With an economic downturn that has hit industries across the board, the quick-serve industry has made some positive gains. In April, the National Restaurant Association’s Restaurant Performance Index—a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry—registered at 98.6, up 0.8 percent from March, its fourth consecutive monthly gain and its highest level in 11 months.

But not everyone in the industry has reported good news. While scary to think about, some operators have experienced having suppliers shut their doors or succumb to acquisitions by larger companies, completely disrupting the quick-serve’s supply chain.

To avoid this problem in your own business, it’s important to keep an ear to the ground and listen to what’s going on around you.

Mark S. Parmerlee, chairman for Golden Companies, which operates 85 Golden Chick locations in Texas and Oklahoma, suggests staying in touch with supply contacts at every level. “Your salesperson, account manager, truck drivers, etc., can be your alarm,” he says. “Your relationship at the bottom might be more important than your relationship at the top.”

In fact, maintaining open communications with suppliers benefits both parties. “It’s important to remember that you need them as much as they need you,” says Joe Redden, director of purchasing for Charley’s Grilled Subs. “I would advise other quick-serve restaurant operators to maintain a close relationship with critical suppliers.”

One way to do this is to keep tabs on suppliers’ financial standing, advises Ashley Morris, chief executive officer of Capriotti’s Sandwich Shop. “You have to know the financial stability of the companies you are working with in order to work with them,” he says. “We have an agreement with our suppliers that gives us the ability to look at their financial statements on a regular basis. A profitable company should be open to sharing this information with you.”

Rich Kamph, vice president of supply chain for FOCUS Brands, says the company had one major supplier go out of business overnight. However, because the company works with four to five key suppliers for each brand, it was a critical problem, but not a catastrophic one. Kamph says the company was able to recover quickly through the company’s second-source providers, something he recommends every quick-serve operator has as part of a backup or contingency plan.

“We have either identified a second source or defined an inventory management plan to accommodate any lengthy supply interruption,” Kamph says. “We also have become very familiar with our major suppliers and require them to have detailed contingency plans.”

Although most quick-serve operators have a wealth of supply contacts throughout the industry, the majority lack any detailed information on the financial stability of those companies. Before the economy began its downward spiral, Antonio Swad, founder and owner of Pizza Patrón, sent out a bid with established criteria of what suppliers had to meet in order to be considered as vendors for Pizza Patrón.

While the company ultimately remained with its existing provider, Swad says the results provided valuable information on possible secondary suppliers. “We decided on this approach during the course of business, but sometimes you get lucky,” he says, acknowledging that the company now has a solid list of possible backup vendors. “If you’re a growth-minded company, you have to nail down distribution at some point.”

Swad also is quick to point out that finding quality vendors—both primary and secondary—is not something to be rushed. “It will take time,” he says. “It’s not the kind of thing you can fix overnight.”

To assist quick-serve operators in finding the right suppliers, there are several software solutions available to help users organize information on perspective vendors. Examples include SmartTurn, ArrowStream OnDemand, and RollStream.

“Being organized was something that was taken for granted before,” says Nick Parnaby, founder and chief operating officer for RollStream. “Businesses put off doing something unless they have to do it.” However, by using a product like RollStream, users can pull all of their supplier information into one easy-to-use format. Also, suppliers can maintain and update their profiles so users always have the most up-to-date information on the

supply company.

In addition to showing vendor profiles with contact information, users can tap into third-party information sources such as LexisNexis, Dun & Bradstreet, and others to obtain financial information to help identify the financial risk of doing business with a supplier. “It puts measures in place so if a supplier becomes a higher risk, you can take steps to protect your business,” Parnaby says.

The general consensus in avoiding a supply- chain breakdown is to do your research now and be ready for anything. “Despite the economic condition, I would advise quick-serve restaurant operators to always have a contingency plan readily accessible, so you are always prepared for the unexpected,” Redden says.

By maintaining open communications with vendors, having information on reliable secondary vendors, and staying up to date on how all of these suppliers are operating, quick-serve operators should have no problem keeping their products well stocked.