Foodservice Equipment & Supplies

SEP 2017

Foodservice Equipment & Supplies magazines is an industry resource connecting foodservice operators, equipment and supplies manufacturers and dealers, and facility design consultants.

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34 • FOODSERVICE EQUIPMENT & SUPPLIES • SEPTEMBER 2017 "There's a lot of ways to do that, but technology is playing a big role in operators' growth efforts," Riehle says. "The greater integration of equipment is truly paramount to ensure success on a long-term basis." In fact, many operators have already integrated technology into their plat- forms, generating some eye-opening results. Panera, for example, reported it generated $1 billion in sales through such digital means as in-store kiosk ordering, app ordering and orders from its website for the 12-month period between May 2016 and May 2017. With its custom- ers clearly embracing the convenience offered by its various technical platforms, integrating delivery represents the next logical step for Panera. As the customer-direct channels grow, the definitions of traditional foodservice will change. Take, for example, meal kits offered by com- panies like Blue Apron. "They sud- denly become a little more mainstream within traditional foodservice and retail settings. And that will impact overall growth and the traditional dynamics," Veidenheimer says. Pentallect remains bullish about the outlook for meal kits for two main reasons. "One is convenience. Consum- ers know they don't have to go shop- ping. The ingredients are coming," Veidenheimer says. "The other big piece is experiential. Meal kits provide a social experience if you have someone else in the house. And they allow you to try a meal you might not normally try on your own. The price point is attractive enough, falling between the grocery store and the restaurant." Seeing the growth potential for meal kits, some restaurants now offer them under their brand names. "If you think about 21 meal periods a week, roughly 5 to 6 are away-from-home solutions, a few are skipped and 14 to 15 are at home," Riehle says. "So there's still great opportunity for meal kits to grow when you look to food consumed at home. There's no doubt that meal kits have a place in the decision matrix of meals consumed at home versus outside of the home." Of course, like any other business segment, meal kits will occasionally ebb and flow. "Consumers will participate for a period of time and will stop for a while," Veidenheimer notes. "So there's a constant need to acquire customers, and that's part of the business model they will need to address." LABOR Another potential pothole on the road to growth: labor-related costs. One out of every two operators reports labor as their top concerns," Riehle says. "Restaurant labor costs are higher on an hourly rate compared to the private sector. Roughly a third of every sales dollar goes to labor." And the pressure shows no signs of letting up. "It is going to be an issue. The pressure won't go away on restaurants to raise wages," says Veidenheimer. Labor pressures take a variety of forms. Specifically, operators continue to focus on retaining good employees and recruiting new employees. Labor- related costs in the form of higher wages and benefits continue to keep operators up at night. In fact, opera- tors attribute 41 percent of their labor increases to higher wages and benefits, according to FE&S' 2018 Forecast Study. Looking ahead to next year, 90 percent of operators say the amount they spend on labor as an overall percent of their budget will increase or stay the same, FE&S' 2018 Forecast Study indicates. This is similar to last year's study results. Rising or even flat labor costs, though, will continue to impact gross profits. Sixty percent of operators pre- dict their gross profit levels will remain flat (46 percent) or even decline, ac- cording to FE&S' 2018 Forecast Study. Among the 40 percent of operators projecting an increase in gross profits, the average level is 2 percent. The foodservice industry has long been known as a low-tech industry with average revenue per employee con- siderably trailing other industries. For example, as of 2015, the last year for which this data is available, the average revenue per employee totaled roughly $56,000 in the foodservice industry compared to $226,000 per employee in the grocery store industry and $769,000 per employee at automobile dealers, per data from the NRA. Traditional Foodservice Equipment and Supplies Dealers 42.59% Specialty Dealers/Distributors' 9.71% Broadline Distributor 15.17% Direct from Manufacturer 6.38% Cash and Carry 2.44% Online Catalog Houses 11.47% Club Stores 0.79% Buying Groups 11.45% Operators' Purchases by Distribution Channel "The greater integration of equipment is truly paramount to ensure success on a long-term basis." — B. Hudson Riehle, NRA STEADY AS THE FOODSERVICE INDUSTRY GROWS

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