By Big Dave Ostrander
Photos by Josh Keown

Imagine this: never asking your sales representative the cost of cheese or the price of any other ingredient ever again. You quit the weekly dance we call placing the order. In fact, you personally delegate that task to an employee. You stop writing a check for deliveries. And finally your food cost drops 3 to 5 percent and your checkbook is always in the black. Your relationship with your rep is a deep and trusting friendship and you cover each other’s backs.

This model is absolutely attainable. In my 30-year career of owning Big Dave’s Pizza & Subs, I evolved from being a purchasing bully to a profit partner with my food distributors. When I was young and full of myself, I pitted all my salespeople against each other. It was a weekly way that got my macho on and flexed my purchasing muscles for the sake of power and ego. I had the power and I wasn’t afraid to make you sweat for the order or wait until the last minute before I paid you. What a major waste of time and energy.

Food service distributors have myriad responsibilities that range from furnishing, automating and equipping a huge big box building to providing a fleet of refrigerated delivery trucks and company vehicles for sales reps to maintaining, insuring and replacing all hard assets. All the while, they provide service and appropriate price levels to keep your business.

Contrary to outward appearances and perceptions, the majority of food service distributors run on very thin margins. They all have one thing in common: they seek to do business and build long-term relationships with top-shelf restaurants.

The fastest way I know to reduce your food cost and get the best pricing is to allow a distributor to make more profit or margin on your account. If you do your part, your overall invoiced pricing will go down. The more food, the bigger the drops, the higher the margin for your supplier. If you are a cherry picker, like I was for 10 years, you will constantly have a distrustful relationship with your distributor. You will be forced to have your guard up at all times.

There are new rules of the road for buying food from a distributor. In fact, there are rules for them and rules for you. Buyers and sellers have a very co-dependant relationship. One is just as important as the other, even though you may have been taught otherwise.

Rule No. 1 — Choose your supplier carefully. What do other restaurateurs have to say about them? Do you share common goals? Do you like and totally trust your route rep? This is a biggie. If the chemistry isn’t there, the relationship starts off on the wrong foot.

Rule No. 2 — Don’t ever lie. A good rep worth his laptop has heard
every lame fabrication in the book. Don’t think you can snowball them. This may be the hardest thing to change. Two-way truths are a wonderful thing. This concept may mean you let go of the “I’m the customer, you’re my servant” mindset.

Rule No. 3 — Respect their time. Be organized and never make them wait for an order or check. Time is money. From time to time schedules get messed up and there is a valid explanation. Don’t make it the rule. The last
10 years I owned Big Dave’s I didn’t write a check to my supplier or call an order in. I trained an employee to inventory and place all of the orders. He was in high school and made extra pay for owning inventory responsibilities. Since I was rarely around when my rep came in looking for a check, I had his signature added to my checking account. He wrote his own check every week. I didn’t make them chase the money.

Rule No. 4 — Treat your delivery drivers with deep respect. They will treat you very special, rotate your stock and be considerate of your time. Buy them lunch (or at least a beverage). If they are great, let the company know. If they are weak, let the company know that, too.

Rule No. 5 — Enter into a written Prime Vendor Agreement. Every major restaurant chain has one thing in common: they buy all of their food from one distributor. That gives you one point of contact and cost-plus pricing. You write one check. In return, you retain the right of audit to confirm price-plus pricing is being honored. You will get better service if you are loyal.

Rule No. 6 — Get the ground rules right out in the open from the start. No one likes to be surprised with new rules or terms. Right from the get-go talk about terms, delivery days, food specifications, customized boxes and minimum order levels. The sales rep is not your gopher. If his company has an out of stock item, they own fixing the problem. If you forget to order it or blow out of an ingredient, don’t force him or her to run to the warehouse for a take-along. If you created the problem, you fix it.

My parting shot this month is this: through thick and thin, for better and worse, relationships built on trust
endure the test of time. If you want to get the most from a supplier, be their favorite customer. It’s just human
nature and the right thing to do.

Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer. He is a monthly contributor to Pizza Today.

