Smart handling of bonuses, discounts and contracts in the hospitality industry

The hospitality industry is a dynamic environment where every margin counts. Optimizing your purchasing policy is crucial to the success of your business. Suppliers offer various bonuses and discounts to make working with them more attractive. Think of invoice discounts, prepaid bonus schemes, and volume discounts. At the same time, many hospitality businesses are tied to long-term contracts, especially with breweries that also own the building in which they are located. Although these contracts may seem restrictive, there are ways to use them to your advantage. In this article, we discuss the different types of bonuses and discounts that suppliers offer, and provide five examples of how you can smartly handle such contracts.

Different Types of Bonuses and Discounts

Invoice discounts

Invoice discounts are one of the easiest ways to save money. Suppliers offer these discounts when you pay the invoice within a certain period, for example within 10 or 14 days. A typical discount can be 2%. Although this percentage may seem small, it can make a significant difference on an annual basis, especially if you work with large volumes.

Advantage : By consistently using invoice discounts, you structurally reduce your purchasing costs. However, this requires a stable cash flow, because you always have to be able to pay quickly.

Prepaid Bonus Scheme

A prepaid bonus arrangement means that you receive a certain amount of money from the supplier before you purchase the products, in exchange for a purchase commitment. This means that you commit to purchasing a certain volume of products over a certain period of time. This bonus can be a useful way to generate additional liquidity, but requires careful planning to ensure that you can meet the purchase commitment.

Benefit : This scheme provides an immediate cash flow benefit that you can use to grow your business or cover temporary financial shortfalls. However, you will need to plan well and manage your inventory to avoid being left with excess stock.

Graduated discount

Volume discounting works by offering increasing discounts as you purchase more. Suppliers often set different purchase levels, for example 5% discount for 1000 units and 10% for 2000 units. It can be tempting to place larger orders to take advantage of these discounts, but it is important to manage your inventory situation well.

Advantage : Volume discounting can significantly reduce your unit costs, which improves your margins. Just make sure you don't build up unnecessary inventory that doesn't turn over quickly enough.

Annual bonuses

Annual bonuses are a form of reward that you receive at the end of the year if you have reached a certain purchase volume with a supplier. This can be a percentage of your total annual turnover. These bonuses can be attractive if you know in advance that you can achieve the required volume.

Benefit :These bonuses can provide a welcome financial boost at the end of the year, which you can use for investments or to improve your margins.

Volume agreements

Some suppliers offer additional discounts or bonuses if you commit to fixed volume agreements. This means that you commit to a certain purchase for a longer period, often with the promise of an additional discount or bonus at the end of the contract period.

Advantage : This can be a way to reduce your costs if you are confident that you can take the volume. However, it requires careful analysis of your sales forecasts and a good relationship with your supplier.

The challenge of long-term contracts with breweries

Many hospitality businesses are tied to long-term contracts with breweries, especially when the brewery also owns the building in which the business is located. This can impose restrictions, such as a limited range or higher purchase prices, because you are obliged to only purchase products from the brewery. Although these contracts may seem restrictive, there are ways to make the most of them.

Negotiating for more flexibility

Although you are bound by a contract with a brewery, you can try to negotiate flexibility in the range. For example, ask for the possibility of including a number of local or craft beers in addition to the brewery’s standard beers. Breweries are often willing to cooperate if this will help you attract a wider audience.

Positive impact: By creating a more varied beer offering, you can attract new guests and surprise existing guests, which can increase your revenue without breaching your contract.

Maximize your annual bonuses

If you are tied to a beer contract, you can try to make the most of the annual bonuses. Negotiate with the brewery for a higher bonus for reaching certain sales targets. This can be an extra incentive to increase your beer sales and thus get an extra financial boost at the end of the year.

Positive effect : By optimizing your sales, you can use the bonus at the end of the year to invest in your business, such as new equipment, marketing, or other improvements.

Create events around your beer offering

Another way to get the most out of a contract with a brewery is to organize events around the beer offering. Think of beer tastings, theme nights or collaborations with the brewery for special editions. This will not only increase your sales, but also strengthen your brand.

Positive effect : Organizing events generates additional income and increases the engagement of your guests, which leads to higher sales and a stronger brand identity.

Optimize your purchasing policy for other products

Although your beer contract is fixed, you can save on other purchasing categories. Use invoice discounts, volume discounts, and other incentives to reduce your costs for non-food items or other beverages. This will offset the higher costs you may have due to your beer contract.

Positive effect : By purchasing smartly from other suppliers, you can improve your total cost structure and thus increase your profitability.

Consider seasonal offers

Another strategy is to link seasonal promotions to your beer offering. Think summer beers in the summer or special winter bock beers in the winter. This helps to optimize your inventory and at the same time respond to the needs of your guests.

Positive effect : By adapting your offer to the season, you increase your sales and make optimal use of your stock, which leads to a better margin.

FactorWinst!: Your partner in smart purchasing and contract management

At FactorWinst, we understand that negotiating and managing supplier contracts can be a challenging process. With years of experience in the hospitality industry and in-depth knowledge of bonuses, discounts and supplier relations, we offer you the expertise you need to get the most out of your contracts. Whether you are stuck with a contract with a brewery or are looking for ways to optimise your purchasing policy, FactorWinst is here to advise and support you. We ensure that you not only realise savings, but also maximise your profitability and future-proof your hospitality business. Discounts and contracts in the hospitality industry smart use of bonuses