfactory sensations.  This kicker this year these basics have found there was into the QSR and Fast Casual segments.

Gone are the days where double size-it promotions, $2.00 off coupons, and 36 oz sugar cola's can draw new customers, especially for the "Homeland" generation.

Segment Movers for 2015

·                     Fast Casual concepts with continue to fight each other for market share. And, innovators like Anthony Pigliacampo at Modmarket Farm Fresh Eateries (Denver) and Ron Siegel of Chickpea International (NYC) will continue to focus on fresh, healthy and tasty fare, while offering real dining value. 
·                     Casual Dining giants that serve up more of the same seafood and Italian dishes year after year will continue to struggle, closing stores faster than they can remodel. Real growth in this segment does not come easily, primarily because the competition is keen and emerging chains can move faster and offer more exciting menu dishes. 
·                     QSR restaurants may outpace all segments in increased profits, partly because they are starting to think "green and healthy" and mostly because the Affordable Healthcare Act in 2015 will force them to reduce non-management staff working sub-30 hour weeks.  This unfortunate (ha ha) situation does offer many operators an opportunity to pocket this political cash gift since they don't have to pay insurance. 

Distributors Are No Longer Price Friendly 

Not even the Wall Street Journal knows why Sysco’s purchase of U.S. Foods has been delayed. Let’s accept the fact that it's hard to turn the Queen Mary even in calm waters, as Super-Cube downsizes sales and support staff.  

What operators really need to watch out for is Machiavellian category management programs from some distributors that restrict open market purchases and distort the true cost of goods.  If you are not controlling 80% of what you spend through direct manufacturer contracting, you need to retain a professional purchasing support service. If you have a home-grown management mentality, then at least consider using an outside audit service to manage price-compliance within your supply chain.      

Your Foodservice Career

2015 will be the best year since 2005 for you to break into management, get promoted, change companies or retire from you day job and open your own foodservice business.

This year the “hot chain” concepts will add culinary to develop or refine new taste experiences and there is always a need for experienced restaurant operations managers willing to work long-hours and relocate to new growth markets. 

If you have the what it takes, make your move between March and May, the best months in the year to land that new career opportunity!

Why not make your New Year's resolution to stay current with your industry by attending a trade show,  taking a professional improvement course, work smarter-not harder, thenpay it forward" by sharing your knowledge, experience and passion for this great industry with the next generation of foodservice professionals.

To Your Success in the New Year!


Fred Favole, is Founder & President of Strategic Purchasing Services (SPS), America’s most experienced consulting firm specializing in foodservice purchasing management. Ask Fred about a solution for your business; P: 912-634-0030, e-mail:

Wednesday, November 19, 2014

Who's Really Managing Your Foodservice Purchasing?

Of all the non-operational activities that produce success in foodservice,  purchasing provides management with the greatest challenge.

The old school buying philosophy was to select the lowest bidder and make sure the restaurants received the right product on time. Because the buying function was undervalued, there was no chair for the purchasing guy at the board-room table. More often than not, buyers were isolated and had little interaction with the chain's culinary, operations and marketing departments. 

Then, progressive companies like; Marriott, T.G.I. Friday's and Howard Johnson's, driven by the force of strong purchasing executive personalities helped to change the balance of pricing power between the chain customer, program distributor and manufacturer. 

Today, for the most part, this approach has given way to “team” decisions regarding vendor selections and forward buying strategies, in what I call the era of soft purchasing.  Who really manages your foodservice purchasing depends on your supply-system and ability to identify true cost.  In recent years the balance of buying power has shifted back to the distributor, aided by willing manufacturers.  The exceptions are emerging chains like Modmarket Fresh Eateries (CO) PDQ (FL) and Chickpea International (NY), who focus on executing unique menus, while fighting to maximize of every dollar of spend.

