Paying For Referrals @#*!

Business By cakequeen50 Updated 18 Jan 2010 , 10:33pm by AngelaM

cakequeen50 Posted 18 Jan 2010 , 8:06pm
post #1 of 17

Let me start out by saying that I DO NOT approve of this but I need opinions from others.

I have a full fledged cake salon, we do anywhere from 3-15 wedding cakes per week but we are still always looking for more business.
There is this wedding planner that I have worked with in the past. We had an agreement that I would give her $50 for each paid wedding cake she got for me. There really wasn't much business at all coming from her.

Well now she is working at a new facility in downtown Atlanta, She is now an sales and events manager, planner, supposedly with a few venues and wants to start this up again. I told her that I no longer "pay " for referrals. The planners that use me are happy that I make them look good and that is payment enough. She says she will get me much more business, however I have had smoke blown up my dress before, that normally doesn't happen BUT it is a new, rising venue, chic, rooftop area, city view, inside a big hotel.

I HATE it, I feel like I get blackmailed. Give me money or you don't get this hotel business. I don't know if I should offer her a percentage and then raise the price of her clients that use me just enough to partially cover the expense or tell her to bite it.

Any thoughts???

16 replies
ccr03 Posted 18 Jan 2010 , 8:19pm
post #2 of 17

I would do a compromise. Since it is a new venue, do it on a trial basis. If you get a certain number of referrals during a definited period of time (you set both), then a renewal of the old deal may be worth it. If the quota is not meant, then don't enter into the agreement. If she agrees, present her with the facts - when you previously had this deal it only generated x amount of business and wasn't worth it.

cakesdivine Posted 18 Jan 2010 , 8:20pm
post #3 of 17

That is a tough one. You certainly don't want to be excluded from a new venue that looks to become very popular, but then again, it basically is a form of blackmail, and there are probably plenty of cake people out there especially ones less known and successful as you that will jump on her offer. I wouldn't do a percentage, I would do a flat fee per and add that cost into the cake total for that venue, and just make sure there is a minimum price you are willing to do for that venue. That way she really isn't blackmailing you she is blackmailing by proxy her own clients...LOL!

cakequeen50 Posted 18 Jan 2010 , 8:25pm
post #4 of 17

The reason I thought about a percentage is because if it is a $300 cake, I give her 50 or a $700 cake I give her 50. I definitely lose out on the smaller cakes. With a percentage, a 300 cake would maybe give $30, 10%.

LaBellaFlor Posted 18 Jan 2010 , 8:26pm
post #5 of 17

I would tell that planner to ki@@ my a$$! Really, though, I would contact the actual managers/owners that own the venue and ask if this their policy. DO they really expect outside vendors, such as D.J.'s, florist, etc., to have to pay kickbacks to them to be able to come into their venue. I bet they don't know anything about what she is doing. And I seriously doubt other vendors are going to want to pay her kickbacks.

cakesdivine Posted 18 Jan 2010 , 8:36pm
post #6 of 17

Yeah...what LaBella said...

If the hotel management knew that their staff event planner that was getting a paycheck from them was accepting or rather demanding kick backs from their vendors they might raise an eyebrow towards her.

Also, if they for some reason don't give a rat's behind about her getting kickbacks then request her tax payer information as you will have to report the money you paid to her to the IRS...that might also deter her from doing it icon_smile.gif

Oh and let me clarify that the flat fee protects you and the client and to charge the client that exact amount, that way you aren't out an actual dime and that way your price across the board is more reasonable, and why I said put a minimum charge...Say the minimum cake you will do for that venue is $400 (That is a $350 cake with the $50 kickback fee attached) then after that if the cake is higher priced the sticker shock won't be as present. If you do it on percentage you could end up kicking back as much as 200 or 300 dollars on a big cake and totally outpricing yourself by adding that kickback amount back into the cake price. So the base cake is $2000 the 10% is $200 so the customer is charged $2200, and their budget is only $2000, you don't end up with the order, the other cake person who negotiated a flat fee and is still within their budget does.

sugarMomma Posted 18 Jan 2010 , 8:48pm
post #7 of 17

Is this legal? It certainly seems to fall out of normal business ethics and morals, and her managers should know about it. It is not fair to you or to her clients. I have been in the hospitality industry for years and have never heard one word about kickbacks to vendors. We avoid recommending certain vendors when they did a bad job, but have never asked anything extra from them.

