Restaurants are Wholesalers, so What Next?

I think when many restaurant companies signed up for third party marketplaces and corresponding delivery services, they didn’t realize they had entered into the world of wholesaling.  Many saw it as a way to get in front of more customers, albeit with fees.  Also, the lure of someone else taking care of the logistics and complication of delivery felt like a great opportunity to grow their business.

I’ll state the obvious but a wholesaler is really anyone that sells food to another at a discount or in bulk to be resold by another company.  What’s interesting is that most food sold wholesale is contracted at a base plus pricing model, meaning they take their “cost” plus a percentage added and this is the price it is sold at. 

What is interesting with third party marketplaces is that the formula is backwards.  The restaurant or wholesaler has a set price and then the retailer tells them what fee or/and percentage they will take.

Really doesn’t make sense!

How can you know if you are selling your items at a profit?  Well, you really do not until afterwards, then you can do the math.  The problem is that its very hard to do without a lot of work, breaking down the cost of each third-party order and then the fees-percentages charged.

Most restaurants would prefer to sell retail vs. wholesale, at a unit level that makes the most sense.  But we are all now faced with the “necessity” of being wholesalers.  But remember it is also your primary responsibility to market to this group of customers to convert them back to a direct or retail sale in the future.

So, with that knowledge in hand what should you do next.

Here is a quick list of areas to focus on:

Just like any manufacturer, it’s the product that matters, not just what you offer but how you position the products, construct them, how the costomer consumes them and what they cost to produce.  All these are critical factors to ensure you present the best you have to offer and make money while doing it. 

For cars fans like me, Ford is an interesting example.  In 2019 they announced the elimination of sedans in their lineup, a clear reduction in products.  Reasoning was mostly lack of demand, lack of profit, big and bold move.  Now, in 2020, we see a clearer picture with the introduction of the Bronco, which is a whole new product line, similar to Jeep is to Dodge.  The product is unique, limited, and much higher margin. If you think of your offerings the same way you will be much more successful.

Keeping on theme, what else do we routinely see with auto manufactures, reinvestment in plant operations.  Rebuilding lines with new technology to improve quality, efficiency and reduce labor costs are routine exercises.  Review your own internal operations and realize you are a manufacturing plant with multiple lines that run simultaneously.  As part of this they also invest in their team, retraining, upgrading, adding specialty positions that facilitate the change in operations.  Taking an old saying from my Panera days, it was always People, Product and Profit.

On a final note, have you seen the auto from the factory on a train all wrapped up and protected?  Just like autos for the factory your food must travel well, and the packaging not only needs to support this but also support the simplicity to produce quickly and efficiently.  We can learn a lot from manufacturers, and as restaurant continue to become multi-channel operations this is a critical evolution for us.

If you are interested in costing out your food menus per sales channel so that you can accurately understand your profits and margins, shoot me a note as I have a great and simple tech solution that can really help solve this difficult problem.


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