Am I Getting the Best Prices From My Suppliers?

You cannot tell from the invoice alone, because an invoice shows a finished price and never the arithmetic behind it. Three checks answer the question honestly. Benchmark what you pay against what comparable volume buys elsewhere. Reconcile your invoices line by line against the agreement you actually signed. Then ask, in writing, how every party in your supply chain is compensated, including anyone advising you. If all three come back clean, you are in good shape. If any one of them cannot be answered, that is where your money is going.

Why can't you tell from the invoice?

Because the invoice is a total, and your price is built from two numbers hidden inside it: what the product cost the distributor, and the markup added on top. That is not an outsider's theory. Sysco, the largest distributor in North America, tells its own investors it makes "a significant portion of our sales at prices that are based on the cost of products we sell plus a percentage margin, mark-up or fee per case" (Sysco Corporation, Form 10-K, fiscal year ended June 28, 2025). Distributors are not villains for doing this; it is a thin-margin logistics business and the markup pays for real work. But it does mean the single number on your invoice is the one number that tells you the least, and that understanding how distributor pricing is built is the starting point for judging it.

What does a fair cost structure look like?

Fair does not mean cheapest. It means visible, defined, and checkable, so that you could reproduce your own price with a calculator. Four things make a structure fair:

• The cost basis is defined in writing. You know whether "cost" means the distributor's landed cost, whether inbound freight is inside it, and whether manufacturer allowances and contracted deviations are subtracted before the markup is applied or after.
• The markup is stated as a number. A flat fee per case or a named percentage, written down, not implied by a finished price.
• Rebates, allowances, and incentives are disclosed and assigned. You know they exist, you know their size, and the agreement says plainly whose books they land on.
• You have audit rights. The contract lets you, or someone acting for you, inspect the cost basis behind a sample of invoices rather than taking the total on faith.

A structure missing any one of those is not necessarily dishonest, but it is unverifiable, and unverifiable is where overpaying survives for years without anyone noticing.

What are the signs you are overpaying?

None of these prove anything on their own. Two or more together are worth a hard look:

• Nobody can tell you your markup as a number. If the answer to "what is my markup?" is a description of service quality, you have your answer.
• Your prices have not been benchmarked against the wider market in the past twelve months.
• Prices move up between order and delivery, or between the quote and the invoice, and nobody flags it.
• Substitutions arrive without being requested, especially on contracted items, and at prices nobody agreed to.
• Your volume has grown noticeably since the agreement was signed, but your pricing has not been revisited.
• You cannot say where the rebates and incentives on your spend end up, or you did not know there were any.
• Each location buys independently, so the group never actually presents its combined volume to anyone.

How do you benchmark what you are paying?

Start with your own data rather than a market report. Pull a twelve-month vendor spend report out of your AP system and rank items by total dollars, not by unit price, because the top fifty items usually carry most of your exposure. For each one, record the pack size, the specification, and the unit cost you actually paid, not the list price. Then compare like against like: the same spec and pack, at comparable committed volume, drop size, and delivery frequency. Most apparent price gaps between operators turn out to be specification gaps, and the ones that survive a true like-for-like comparison are the real ones worth negotiating.

How do you audit an invoice against the contract?

Take one period, not a year, and reconcile it properly before scaling the exercise. Put the contracted price, the quoted price, and the billed price for every line side by side, and flag every row where the three disagree. Check the pack size and the item code on each flagged row, since a substituted pack is the most common way a price rises without anyone appearing to raise it. Then total the variances and take them back to the supplier with the contract attached. Recoveries and credits are normal, and the exercise usually pays for itself the first time, which is why auditing foodservice invoices for overcharges belongs on a schedule rather than in a crisis.

Where do hidden markups and kept rebates hide?

In three places, mostly. Inside the cost basis, when allowances and deviations are applied after the markup instead of before. Inside a percentage markup, which grows automatically with inflation even though the work performed is identical: with USDA's Economic Research Service forecasting food-away-from-home prices up 3.6% and all-food prices up 3.0% in 2026 (USDA ERS, Food Price Outlook, updated August 25, 2026), a percentage lets a rising market raise your supplier's margin without a single conversation. And inside the compensation of whoever is advising you, when that party is paid out of the same spend they are supposed to be reducing. The last one is the hardest to see and the most expensive, because it quietly aligns your advisor with a bigger invoice.

How much of your cost of goods sold (COGS) is really negotiable?

More than most operators assume, and less than a sales pitch implies. Cost of goods sold (COGS) has two halves: the price you pay per unit, and how much of that unit your operation consumes. Everything in this article touches the first half, the purchasing-driven portion, which is set before your kitchen ever opens the case. The second half belongs to portioning, prep discipline, and waste control, and no supplier negotiation will fix it. Knowing which half your problem lives in is the difference between a productive quarter and an expensive distraction.

Who can check this for you?

CORE Insights Group is a hospitality and foodservice procurement and supply-chain consulting firm that lowers what operators pay for food, supplies, and services through three offerings: CLUB360, CORE360, and CORE Consulting. For the work described here, two of those apply. CORE360 runs the benchmarking, contracting, and invoice auditing as an ongoing program: it is paid by its clients through a transparent agreed fee for the work performed, never a markup on what you buy, and 100% of every rebate, incentive, and allowance it negotiates is passed back to the client, who owns every contract and keeps their existing distributors. CORE Consulting does the same diagnostic work as a defined project when you want an answer rather than a program. In both cases CORE keeps none of your rebates, which is the point: nobody auditing your spend should be paid out of it.

"As customers expand, it is important to evaluate their supplier programs to ensure the economics of their program scale appropriately." Ross A. Kellman, Managing Partner, CORE Insights Group

What that looks like in practice: Gecko's Hospitality Group had every location buying independently, so the group never leveraged its true scale, and leaned on a single distributor for what it could see and buy. Working category by category, CORE renegotiated a lobster contract saving over $350,000 a year, alongside additional category savings. That story and others are in our success stories.

What is the fastest first step?

Two documents, one afternoon. Pull your year-to-date vendor spend report and a copy of your current distributor agreement, and put them next to each other. Between them they will tell you what you are paying, what markup structure you agreed to, and whether your current volume is earning what it should. If those two documents do not answer the question, you have learned something important: the structure itself is not transparent enough to verify, and that is the thing to fix first.