Next Level Buying  - Vendor Selection

Often overlooked in the overall buying process is the importance of vendor selection. The selection of new suppliers is often restricted in "One-Stop" delivery programs. Strategic Purchasing (SPS) specializes in supporting emerging chains by building cost-effective purchasing supply-chain systems. Our innovative category buying and specialized re-distribution system is changing the vendor selection process.  

Food Cost Thieves
The challenges of developing and maintaining an efficient supply-chain are many, especially when true costs are not transparent to the operator and hidden profit centers (distributor) prevail. The avenue of dishonesty (transparency is a more politically correct term) in foodservice distribution and manufacturer programs is a winding road paved with temptation.  

There is no excuse for distributor or suppliers to raise prices counter to changes in commodity markets or overhead costs but that happens every day.  This practice, along with participation in earned-income programs often add 7-9% to the operators' true delivered costs.   The operators response is to private label products and forward contract prices.

Our great industry is faced with an ethical challenge of continuing under the economically false assumption that a $1.65 distributor fee or 6.5 % blended delivery margin can actually generate the $185. gross profit per delivery most distributor require to be profitable. 

Are restaurant operators willing to continue buying national brands that offer deep discounts and long-term pricing to the major chains or buying third party buying groups, while loyal but smaller chain customers pay more for the same products? There are numerous, more subtle forms of food cost theft, but you get the picture. 

Show Me the Money!

Every proactive procurement program starts a buying strategy, a long-range plan, and a systematic approach that advances menu profit objectives. If your process has a disconnect anywhere in the supply-chain, you are losing money. 

For now, think again about who is really managing your purchasing process. Is delegating spend management to a non-professional within your organization the best way to assure high-performance and profitable growth? 

To Higher Profits

Fred Favole is Founder / CEO of Strategic Purchasing Services (SPS), America's most experienced foodservice consulting firm specializing department outsourcing and COP cost reduction. Ask us about a free consultation or spend assessment today! Contact (912) 634-0030, e-mail: 

Thursday, October 16, 2014

Proactive Procurement in the New Supply-Chain

Today’s discussion tackles the question of whether a food service organization can change the new supply-chain enough to reduce food costs and thereby increase profits.

The answer depends on whether or not you can distinguish between a distributor managed pricing program from a true-cost of goods model which correlates production costs, commodity markets with finished goods pricing.

Most emerging restaurant chains pay less attention to true costs than they do pressing the distributor for lower delivery margins and suppliers for rebates.  From my 20 years consulting with more than 60 restaurant and hotel chains, I guarantee that any direct cost associated retaining a purchasing professional is an extremely sound investment.

What’s wrong with the new food service supply chain?

Traditionally, chains worked hard to move away from distributor managed purchases; managed product sourcing and structured pricing agreements with limited outside influences, and developed manufacturer sales advocates. 

Pre-2000, the transport of contracted products was handled by the supplier directly with the foodservice chain or co-managed with freight carriers.  While there was never was "true" pricing transparency; in past years supply partners discussed freight, production costs, overhead, sales overages, and distributor discussed financials.  

Today's new food service supply model or should I say, the“multi-income stream approach” that is taken by many distributors. This splits costing areas into watertight distributor profit centers.  All this is happening even as chains rush to reduce their purchasing staff  or delegate responsibility to non-procurement managers. You can bet the tremendous growth of group purchasing organizations (GPO's) can be traced to staff reduction.  However, this comes at considerable bottom line cost to the food service operator.   

Where the essence of procurement supply chain management has been transparency, and management of the cost components to the purchase there are two drivers changing this model, the are;  manufacturer segment specialization (ie: designated as a local chain, regional, national or broker /distributor managed program) and distributor category management. 

Both systems limit the chains ability to source the best product available at the best price. Making the task harder is direct collaboration between the manufacturer and distributor operating the single source system. 

Consider the 100-unit chain buying 15,000 lbs. per month of a standard breaded chicken tender under the distributors private label, for $2.55 per pound.  The chain opens a restaurant 500 miles away and discovers the same product under the manufacturer label sells for $2.40 per pound.  At the NRA show the buyer meets with the supplier directly and they reach an agreement for a private label program for only $2.25 per pound!  

