Greg Powers

Yankee Pot Roast at Founding Farmers.

Getting to the Source of Local Supply

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How is the demand for fresh, local, and seasonal ingredients changing the way operators navigate the complicated world of supply chain dynamics?

By Danny Klein April 2016

In some ways, the supply chain dust has settled. The purported merger between foodservice titans Sysco and US Foods never happened—at a reported cost of $693 million to the former—while local sourcing, food safety, food waste, labor shortages, and government regulations continue to dish out their share of sleepless nights to operators around the country. If anything, those concerns have only sharpened, especially as the cautionary tale of fast-casual trailblazer Chipotle unfolds on a national stage. Despite the distinction in business models, full-service operators are paying close attention to the spiral, which reached public conscious in November when 42 Chipotle locations in the Pacific Northwest briefly shut down following an outbreak of E. coli. In fact, the concern hits home on very sturdy footing. Most operators agree that Chipotle’s breakdown was the result of good intentions mixed with flawed infrastructure and simple, undeniable bad luck. The same guiding principles that shook Chipotle—the ethos of offering local, sustainable, and better-for-you ingredients—isn’t an option for most full-serves; it’s an adapt-and-survive model that comes with the territory, a by-product of higher check averages, elevated consumer demand, and the onrushing momentum of the farm-to-table movement.

The question now becomes not if, but how restaurants can navigate the realm of local sourcing effectively, safely, and without sending bottom lines plummeting into the red. Meanwhile, making sure to monitor market trends, weather patterns (think California drought), changing labor rules, and the often confusing, yet crucial arrival of the FDA’s Food Safety Modernization Act (FSMA). “The amount of things you have to stay on top of is mind-boggling,” says Mark Allen, president and CEO of the International Foodservice Distributors Association (IFDA). “But you’ve really only got one shot at food safety, and if you get tripped up in that, you could destroy your business.”

The Path from Farm to Fork

When it comes to purchasing fresh and seasonal ingredients in the supply chain, there is something appealing, Old World, and, undeniably, marketable about a chef dealing directly with a farmer. It’s the local promise at its purest level. But, weighing the risks and challenges against the reward, is it a realistic and sustainable business model? That depends on a multitude of factors, says Tejas Bhatt, the director of the Global Food Traceability Center, Institute of Food Technologists, which is headquartered in Chicago. “Local sourcing has its advantages, but when you fail to deliver on that promise, that really has a big impact on companies,” Bhatt says. “On the one hand, you’re able to get fresh ingredients to your customers, and presumably, fresh ingredients would not only reduce your carbon footprint from a sustainability standpoint, but provide better-tasting food to your customers. That’s the good side of it. The downside is that it’s extremely difficult, if not impossible, to ensure consistency across the board.”

That consistency delves deeper than, say, menuing firm, ripe carrots that always present with vibrant color. For independent and small-chain operators especially, it’s important to keep the local supply chain under control, says Bruce Reinstein, the president of Consolidated Concepts, a partner for more than 20,000 restaurants in the U.S. “The answer is: Everybody wants local. Everybody would like to be able to use environmentally friendly products. That’s a lot of wishes,” Reinstein says, adding there are many questions to be addressed. “Are you going to be paying more than you can really afford, is the consumer going to give you credit for it, and is it worth the risk in regards to food safety and traceability on local product? That is part of what happened with Chipotle. They used a lot of local farms, and the food traceability in those products is negligible. Can restaurants take those chances in today’s world?”

Reinstein says buying direct from a farmer, if done carelessly, can result in a complicated web of challenges capable of sinking a business. In Chipotle’s case, one of the major issues, both from an investigative and consumer standpoint, has been the fruitless chase to identify its original source of contamination. As Bhatt notes, the potential for such a catastrophe grows when multiple parties enter the supply chain equation, a guarantee for a restaurant hoping to stock its pantry with direct product.

