Negotiation
Cost-plus pricing, explained by someone who pays it
· by the Candor team — operators auditing real restaurant invoices
"Cost-plus" sounds transparent — the distributor's cost, plus a markup. The transparency ends at which kind of cost-plus you're on, and that single distinction quietly decides how much you overpay when prices rise. Here's the version written by people who pay these invoices, not the version written to sell you a contract.
The three structures, plainly
Cost-plus-fixed. A set dollar amount per case, regardless of the distributor's cost. Your markup is locked; when their cost rises, you pay the increase but not a bigger markup on top of it. This is what large chains negotiate. Most independents can't get it — and that's okay to know rather than resent.
Cost-plus-percentage. The distributor's cost plus a percentage. This is what most independents are on. The catch: when their cost rises, your markup rises with it. You pay the increase twice. As one distributor-negotiation guide puts it bluntly, "cost plus percentage should be avoided since the amount you pay the distributor will increase as food prices rise" (JES Restaurant Equipment).
Margin-percentage. Priced off the distributor's profit margin rather than a straight markup — generally more expensive than a markup percentage for the same headline number (Lavu). If you're quoted "a percentage," ask which one; markup and margin are not the same math.
Why this is the most important question you're not asking
Unless your invoice itemizes the markup, reading it won't tell you which structure you're on. But it's the difference between an increase that hits you once and an increase that compounds. When the big broadliners raised prices — Sysco 13.4%; US Foods 11.5% in its own quarterly reporting (The Food Institute) — operators on percentage deals absorbed both the cost jump and a fatter markup on it.
What to ask your rep
You don't need a lawyer. You need three questions, asked calmly:
- "Am I on cost-plus-fixed or cost-plus-percentage?" Just knowing changes the conversation.
- "What's the markup, and which of my top ten items carry the highest?" Markup often varies by item — the "gotcha" lines are usually the high-volume staples.
- "Can we fix the markup on my top five items, even if the rest floats?" A partial win is still a win, and it's a smaller ask that's easier to say yes to.
Those three questions are the same whoever delivers. The distributor guides add the per-supplier context — Sysco, US Foods, PFG, Shamrock, and, for a cash-and-carry reference rather than a negotiation, Restaurant Depot.
If you buy enough volume, ask about a fixed structure on your core items specifically — french fries, oil, protein, the things you buy every week (Consolidated Concepts). You don't have to move the whole contract to move the lines that matter.
The honest limit
Knowing the structure only helps if you also know your prices are high — a percentage markup on a competitive base price is fine. The structure tells you how increases hit you; a benchmark tells you whether your base is off. You want both.
That's the whole audit: send your last 3 invoices, get your overpaying items and — in the full audit — a word-for-word script built around your actual contract structure. Start free.