Lets look at this example from the product sourcing perspective.  The distributor’s single-source buying system offers chicken tender for $2.55 lb. and they do not inventory a competitive product. The chain buyer asks the supplier for a special price based a volume purchase commitment, and the supplier refuses, stating "this is not allowable under the agreement we have with your distributor".

Every seasoned buyers reading this blog is shouting "foul" and will be quick to point our there are laws against price-fixing, The “Robinson-Patman Act”  or Interstate Commerce regulations; ...inside the ropes, however, they lament about how earned income,  single sourcing, and greed have distorted  the "true" cost of goods in the new age supply-chain.  

Is our buyer daunted by these obstacles?  Never!

Not wanting the chains' purchasing power to go down the drain and wishing to use his strategic buying plan for 2015, a lower cost supplier is sourced from outside the controlled supply system.  The new price is only $2.30 per pound and the supplier offers firm pricing.  Now the bad news!  The potential program is derailed because the new supplier does not have a financial relationship with the distributor resulting in higher inbound freight

Purchasing managers must develop missionary zeal in making the right distributor and vendor selections, and implement proactive procurement programs that allow the chain to take back the management of their supply-chain. It's the key to improved purchasing, higher profits, future cost-controls, and culinary independence.

To Higher Profits,   Fred                                                                                                   

Fred Favole is Founder/CEO of Strategic Purchasing Services (SPS), America's most experience foodservice consulting firm specializing in staff outsourcing and cost reduction management. Contact SPS for a free spend assessment or purchasing consultation: Office: (912) 634-0030, Email:

Monday, February 17, 2014

Lessons from The Olympics

Is your foodservice organization ready to annihilate the competition leading to the total destruction of their most profitable menu offerings?  
Creating the proper “supersport” attitude with advanced culinary-purchasing-operations teamwork the rocket science blackboard schematics of the New England Patriots.  

However, it does require the shot-out guts of USA Hockey star TJ Oshie and attention to 4 management areas that impact cost. 

Foreplay To Success    

Increase Supplier Performance – make sure your suppliers are meeting your objectives, don’t merely maintain the relationship – build it.

Reduce The Buying Cycle -- most suppliers no longer offer long-term pricing unless you take the risk, so streamline your bid process and focus on quarterly bids that generate even modest savings or cost-avoidance.

Cut Purchasing Costs and Overhead – lower operating costs by outsourcing where you don’t have on-staff staff expertise. If company-buying responsibility rests with the multi-tasking executive in the corner office who does many things “adequately”, ask your distributor if your prices are comparable with your competitors’.

Reduce Maverick Purchasing and Increase Control – increases spend management and control purchases - you will need to maximize every purchase dollar. 

Whose chain menu will reign supreme?

From the Sochi Olympic Stadium to Kitchen Stadium - Iron Chef, the lesson is the same...challenge your Gastronutritional and creative Team to gain the People's ovation and make your culinary-purchasing ROCK.  

Here are artistic creations spotted on slopes on the way to Russia!                                      


Breads, twists, wraps, nuggets


Haute Jewish Deli (amped up chicken liver, peppered pastrami; other - Beef potato chips, marshmallows & macadamia nuts, Asian-American comfort food (hand held)


Trendy ingredients (jerk, ABF chicken, Italian ham, fried avocados
Frittata, broccoli slaw, roasted, as pizza topping, and
Pizza oven-roasted cauliflower with whipped goat feta

Wraps With an Attitude


TO-GO "car cups"

Street food in a great wrap, taking it to the Food Court competition

Actually fits both Yugo & Mercedes cup holders, how about that:  holds finger foods from fried fish to whiskey butterscotch parfaits.

To Higher Profits!

Fred Favole is the Founder/President of Strategic Purchasing Services (SPS) and Chain-Link Culinary Services (CLCS); America’s most experienced consulting service for foodservice chains.  Contact information:  P: 912-634-0030