By Big Dave Ostrander
Photos by Josh Keown

Do you know of any independents grouping together to get discounts with suppliers?

Darren Larson
AllStar Pizza
Clute, Texas

For the most part, suppliers are not keen on pricing with a loose group of independents. They are looking for groups that have been around for a while and have the authority to speak/represent their respective groups. What you are referring to is what is called a Prime Vendor Agreement. All chains purchase 85-plus percent of their food from one supplier. In effect, this allows the supplier to enter into the agreement and charge less margin. The way they look at it goes like this: “Would I rather make 18-percent margin on a third of spotty business, or would I rather make 13 percent on all of the business, week in and week out?”

If you are a good prospective customer you can en­ter into your own Prime Vendor Agreement with your current suppliers. I have written and given numerous seminars on the subject. I also have assisted many of my single-unit clients in establishing their own contracts with suppliers. Once the new prices kick in, a 5-percent or better drop in pricing typically occurs.

This is how it works. First, you compose a letter and mail it to all suppliers that could service you and with which you are comfortable doing business. This letter invites the supplier to bid on your purchases us­ing a cost-plus system. At that time you will honestly describe several important things to the supplier.

They will want to know: 

• How many deliveries will you require a week? 


• What sort of credit terms do you desire –– COD, 7-days or 14-days, electronic payment, credit card, etc.? 


• How will you place your order and how much lead time will you want? Internet, phone, in person to DSR, etc. 


• Will you allow automatic substitutions if they are out of stock on specific items? 


• What time do you want the delivery? 


• Is your business seasonal? 

All of the above factors are important in determin­ing how much it costs to service your account. If you lower the cost of doing business with you, you deserve lower pricing. If you are unorganized, don’t have the order placed before cut off time, bounce checks, and give away business to their competi­tors who come in and quote lowball prices to get your business, they won’t be interested in being your supplier/partner. On the other hand, if you are loyal and easy to do business with, you are what they are looking for.
I assure you that if you meet the above criteria this system will work for you. It is a two-way street with requirements on both the buyer and seller. These agreements are cancellable by either party with two week’s notice and allow you to do spot check audits of their costs from their suppliers to guarantee they are actually pricing your ingredients on a true cost-plus percentage basis.

For the most part, this is how the majority of big chains purchase their food items. It lowers their over­all food cost percentages in the long run.
The last 15 years I owned Big Dave’s Pizza & Subs I never asked my sales rep the cost of cheese. When you think about it, the rep has the least amount of power in the entire organization. He or she has a laptop that is programmed with the least amount they can charge for items before they have to do some fancy explaining to their boss or the company buyer if they override the pricing bracket. My system takes the adversarial component out of purchasing. Every Friday, I looked up the block price of cheese and then added our pre-agreed “cost plus XYZ pennies over block”, and that figure is what showed up on my invoice.

This is a simplistic description, but you get the point.

Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer. He is a monthly contributor to Pizza Today.

By Big Dave Ostrander

What is the first question you ask your sales rep every week? I’ll bet it isn’t weather or family related. I’d bet it goes like this: “How much is cheese this week?” I stopped asking the big question in 1989, after I was educated on a term that changed the entire way I bought all of my food from that day forward.

Your sales rep has very little control over the prices that show up on your invoice. DSR’s (Direct Sales Reps) have to sell their food and supplies under high scrutiny. They answer to their district managers, then to the sales manager, then all the way up the to the corner office. Food distribution companies must cover four areas of expense before the final lowest cost price is set and reflects on your invoices. They are:

• Product costs: What it costs the supplier to buy the products from their manufacturers. The higher their volume, the lower their costs are.

• Delivery and handling costs: This is much the same as how we charge for home delivery. What is the cost per drop to your restaurant? This cost has skyrocketed for your distributor in the last year because of diesel fuel, insurance, wages and depreciation of tractor-trailers.

• Selling costs: The cost of servicing your account and processing orders. The more you order determines how far these fixed costs can be spread over your total sales dollars. Special orders, delivery frequency and credit terms are factored in here.

