Two recent news stories present the issue of how restaurants should deal with supply issues. The first story is the infamous horse meat scandal that has plagued Burger King in the United Kingdom since January. Click here for that story. The second story appeared in today’s Wall Street Journal. It deals with the fact that the U.S. Department of Agriculture may purchase up to 400,000 tons of sugar to bail out sugar processors who may default on current loans of approximately $862 million. Click here for the full story.
These stories show that restaurants and others in the food industry are quite reliant on suppliers. As such, restaurants may be greatly affected by the actions of suppliers. The stories above show that Burger King’s reputation may have been damaged from the actions of its meat suppliers. The sugar story shows that, despite falling prices, these bailouts could keep sugar prices up. This affects restaurants, candy makers and really all of us, given the world-wide “addiction” to sugar.
So how can restaurants (especially here in Texas) insulate themselves from these (and other) kinds of liabilities? Consider the following possible solutions:
- Carefully negotiate food and all supplier contracts;
- Ensure that such contracts discuss solutions for supplier liability or bad dealings;
- Use back-up and alternate suppliers to give you the best bargaining position;
- Coordinate supplier contracts with others of the same or similar restaurants to maximize leverage for negotiating these items; and
- Carefully review any supplier regarding their quality control and ongoing practices and negotiate ongoing audits and review of these processes, if possible.
Further, how should restaurants deal with these issues after the fact? Consider the following possible solutions:
- Have a game plan in mind before an incident; and
- Deal with any incidents up front instead of trying to cover them up (like it was alleged that Burger King did in the story above).
At the end of the day, there is only so much that anyone can do about liability from third-parties that you rely on for your business. However, preparing for issues and properly executing a plan for dealing with them when they arise will put you in the best position for when such unexpected and negative issues arise.
About the author: Matthew Sanderson is a restaurant lawyer in Texas. “Good service with a smile” is his motto. Click here to find out more about Matthew Sanderson’s legal practice and how he can help you today. Follow him on Twitter @dealattorney.