Your produce supplier offers you 3% off the invoice for settling in seven days rather than the thirty you currently take. It sounds like free money. It is not. You are giving up twenty three days of cash to save three percent, which annualised is an eye watering rate of interest on a loan you have made to a company with better cash reserves than yours. Take it only if you have cash spare and nothing better to do with it, which in the first two years of a restaurant you almost never do.
Supplier terms are the least glamorous conversation in hospitality and the one that most reliably decides whether a busy business runs out of money.
Payment days are working capital, and you should count them
Write down three numbers. How many days your suppliers give you. How many days of stock you hold. How many days it takes to be paid by your customers. In a restaurant the third number is zero or close to it, because people pay at the table and card settlement lands within a couple of working days.
That combination is the great structural advantage of hospitality. You are paid before you pay. Thirty days from a food supplier against three days of fresh stock on the shelf means your customers are funding your purchasing. Lose the terms and you fund it yourself, out of an overdraft, at a rate you will notice.
So treat payment days as part of the price. A supplier a penny a kilo dearer on thirty days is usually better value than a cheaper one insisting on proforma. Ask for terms in writing at the start of the relationship, not after three months of paying on delivery, because a credit account granted late tends to come with a personal guarantee attached.
While you are reading the account application, look for two clauses. A retention of title clause means the supplier keeps ownership of goods until they are paid for, which matters if things go wrong. And a personal guarantee turns a company debt into your debt, secured on your house. Both are common, both are negotiable, and neither should be signed without reading.
Payment works both ways. Under the Late Payment of Commercial Debts (Interest) Act 1998 a supplier can charge statutory interest at 8% above the Bank of England base rate plus fixed compensation of £40, £70 or £100 depending on the size of the debt. Most never do. That does not make late payment free: it makes it a relationship cost, paid in delivery priority on the week everything is short.
The discount that is not a discount
Volume rebates, retrospective discounts, loyalty tiers and free equipment are all the same instrument wearing different coats. Each one exchanges a cheaper unit price for a reduction in your freedom.
- A coffee machine on free loan against a minimum weekly bean order
- Cellar equipment and glassware supplied in return for a drinks tie
- A rebate paid quarterly if you exceed a spend threshold
- A lower unit price for accepting a single delivery day
- Branded refrigeration you cannot use for anything else
None of these are traps in themselves. The trap is not pricing the freedom you gave up. The machine is free until your coffee is mediocre and you cannot change roaster without buying yourself out. The rebate is worth having until it pushes you into ordering stock you do not need in a quiet January so you clear the threshold.
The honest test is to work out the all in cost per unit including everything, then ask what it would cost to leave. If leaving costs more than a month of the saving, you have a contract rather than a discount.
Minimum order values quietly write your menu
A minimum order value of £250 sounds harmless. Then your fish supplier delivers on Tuesday and Friday only, your produce supplier on Monday, Wednesday and Friday, and your dry goods supplier weekly with a minimum that takes you two weeks to reach.
What you have now is a menu constrained by a delivery timetable. Monday is the day the fish is three days old. Thursday is the day you are short of the garnish for the bestseller. Saturday's prep depends on a Friday delivery that arrives at eleven when service prep should have started at nine.
Most kitchens plan the menu and then discover the timetable. The better order is to map the delivery days first, then design the specials around them. If you want to change that, negotiate the delivery day before you negotiate the price. A supplier will often move a drop for nothing and will almost never move a price for nothing.
Watch the minimum order value against your quiet weeks too. A January where you cannot hit the minimum means either buying stock you will throw away or paying a delivery surcharge. Both are worse than a slightly higher unit price with no minimum.
A second supplier is insurance, not disloyalty
Single sourcing feels efficient. One invoice, one relationship, one delivery. It also means that when that company has a bad week, you have a bad week, and you have no evidence about whether the price you pay is sensible.
Keep a second account live on your main categories even if it only takes ten percent of your spend. It costs you a little in volume terms and buys three things: a price reference, a supply route when the first one fails, and negotiating credibility that does not depend on bluffing.
The failure modes are real and seasonal. Vehicle breakdowns, staff shortages at the depot, a supplier who has taken on a large contract and quietly deprioritised the independents, and the annual chaos of the fortnight before Christmas. None of those are forecastable. All of them are survivable if somebody else already knows your account number.
If you are dealing with a large supplier, it is worth knowing that under the Reporting on Payment Practices and Performance Regulations 2017 big companies must publish their payment terms and how quickly they actually pay on a public government service. It is a useful thing to read before you commit to someone who will hold a lot of your stock.
Price rises arrive by email and should not be accepted by silence
Every supplier contract in hospitality now assumes movement. Beef, dairy, oil and energy have all had years where they moved faster than menus did. What matters is not the rise itself but whether you notice it dish by dish.
Set up one spreadsheet with the four or five ingredients that carry most of your food cost, and update them monthly from actual invoices rather than from quoted price lists. When a line moves more than a few percent, recost the dishes that use it. A four pence rise on a protein that appears in your most ordered dish is worth more to your margin than any negotiation you will have that quarter.
Where this shows up in the game
Restaurants are part of Business Baron's full game, and a café or a pub costs nothing to run. Supplier terms are earned: nobody gives a new business thirty days, you build credit one paid invoice at a time, and then you choose between a cheap pallet and the cash it ties up. The cheapest price on the screen is rarely the cheapest position to be in.