Introduction
In the fast-paced world of business, relationships with suppliers can be invaluable. A strong partnership with a reliable vendor can help your company thrive, ensuring you receive quality products and services promptly. However, there’s a dangerous practice that often creeps into these relationships, one that can ultimately undermine your business’s integrity and financial stability: accepting freebies from vendors.
TheGrift
This is a significant grift that can affect you from suppliers, managers, staff and even your own business partners. While “freebies” may seem harmless and well “Free”. Nothing is “Free”. You are basically paying more somewhere else for something free. Also this practice can cost you a fortune.
It’s not uncommon for suppliers to extend their appreciation to customers, especially those who hold decision-making power over their products. These gestures can range from seemingly harmless perks like concert tickets to extravagant gifts such as lavish vacations and high-end merchandise. While it may seem like a mutually beneficial arrangement, it can lead to ethical dilemmas and financial repercussions for your business.
A brand manager or supplier will offer you (hopefully), your manager or anyone who can make a commitment for a significant purchase of product. For example, you agree to buy 20 cases of a premium vodka and they will give you hotel nights (on them) to a nearby city or tickets to an expensive sports or concert. This may seem innocent, but its not. Somebody (You) is paying for those gifts. And it can get out of hand. Here are some examples I have had with my businesses.
How it works
To illustrate the gravity of this issue, let me share a personal experience. A few years ago, our establishment had a bar manager who decided to switch our tequila supplier to a relatively unknown brand. We purchased a few cases, and the manager even added some new tequila-based drinks to the menu. However, these drinks didn’t resonate with our customers, and we decided to remove them from our inventory.
Approximately a month later, the tequila brand’s representative, accompanied by our distributor’s sales manager, paid us a visit to inquire about our decision. To our astonishment, we learned that our bar manager had made a commitment to purchase 30 cases of this tequila. The reason for this commitment? He was promised a 7-day vacation for himself and his girlfriend as a thank-you gift.
The consequences were clear: we didn’t have to pay for the tequila, but the generosity of the supplier had tainted our business relationship and compromised our bottom line.
Some additional examples:
Bar Manager – One of of bar managers always had better seats to our local pro hockey teams games than myself and my business partner had. Turns out he would take in all kinds of crap liquor and let it waste away in our liquor storage and back bar in exchange for tickets. Basically, we the owners were indirectly sponsoring his hockey habit.
Another Bar Manager – Another clown took it to a greater level. He claimed that a popular rum was hiring him to be a demo mixologist at special events and trade events. Turns out, to get special treatment (i.e. we were paying top price on a number of liquor in this brands portfolio) he was committing to a large number of brands at top prices. He was handsomely paid by the vendors to do this. They even stroked his ego making him feel important and a guest bartender.
The Problem
It’s not uncommon for suppliers to extend their appreciation to customers, especially those who hold decision-making power over their products. These gestures can range from seemingly harmless perks like concert tickets to extravagant gifts such as lavish vacations and high-end merchandise. While it may seem like a mutually beneficial arrangement, it can lead to ethical dilemmas and financial repercussions for your business.
A brand manager or supplier will offer you (hopefully), your manager or anyone who can make a commitment for a significant purchase of product. For example, you agree to buy 20 cases of a premium vodka and they will give you hotel nights (on them) to a nearby city or tickets to an expensive sports or concert. This may seem innocent, but its not. Somebody (You) is paying for those gifts. And it can get out of hand.
Here are some examples of problems this can cause:
Legal consequences: Accepting gifts for purchase of products illegal illegal in most states and can lead to legal consequences for both the manager and the establishment. The establishment can face legal action and may be required to pay fines for accepting gifts from suppliers.
Lost revenue: When establish or manager accept gifts, the establishment pays more for the products supplying the gifts. This can add up quickly and result in significant financial losses over time. Also, you are far better off getting the best posted pricing of products instead of paying top dollar for your menu items or purchasing unknown products that won’t sell.
Form of Theft: When a manager or even your partner accept these gifts behind your back and at the detriment of your business, that is Theft.
Inventory discrepancies: Accepting gifts can also lead to discrepancies and waste in inventory management. Why pay more for products for gifts that don’t benefit your establishment; when you can instead get better pricing for products you sell.
Solutions
To prevent such situations from arising and protect the integrity of your business, it’s crucial to implement clear policies regarding what is acceptable and what isn’t when it comes to receiving gifts from suppliers. Here are some actionable solutions:
Establish a Clear Policy: Every business, especially in the restaurant industry, should have a straightforward and well-communicated policy regarding gifts from suppliers. Make sure your employees understand the boundaries and consequences of accepting such gifts.
Zero-Tolerance Policy: Consider adopting a zero-tolerance approach, much like the retail giant Wal-Mart. Employees should not accept anything from a supplier, no matter how small. This stringent stance ensures that nothing interferes with your team’s commitment to the company’s best interests.
Rotate Purchasing Personnel: Prevent cozy relationships with suppliers by occasionally rotating employees responsible for purchasing decisions. The longer individuals interact with the same suppliers, the higher the risk of unethical practices and abuse of the relationship.
Independent Price Evaluation: If you suspect that someone on your team is receiving kickbacks, verify supplier prices. Have someone outside the purchasing department, like a bookkeeper, perform competitive bidding with key suppliers. This will reveal any premium prices you might be paying due to questionable deals.
Conclusion
In conclusion, while strong relationships with suppliers are vital for the success of your business, accepting freebies from them can lead down a treacherous path. Implementing clear policies, maintaining a zero-tolerance stance, and periodically evaluating supplier relationships can help safeguard your business’s integrity and financial stability. Don’t let the allure of freebies blind you to the potential pitfalls they may bring to your company.
Additional Resources
