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    How Renegotiating Vendor Contracts Fueled CoreLife’s Growth

  • Key relationships can down costs for expansion.

    CoreLife Eatery
    When working to develop vendor partner relationships, the ultimate goal is transparency and co-operation between both parties

    When it came time to open our first CoreLife Eatery, we had several vendor contracts in place that allowed us to grow. However, as our brand scaled and grew to 10 locations, we renegotiated our contracts, solidified our vendor partners and kept those relationships close as we continued with our expansion push.

    Once went expanded to 50, we went back to our vendor partners and asked for their help to get our brand to the next level. It was an important milestone in not only our evolution, but in the evolution of our partner relationships as well.

    READ MORE: CoreLife Eatery prepares for a growth boom

    In order for us to grow, we need our vendor partners to support our efforts. That is why it was so important for me—when we went to renegotiate our contracts at 50 locations—to personally meet with each and every one of our vendor partners. Whether over the phone or in person, I asked them for their help to get this brand to the next level. It was the most successful thing we’ve ever done.

    Because of our vendor relationships, we were able to shave 650 basis points off of our bottom line, which equals 6.5 cents per transaction. But it goes without saying, the commitment to this is important and it has to come from both sides. It didn’t matter what they sold to us or the size of what we order; I met with everyone and now we are big enough to foster those relationships on an ongoing basis.

    From that experience, I learned four things:

    Come to the table prepared. In order for us to renegotiate our vendor contracts, we had to come to the table with our growth plan. We had to show them our growth strategy and how the business is going to look in five years.

    Know Your Sweet Spot. We were part of a Group Purchasing Organization (GPO) when we opened our first location and, as we grew, moved into direct vendor partnerships. We had to know what our sweet spot was in terms of number of locations before we made the switch. That number for each individual brand will be different depending on the growth model. We knew at specific numbers of locations when we could renegotiate our contracts and we won’t make changes again until that number is much higher. The idea is to work in partnership rather than nickel and dime your vendor partners.

    Make the time. In order to make this a success, I had to make the time to reach out to every vendor partner. This included sending e-mails at 1 a.m. In all, I probably spent 1,000 hours in the first four months of the year connecting with and contacting our partners. And we went through the cost down to the penny of every item we purchase. A total of 162 items were reviewed, which will ultimately lead to an annual $5 million in savings. But, we had to first understand what our vendors’ products were, how they worked with our menu and how we could best utilize what they had to offer. While it was time consuming, the payoff was great.

    Trust your vendor partners. It takes a lot of trust to between your brand and vendor partners to make a true relationship work. However, the partnership is worth the effort because when things are not great, or supply is in short demand, your partners will help you get through it. They will, ultimately, do a better job for you when you have problems – such as produce recalls or heat waves—than what you can do yourself. The real juice is when the relationship shifts from a transactional one to a true partnership, and turns into complete brand health and growth.

    When working to develop vendor partner relationships, the ultimate goal is transparency and co-operation between both parties. If so, the whole system will thrive and the money you save can go back into the business. Our franchisees also were thrilled to the point where they are growing more stores and making more deals. This means, while time consuming, we were able to create a win-win for all parties involved. So be prepared, know your sweet spot, take the time, and build and have trust. It’s all worth it in the end.

    Larry Wilson is the CEO and chariman of CoreLife Eatery, and the driving force behind the development, focus and discipline of the brand. He is responsible for all aspects of directing the company's officers and resources, and ultimately bringing the eateries together into reality at cost. Larry has a passion for real estate and an unlimited endurance for the details of the buildout.