“The issue with sourcing locally is that restaurant suppliers would need to change from time to time,” he says. “One supplier might not be able to meet their needs on one day and the operator might have to go to someone else locally. That creates a question with consistency, and that brings its own headaches of, ‘Has everyone followed the same safety protocol, the same food-safety standards?’ And as a restaurant, it becomes cost-prohibitive to provide that kind of training, or pay that much attention, to all of their suppliers at a local level.”

With those points in mind, if the farm-to-door process doesn’t fit the operation, there are emerging and alternative ways for restaurants to load up on ultra-local goods. James Barham, an agricultural economist with the USDA, has worked primarily on building the local supply with local food distribution. One intermediary solution he sees, a link that doesn’t disconnect the farmer from the chef, is the concept of a food hub. Barham says there are currently more than 350 food hubs operating in the country, a number that, according to a USDA report, almost tripled in the last seven years. Food hubs range in size and scale, but are traditionally distribution points that aggregate locally produced foods. Basically, the food hub sources from nearby, regional farms, and then sells the product to restaurants, among other businesses. This allows a restaurant to process just one invoice and avoid worrying about multiple shipments to stock its pantry.

“In one way, restaurants have really helped scale food systems because they’ve been one of the champions of local food, and it’s helped these chefs really take their restaurants and their products to another level,” Barham says. “But it’s also created the kind of champion who is fatigued from having to try to work with 10 to 15 producers every day. Now, you have this new intermediary stepping in.”

Some of the same concerns remain, however. While the source is easy to identify, as food hubs will list the farms of origin on the invoice, there are still safety questions, which are hard to regulate on the grassroots level. When Congress passed FSMA in January 2011, it effectively gave the FDA leverage to impact the supply chain at its source. But the produce rule exempts farms that have an average annual value of produce sold during the previous three-year period of $25,000 or less. Not to say that excuses growers from fault. “Everyone has a role to play in food safety, including small businesses and businesses that sell locally,” the FDA explains in a statement to FSR. “The [produce safety] rules … include certain exemptions and limitations for certain small businesses, but we note that such producers are still subject to the requirements of the Federal Food, Drug, and Cosmetic Act.”

At the Tahoe Food Hub in Alpine Meadows, California, Susie Sutphin, its co-founder and executive director, says the organization must take responsibility to ensure system viability. She says it deploys a multi-pronged approach, especially in regard to food safety. If possible, it seeks out farms with Good Agricultural Practices (GAP) certification. “That’s the gold standard,” she notes.

However, while this is often a requirement for many wholesale distributors, a large portion of small farmers don’t find it cost-effective to acquire and maintain the certification through an audit process, which runs in the ballpark of $90 an hour per auditor. The same sentiment is true of organic certification, which the USDA says can range anywhere from a “few hundred to several thousand dollars” based on the “size, type, and complexity of an operation.” And that does not include the cost to keep the process in place.

That leaves the distribution point, in this case a food hub, shouldering additional responsibility. Sutphin says her company, which supports a 100-mile radius and operates as a non-profit, has about 40 producers, and only works with businesses that follow the food hub’s minimum food safety guidelines, as well as carrying some liability insurance. Additionally, Tahoe Food Hub offers safety workshops and follows its own strict procedures once pick-up is made, like making sure its two trucks are properly refrigerated and that there’s no cross-contamination in the warehouse.

“There are food safety plans out there, which is great, but they’re not always feasible for small farms,” she says. “Maybe a lot of farms are exempt from some of the Food Safety Modernization Act requirements, but most of it stems from making sure their food is safe. And so we all have a responsibility to ensure that.”

The Broadline Benefit

“We’ve been in really, really good shape,” says Scott Taylor, the president of Walk-On’s Enterprises, a growing two-concept company based in Louisiana. Taylor pauses for a moment, almost afraid to jinx himself. “Knock on wood, we haven’t had a product recall in the five years I’ve been here,” he adds of the group, which runs seven Bistreaux & Bar locations and also has three Happy’s Irish Pubs, as well as an events venue and a catering division.