LaBellaFlor Posted 18 Jan 2010 , 8:50pm
post #8 of 17

And this is a story you may want to tell the Venue owners. Just to give them an example of the potential lost of business. There is a venue here that you can rent to get married at. Well, they have a preffered event planner that they like to coordinate the rental of the place. Now, thats not to say you have to hire the planner to rent the place, you just need to go through her to get the rental done. So, what happens now, when people call to rent the place, she talks to them, swamps them with a lot of questions about their event, tries to sell her service, and thats when they just call for pricing! I have had a few clients talk about this and they end up looking for another venue. It's funny the things you find out when you ask clients how are the wedding plans are going.

Rosa2745 Posted 18 Jan 2010 , 8:52pm
post #9 of 17

The nerve of some people...always trying to make a buck off of someone else. I'd decline the offer and rat her out. I don't think what she's doing is legal. She's basically using her position to make money off of others. Who knows you might not be the only one she has possed this offer to.

Mike1394 Posted 18 Jan 2010 , 8:56pm
post #10 of 17
Quote:
Originally Posted by LaBellaFlor

I would tell that planner to ki@@ my a$$! Really, though, I would contact the actual managers/owners that own the venue and ask if this their policy. DO they really expect outside vendors, such as D.J.'s, florist, etc., to have to pay kickbacks to them to be able to come into their venue. I bet they don't know anything about what she is doing. And I seriously doubt other vendors are going to want to pay her kickbacks.




Yep,

Mike

cakequeen50 Posted 18 Jan 2010 , 9:05pm
post #11 of 17

When I bought this existing business and merged it with my own, there was a venue that the previous owner was being referred, and the venue would require a 25% kickback....I just cannot deal with people like that. I am sure I missed out on some business but how can I fake my pricing for their client and upcharge out the rear just to get in that venue. I just don't roll that way.

Now that being said, I do have a venue client that charges an arm and a leg to their clients for my cakes, but that is on their end. I do the cakes and send a bill. Whatever that venue charges is their business.
So they get a "kickback" of sorts. but last year they gave me $$$$$$$ in cake business!!!

this-mama-rocks Posted 18 Jan 2010 , 9:10pm
post #12 of 17

Yep, "verify" this practice with the venue's management.

She's an event wh*re.

Revenge Fantasy: have "XXXX is an event wh*re" in lights on the marquee at the Fox - wouldn't THAT be a fun thought?!

LaBellaFlor Posted 18 Jan 2010 , 9:12pm
post #13 of 17

But that is different. If you sell a product to someone who is going to turn around and sell it to someone else, you have nothing to do with their pricing. If I have to pay a kickback, I'm going to let the client know and charge it to them. I'm sure they will be pretty ticked off that the place they have to pay money to rent has hidden charges.

CakeForte Posted 18 Jan 2010 , 10:20pm
post #14 of 17

Yes...go to the director of catering, or te F&B Director. I would guess they have NO IDEA because that is money the company could be earning via upselling the cake. Two different scenarios. She's already being paid an extra commission on events booked, that's how the industry works.

She's being shady.

Texas_Rose Posted 18 Jan 2010 , 10:26pm
post #15 of 17

I knew someone who did that, sort of. He was in charge of event rentals for a large facility and he had certain caterers who he would recommend. When those caterers got a job because of him, they paid him in food...individually packaged frozen meals that he took home. Somehow that didn't seem as bad as demanding money...I assumed it was the leftovers he was getting...but I can see where that wouldn't work with cake.

snarkybaker Posted 18 Jan 2010 , 10:32pm
post #16 of 17

I have one event planner at one venue that is worth about $2000 a month in business. She builds money for dessert into her packages, and ALWAYS sells something. She is right down the road from us. I would pay her to keep her in a second. One, I don't like other cakes on MY turf, and two, it's $2,000 a month.

She was considering leaving the venue when new owners came in last fall. I flat out offered her a commission to help make up for the pay cut she was taking. She didn't take it, but I do give her a floating credit of 10% of her sales in order to help book events with small budgets. She has used it for charity events etc...

It's worth while to scratch the back of somebody who reciprocates. JMO, ymmv, etc.

AngelaM Posted 18 Jan 2010 , 10:33pm
post #17 of 17

I don't think she's being shady by any means, simply because they had this arrangement set up in the past. It's not unexpected for her to think it's ok to ask to do it when you've done it before. I also think that business is "you scratch my back, I'll scratch yours". A lot of people are willing to provide referral fees for business and I don't think there's anything wrong with that. It's a win-win situation for both parties.

That being said, my suggestion would be to say "If you provide me with $X amount of business in one month, I will compensate you $X". That way she's working to give you the business, but you're not coming out of pocket with anything if she only ends up giving you small orders.

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