Managing the Impact of Restaurant Commodity Price Swings

Produce prices are in constant fluctuation. This is no big deal for a restaurant if the shift is small, but can make a massive difference if the price jumps significantly—especially if the commodity is one of your most used items. You can’t control the changing costs of commodities. You can, however, employ some strategies to help manage the impact of those changes. Here are a few techniques to help ameliorate the impact of commodity price swings in the best way possible.

Have a Clear Picture of Which Commodity Items Are Driving Your Highest Costs

In most restaurants, it’s usually about 20% of the commodities that are driving 80% of the costs. When it comes to managing commodity prices, these items are the most critical to focus your cost saving efforts on. Don’t get side-tracked pinching pennies on items that have a negligible impact on your overall costs. Focus on the big guys, and then take the time to shop around, compare prices between produce suppliers and find opportunities to negotiate better deals.

Want to Know When the Next Restaurant Commodity is Going to Soar? Keep an Eye On the News

Commodities prices are affected by what is happening globally, and no one can predict when the next fluctuation will come. That said, keeping an eye on the news can at least provide some indication of the next big price increase and can help you be prepared to handle it. Whether it’s a drought in the Bread Belt, frost in Florida or civil war in Columbia, commodity prices are going to be affected. Knowing where your main commodities are coming from and monitoring the news from those areas will go a long way toward giving you a head start in dealing with the forthcoming price increase that occurs when disaster strikes.

Consider Restaurant Purchasing Contracts Instead of Managing Produce Orders In-House

Another way to manage commodity costs is by partnering with a purchasing company. There are a number of benefits to doing so—not the least of which is negotiated rates, as well as buying and consulting support. Restaurants who have purchasing contracts are protected from being at the whim of dramatic shifts in commodity costs throughout the course of the year. When deciding to enter into a purchasing contract, shop around and get a number of proposals as a tool to negotiate the best deal. Know your specifications to ensure that you’re getting comparable price quotes from suppliers and distributors. Look for fixed contracts to best manage commodity prices over time.

The downside of purchasing contracts is that you’re not free to shop around for a better deal until the contract is done. If you know that the price of a produce item is likely to go down, look for shorter-term contracts. When your contract is up, be sure to take a fresh review of available alternative options before signing the contract for another round.

No one can guess what will cause one item to spike while another stays static, but we all know how much those fluctuations can effect our bottom line—especially when they are unexpected. Taking the time to be aware of which commodity items could cause the most risk in your restaurant business if prices fluctuated, monitoring the news from areas where those commodities come and considering purchasing contracts to lock in better prices are all great strategies to help manage the impact of commodity cost fluctuations.

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2 Responses to “Managing the Impact of Restaurant Commodity Price Swings”

  1. lyndaybaker Says:

    Reblogged this on lyndaybaker.

  2. Chris Bronstein Says:

    Please don’t ruin Norms. I beg of you.

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