With Small Business Saturday only a few days away, it’s important to remember that business owners – not just consumers – can also support local, small businesses. One sector where supporting local businesses has tremendous financial advantages is the food service business. The $580 billion restaurant industry is realizing that sourcing ingredients locally is not just a “feel good fad” but instead a long-term trend with inherent advantages over today’s food sourcing model.
What is local?
The definition varies but generally defines “local suppliers” as those located within a specific geographic radius from the buyer. Usually a supplier that is located within 100 or 150 miles from a buyer is considered local. Other companies determine “local” based on the time it takes for the food products to arrive from its source. One large chain, for example, requires that produce arrive within seven hours of leaving the supplier for it to be considered local.
Local sourcing is more efficient
According to a study by Richard Pirog, the associate director of the Leopold Center for Sustainable Agriculture at Iowa State University, the average produce item travels 1,500 miles from farm to table. That generates high costs in packaging, travel, overhead and risk management that could otherwise be reduced (or eliminated) if buying from a supplier located locally.
Local sourcing is scalable… to a point
For larger food service businesses, doubts about scalability have prevented working with local suppliers. Chipotle Mexican Grill, one of the fastest growing “fast casual” chains in the country is proving that it can work. According to co-CEO Steve Ells, 35 percent of Chipotle’s ingredients are locally sourced. The goal is to reach 50 percent. With over 1,000 locations increasing by 12 to 15 percent annually, they show that it does work for large, high-growth companies.
Chipotle may be the exception to the rule and perhaps a 5,000 location chain simply won’t be able to procure a meaningful percentage of its food products locally. It remains to be seen. If you are the owner of a small chain or a single location, this should provide even more incentive to adopt local sourcing as it provides an additional point of comparative advantage against larger chains that simply can’t implement it.
Local sourcing is customer-focused
Locally sourced ingredients are fresher. That means they are more nutritious and have a better taste. This resonates with consumers. According to a study by the National Restaurant Association, 73 percent of adults say they “try to eat healthier now”, compared to two years ago, when they go out to eat. Fifty-seven percent of adults indicate that they are “likely to make a restaurant choice based on how much a restaurant supports charitable activities and the local community.” Fifty-six percent of adults say “they are more likely to visit a restaurant that offers food grown or raised in an organic or environmentally friendly way.” These trends converge to make local sourcing a required component of your food business’ sourcing strategy.
Local sourcing will keep your business competitive
The National Restaurant Association recently conducted a survey of more than 1,800 chefs from the American Culinary Federation. Local sourcing of ingredients, sustainability and nutrition were ranked as the hottest trends by the participants. On the list of “What’s Hot”, the chefs were asked to rank 215 food items. At the top were locally grown produce, locally sourced meats and seafood and locally produced wine and beer. The people that drive demand for supplier purchases – the chefs – have identified local sourcing as a key element of their overall kitchen-management strategies. Given the potential cost savings and consumer benefits it’s clear that food-service businesses that don’t add it to their strategy will be at a disadvantage.
Why not start on Saturday? With Small Business Saturday, you have an opportunity to try out a local supplier. Try one out! Purchase a few ingredients for your restaurant and try them in a new recipe. If it works, establish a relationship with that supplier. Let your customers know about your local sourcing efforts. Explain to your staff why it’s important. And most importantly, have fun!
Mike Periu is the founder of EcoFin Media, LLC an independent producer of financial, economic and entrepreneurial content for television, radio, print and the internet. Over the past ten years he has started three companies and advised over 50 companies on financial strategies including fundraising. Mike also hosts regular small business webinars on a range of topics relevant to business owners.
Celebrate “Small Business Saturday” by visiting your favorite locally owned businesses on Saturday, November 27th. Learn more about this event and how you can show your support at facebook.com/smallbusinesssaturday.