By Jacque Coe, APR
Keeping costs down to maximize revenues is one of the greatest challenges in hospitality. At any given moment, a restaurant owner can be pulled in a range of different directions; tasked with managing staffing, training, inventories, menu creation, marketing, finances and a multitude of other duties vital to keeping a restaurant running smoothly and profitably. Worrying about whether they’re maximizing profits and taking advantages of rebates isn’t something most owners have time to do. But if they’re a member of a Group Purchasing Organization (GPO), such profit and rebate actions often become automatic.
There’s Strength in Numbers
Members of a GPO gain access to rebates otherwise unattainable if they were making those purchases as an individual business. GPOs leverage the purchasing power from large numbers of restaurants and hotels to negotiate rebate terms with manufacturers, which helps group members save money on the items that they buy. Historically, GPOs were common in the health care industry, where groups of hospitals would combine their buying power to achieve economy of scale on medical and surgical supplies. Now, GPO memberships are on the rise in the restaurant and hospitality industries, where thousands of operators are benefitting by earning cash back and a wide variety of discount programs.
How GPOs work:
Operators sign up with a GPO to gain access to rebate agreements which are then tracked and paid directly to the member. GPO contract specialists work with manufacturers to set rebate levels to provide the maximum benefits and savings to operators.
Most items on a GPO contract carry a rebate amount based on each case or pound of goods. For example, a case of plastic ramekins might come with a $3 rebate per case that is paid to the operator as part of a quarterly or monthly rebate check they receive directly from the GPO. The GPO can conduct a savings estimate for potential members to analyze several months of distributor invoices to determine exactly how much cash back an operator may be able to realize if they join the group. Then, once a restaurant or hotel has several months’ worth of invoices on file with the group, the GPO can conduct a savings optimization analysis to uncover additional rebate opportunities in the form of product switches, which can often net significant cash back on easily swappable items, such as chicken breasts, rubber gloves, can liners and more. Cost are always a concern but even more so during the current pandemic. As businesses face an unprecedented need to optimize spending and watch where every dollar goes, having access to these savings can make a big difference.
Given the expanding role of GPOs in the hospitality purchasing equation, the association believes establishing an official GPO program makes sense. After thorough vetting, the association will choose a GPO for their size, contract coverage, and technology tools that will serve the majority of the association members to provide savings.
Such an organization typically can offer over a hundred thousand products under contract from hundreds of top manufacturers for everything from tomato sauce to tablecloths. Under such programs, members can earn cash back on everything from chicken, pasta, mayonnaise, paper towels, containers and thousands of other items across hundreds of categories. Additionally, some organizations feature programs that offer savings on non-food expenses such as uniforms, footwear, cable TV packages, equipment suppliers, paint, and technologies featuring third-party delivery and order consolidation.
Addressing the lodging side is also very important to the Washington Hospitality Association, so we’ll choose a program that offers a specialized suite of services for hotel and casino properties that can include savings programs on operational supplies and equipment, furniture fixtures and suppliers unique to hotel and casino properties.
Ease of technology
The last thing a hospitality operator needs is another task, or a headache. Washington Hospitality Association will partner with new technology that makes sign-up and GPO account management simple. Online member portals need to provide easy software programs for updating accounts, browsing product, program and promotion opportunities, as well as platforms that allow members to view
their purchasing data by manufacturer, category, time period and other factors. Additional technology features that track food inventory and ordering, recipe cost calculators, accounting tools and rewards points are all features our members may want and need.
Information for this article was provided by Dining Alliance, a group purchasing organization. Washington Hospitality Association is currently working to develop a GPO program to provide members value and ease of use