PROACTIS Blog

Effective Sourcing: A Key Driver for Restaurant Growth

Kelly Deacon
Kelly Deacon,
PROACTIS
Restaurant sales are expected to reach nearly $799 billion this year, according to the National Restaurant Association. This will be the eighth straight year of sales growth for the industry, but the actual growth rate remains moderate. With tastes, preferences, food trends and diets constantly in flux, the industry can be complex to navigate. Changing food prices, fluctuating product availability, regulations and uncertain economic conditions make it harder than ever to predict customer spending habits and entice consumers through the door. 
To improve chances of success in this dynamic market, restaurant teams need to offer more innovative, quality menu items – at an attractive price point – that keep patrons coming back. Figuring out how to do this without breaking the bank can be tough if the right strategy isn’t in place. Adopting an effective and holistic approach to sourcing that connects teams with the exact suppliers and products they need will enable restaurants to deliver a menu that stands out. This ultimately leads to sustained and measurable growth – sales, new customers, revenue and even more product offerings – for the business.

There are five procurement strategies restaurants need to leverage to hedge against market challenges and improve overall business outcomes.
  • Expand sourcing goals
As consumers seek higher quality and healthier ingredients, restaurants need to pay even more attention to the suppliers they work with to ensure their customers’ needs are being met. Thoroughly evaluating suppliers, and nurturing relationships with the strategic vendors that fit your business needs, will pay off in both the long and short run, as these partners can help you discover new or higher quality products and ultimately provide greater value. Transparency, traceability and open communication with every party involved in the supply chain – from the manufacturer down to the consumer – is becoming more important than ever.
  • Strategically assess
Restauranteurs need to have a clear picture of the most profitable locations and categories, and use that data to make informed decisions. If the price of kale is skyrocketing, for example, does it make sense to continue to invest there, or find a comparable alternative? If it’s a popular item, the answer is obvious, but if the market loves arugula just as much, it could be more profitable to rethink the menu. It’s important to reference all the information available and look across the business to make these types of informed, confident decisions.
  • Revaluate relationships
Restauranteurs will sometimes discover there’s a better deal available than what they currently have when they go through a live auction. When this happens, it might mean switching suppliers, but typically the incumbent ends up lowering their own price to keep your business, giving you the same high quality products your customers enjoy and additional savings.
  • ​Uncover new categories 
Food and commodity prices are always changing, sometimes due to the seasonality of items or general market trends. That makes running auctions on just a few categories a poor approach. Running regular auctions on any variety of categories, on the other hand, may reveal savings in places you never even considered. Knowing where to look for savings beyond typical categories, such as on the operational side, will help you source more effectively and efficiently with the right suppliers.
  • Diversify to mitigate risk
Avoiding risk is a priority every sourcing professional should keep in mind when examining their supplier base. By working with a diverse pool of suppliers and taking geographic risk into consideration, sourcing teams reduce risk and gain insight into supplier practices and where the ingredients are produced. This will help companies avoid potentially risky situations before any issues arise. Having quick and easy access to a pool of qualified secondary suppliers is vital. Just think: what would happen to a seafood chain if their first and second suppliers couldn’t get them shrimp due to a disruption? In a case like this, restaurants rarely have enough time to vet and find another supplier, and get product on the table before it affects the consumer.

To learn more about how a smart, holistic and effective approach to sourcing can benefit your organization, please see PROACTIS Sourcing Services