There is a stigma that using a large foodservice distributor means giving up on local. Taylor couldn’t disagree more. Broadline companies are adjusting to the farm-to-fork movement with rapid success and have the resources in place to offer perhaps the most secure path for restaurants. Taylor says it comes down to fostering a relationship and being able to communicate those demands. “We only use Louisiana shrimp,” he says of one example. “We’ve worked with [Reinhart Foodservice] as a partner to set up agreements and contracts with local shrimpers in Louisiana. We can buy that product, contract it, bring it in to distribution, and then deliver it across our network.”

Taylor notes, especially as his company begins to franchise locations in other states, that there’s value in stability. “We just try to limit those points of supply, but at the same time, you can work with these guys and say, ‘We want to buy here. We want to buy this product from there,’ and they make it happen because they’re buying from all these guys already,” he says. “You just kind of pinpoint what you want to do, and you can achieve that local sourcing deal with a partner.”

IFDA’s Allen says distributors hold suppliers to strict food-safety requirements, a result of wielding extensive buying power. There’s also the boost of GS1 standard traceability. The Foodservice GS1 U.S. Standards Initiative was launched in October 2009 by GS1, a non-profit, international organization, in partnership with IFDA, The International Foodservice Manufacturers Association, and the National Restaurant Association, in hopes to “drive waste out of the foodservice supply chain, improve product information, and establish a foundation for food safety through better traceability,” as stated on its website. The idea is to identify the source of a product and keep track of the distribution through different points in the supply chain. To do this, manufacturers assign global location numbers to headquarters, tab products with global trade item numbers, and encode the latter information into barcodes on cases of product. Distributors, manufacturers, and operators can scan those GS1 barcodes inbound and outbound to establish a traceable line of data easily followed and quickly located in the case of a recall or other issue.

“I’m not aware of any distributor of any size who isn’t doing this [local sourcing] today,” Allen says. “They’ve had to become very competent. For a lot of them, it’s a competitive benefit if they can deliver that. If they can work with local farms and deliver that product in a safe, efficient manner, it can put them in a competitive situation with a certain operator.”

Mary Carter, the managing partner of the Founding Farmers flagship Washington, D.C., location, agrees that finding a capable partner is key. She says the four-unit group, which also has locations in Maryland and Virginia, and is owned by the more than 40,000 members of the North Dakota Farmers Union, pays as much attention to how its product is grown and harvested as it does the zip code it came from. On its website, a sentence reads, “Sustainable doesn’t necessarily mean organic or local, but it does mean carefully sourced.” That’s in line with the mission of the group’s ownership, which tries to do business “through the eyes of the farmer.” Carter explains that Founding Farmers will source local when possible, but the goal is to work with American family farms with positive practices, regardless of their address. Accomplishing that means linking up with a trusted, and capable, distributor.

“Buying and sourcing as locally as possibly, obviously, is the right thing to do. There’s a demand for it and it’s cost effective, in most cases,” Carter says. “The goal for us is to always have the best relationships. If you have a great distributor, that relationship extends to the farmers. They can help the restaurant source the product they need in the quantity they require. They’re also going to ensure that the product is safe, and they’re going to deliver it to your door, where a lot of times, the farm can’t necessarily do that.”

Founding Farmers operates with wholesale suppliers Keany Produce and Coastal Sunbelt, companies Carter says have established and thriving local ties. On the protein side, the group has a relationship with a ninth-generation family farm that partners with Seven Hills Food in Lynchburg, Virginia.

That close-knit interaction, she adds, allows the farm to communicate with the restaurant on how much cattle to commit, which helps cut down on food waste and cost, as well as offering a nearby grass-fed, grain-finished product the chefs can trust.

