Food distributor: limit risks and improve contract conditions

Problem: a large importer and wholesaler in fresh products (client) supplies an international restaurant chain, with a turnover of several hundred thousand euros per day, seven days a week. The parent company of the restaurants has hit a rough financial patch, while the restaurants themselves are more than viable.
The food distributor wants to limit its risks, whilst managing to continue to supply the restaurants at better conditions – a commercial and organisational issue with far-reaching — and essential — legal pitfalls and traps against the background of a fairly complex operation with an array of companies.

Solution: The original contract conditions were not very favourable for the distributor, but the volume advantage, in combination with other deliveries, made things somewhat good. At the same time however, against the background of the parent company of the restaurants that was performing poorly, together with the sizeable daily turnover, the financial exposure was high. We saw to it that a new agreement with the restaurants, plus the purchasing for them, was brought under a separate subsidiary. It was important in that process that the distributor’s suppliers could be ‘involved’ in the new situation, where the new company became their customer.  This set-up proved successful thanks to a strategic approach and the provision of assurances. The result was a lower financial exposure for the distributor, and that if the restaurant chain were to go bust, old and new claims from the new company on that chain would go to the parent company of the distributor instead of to the suppliers.  This meant double assurance for the customer, made possible by a well-thought out legal construction.

The restaurant chain did go bankrupt subsequently, in the slipstream of its parent company. That meant that ca. €4 million in turnover would remain unpaid. The restaurants had to stay open and make a new start under the wing of a new owner – and thus wanted to be supplied. The question then arose: could supplies be stopped from the legal point of view, and secondly:  what are the suppliers (of the distributor) to do? By consulting with all parties pursuant to a reasoned plan, we managed to ensure that supplies continued, at better conditions for the food distributor.  As a result, the suppliers could be guaranteed that the ‘new’ supplies would be paid in any event, against the conditions that existed for them already. In the end, the suppliers put their claims on hold for the period that the restaurant chain could no longer pay.

Result: The customer’s continuity position was secured, the supply contract was renewed and better margins were achieved without having to buy bigger quantities in return