• Profit on account: This is the percentage of mark-up or gross profit (sometimes referred to as margin) that needs to be made to consider your account profitable, after considering the above factors and potential volume of your account.



Did you ever wonder why publicly held chain restaurants are two to three time more profitable than independents? One of the big reasons is they don’t buy their food like we do. Every single one of them uses one primary supplier to buy 80 to 100 percent of all of their food and supplies. I’m convinced that this issue alone accounts for a huge reduction in their annual food cost percentages.

I was taught to be an adversarial buyer. I was very good at it. I used guilt trips, lies, and threats to get the lowest cost possible from my DSR. I spread my orders over three to four distributors (not including the produce guy and soft drink distributor) to keep them honest. I made them sweat for my order. I must have said, “How much is it for XYZ?” a million times.” They shot me a price and I started the adversarial dance of, “Sorry, you’re 10 cents too high.” Little did I know I wasn’t getting their lowest prices. It was a very time consuming power trip. They still had to factor in the four equations described above. My monthly food purchases were about $25,000. I was spreading my orders between 3 distributors. Each one of them was getting around $100,000 a year. They were paying around $80,000 for the food they sold to me. Their gross margin was close to 20 percent. That wasn’t profit. They still had to subtract selling and administration costs, delivery, handling costs and profit.

Then I met Ty Troy, DSR extraordinaire. After cold calling me for six months I gave him his first mercy order, just to get him out of my hair. He showed up every week, sometimes twice. He was like cancer and just wouldn’t go away. He kept on telling me all of the ways his company was the only choice and how he would blow me away with service and price. He was so genuine and his references checked out, so I decided to give him a try. After a rough start (I was disorganized and accidentally bounced a few checks to him) we settled in and got down to business. After the honeymoon period we started to trust each other. I told him what my worries were and he shared his. Then we did something very extraordinary. We made a solemn vow to never lie to one another. He told me what he was looking for in a customer. He was a four million dollar man (eventually grew his route of 100 miles of lonely Lake Huron shoreline to 6 million) and didn’t have time for customers who weren’t:

• Going to pay their bills on time

• Totally honest

• High dollar accounts

• Loyal, even with low ball offers from competition

• Going to refrain from guilt trips and adversarial buying games

• Organized and have the order ready. (time is money)

• Going to regard the relationship as win-win

• Reasonable in their expectations



I shared my thoughts too. I was looking for a supplier who:

• Stocks the right ingredients in their product mix

• Can deliver food on time, at agreed pricing amounts

• Will work out agreeable credit terms

• Is totally honest

• Knows their product line inside and out

• Suggests money saving ideas without compromising the food quality

• Will suggest, track, and monitor manufacturer rebates and special pricing

• Is comfortable on a cost plus arrangement

• Will cover me if I screw up and forget to order a product.



He suggested that we might want to try a non-binding Prime Vendor Agreement for six months. He knew my potential volume was appealing to him and his company. I would buy all of my food from him and he would set me up on a cost-plus program. He would much rather cut his margin almost in half to get all of my business. After all, 12 percent of $300,000 is better than 20 percent of $100,000. From that day on I never asked him the price of cheese or anything else for that matter. My cheese price was directly tied to the Chicago Mercantile Exchange (CME) Block Cheddar price, and all of my other categories were indexed off of cost-plus percent over their invoices. He organized my purchasing and created customized order forms, par levels and was always informing me when my food ingredients were on sale or when they expected costs to go up.

This type of arrangement is based on trust and goes both ways. Other suppliers tempted me with better prices on specific items, but in the long run it’s not wise to cherry pick. I was finally able to spend the three to four hours a week of newly found extra time on more productive areas (like training, guest service, finances, and marketing), and eventually delegated the entire ordering process to one of my high school employees.

Bottom Line: my annual food costs went down 8 percent. I gained over 200 hours a year for more productive management. My invoice paper clutter was slashed. My DSR was my advocate and was always watching my back.

Does this make sense for your pizzeria? Give it a shot.