The Cost of Change

One of the most significant supply chain strategies relative to local sourcing involves menu flexibility. With weather and other market indicators impacting the price and availability of product (avocados are a prime example), operators should deploy seasonal contingency plans instead of committing to a few ingredients, says Karmen Gilbert, the vice president of supply chain planning at HAVI Global Solutions. This especially applies to multi-unit restaurants with locations in different parts of the country. In that case, it helps to roll out LTOs, or focus on different regional ingredients, instead of trying to source the same menu from California to New York City. “Think about being agile and flexible in a way that’s different than you have in the past,” she says. “It’s a new challenge. It’s an interesting one, and I think there’s more to come in the coming years.”

Taylor offers another example. “There are certain times of year when shrimp are tough to source and the costs are crazy, but then we can feature things with different fish to kind of pull the seafood lover in a different direction, and ease some of the supply concerns,” he says.

David Werner, the vice president of Ben E. Keith, the eighth-largest broadline distributor in the country, with around 550 trucks, says it also helps to broaden your ingredient horizon. While he says his company meets local demand when available, there are times when it’s simply not feasible from a cost and operational standpoint.

“So many times, I think operators will tout serving all local, and to a point it’s very valid and it may be true [on some level], but everyone knows you’re not growing bananas in Little Rock, Arkansas. … We buy a lot of stuff out of Central America. It’s a great product. It’s safe. It’s tested. It’s going to work. But I think one of the advantages of a distributor is to be able to say, ‘We’re going to do all we can to get locally sourced product when available, but here’s Plan B when it’s not available.’ And I don’t think a lot of operators understand that.”

Regardless of how restaurants decide to navigate the realm of local sourcing, Bhatt believes the supply chain will eventually work out a middle ground.

You know what? I believe in moderation, and what I believe we’ll end up with is the equilibrium that some ingredients are locally sourced and some come through a [larger] supply chain,” he says. “The goal is for everyone to be satisfied, safe, and for operators to have the opportunity to focus on what makes them most successful.” 


The Digital Distributor

The accelerated influx of technology into the kitchen has changed how restaurants do business. From mobile point-of-sale systems to back-of-the-house ordering apps, operators can rely on digital solutions to ease most of their day-to-day processes. It was only a matter of time, says Anthony DiBenedetto, the manager of food purchasing for The Culinary Institute of America in Hyde Park, New York, before the local supply chain followed suit.

In his position, DiBenedetto handles the task of sourcing products outside of meat, fish, and alcohol for the school’s five public restaurants and 42 teaching kitchens. And while the CIA has a long list of relationships with local farmers, some that date back decades, he understood the limitations, especially in the wake of Hurricane Sandy, which rocked many Northeast growers in 2012.

About two years ago, he began working with Farms2Tables, a digital application co-founded by Patricia Wind, a graduate of the school. Unlike the plethora of back-of-the-house ordering apps on the market, Farms2Tables has the additional feel of a digital-based distributor. On top of ordering, the platform will actually deliver the product to an operator’s door. “She’s been able to facilitate some great relationships for us,” DiBenedetto says.

Like a food hub in many ways, the app creates access for the direct sale and purchase of locally sourced product. Wind says they have more than 60 producers on board. Those clients, mostly farmers, display and describe their products and set prices in real time. A restaurant can search through the inventory, pick the farm, and place a single transaction. The only cost is a varying transaction fee to the farmer when an order is processed.

Similar to Sutphin’s food hub, Wind says, there’s a certain level of trust involved. She personally visits every farm, and says she’s yet to meet a grower with red-flag credentials. Farms can also post any certifications on the app’s website. “If the farm isn’t certified in any way, the buyer knows that,” says Wind, who started the platform with business partner Clifford Platt.

Wind, to offer additional security, brought in a USDA auditor to make sure her operation was Hazard Analysis Critical Control Point compliant. She also earned GAP and Good Handling Practices certification. “We wanted to make sure that, every step of the way, the way we are handling the product—from the time we pick it up from the farm to the time we deliver—is completely up to standards.”