Have you ever wondered how small, independent restaurants are able to buy state-of-the-art technology? Or, able to afford high-quality ingredients and materials? Ever thought they are all working together?
Well, they are.
And their partnership is called a group purchasing organization (GPO). A GPO is an organization that pools the buying power of its individual members to help get the best possible prices and quality on products and services.
Some people might be familiar with the idea of group purchasing from the practices of insurance companies and wholesale retail operations like Costco. Both industries use group purchasing to get the highest quality goods and services while keeping costs as low as possible.
The large national restaurant chains act as their own GPOs to help them with all of their purchasing, from food items to cleaning chemicals to toilet paper. The combined clout of all of their individual franchisees allow them to bargain hard with suppliers — gaining favorable pricing and first-in-line delivery when supplies are short, among other benefits.
Meanwhile, most independent restaurants pay significantly higher prices for the exact same items.
It’s a two-way street. The benefits of GPOs are hardly limited to the restaurants who are members. Vendors who partner with a group purchasing organization gain hundreds, if not thousands, of new clients and are able to lock in large contracts with less selling time.
Make sure you have local representation. Working relationships with local vendors and on-the-ground representatives are crucial to ensure the best quality product and prices. Aside from quality and savings, the sense of community that comes from working locally is invaluable.
Make sure that your organization relies on the collective thinking and advice of active local restaurant members to make the right decisions to contract with the best local vendors based on price, service, and most importantly, quality. Anyone can buy a low-grade product cheaply. The best GPOs leverage buying power to improve quality while still lowering prices.
Check to see whether your GPO works on a pay-for-performance basis. This model helps ensure that you’re getting the best deals and quality with no out-of-pocket costs to you.
Does your GPO offer you a combination of savings opportunities such as rebates, deviations, cost-plus programs, and high-low contracts? If the answer is yes, you’re most likely dealing with an organization that is keeping ahead of the game.
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