By Amy Bostock
From supply-chain challenges to reduced operator budgets, even post pandemic, the foodservice-equipment business is still facing daily struggles.
“The pandemic brought countless unknowns, and those unknowns continue today,” says Kristy Barber from R.E.D. Restaurant Equipment Distributors of Canada Limited. “Most Canadian equipment dealers have been in business for many years and have seen recessions and high interest rates before, but what we’re facing today is different. For one, customers have fundamentally changed. Food-equipment dealers have spent decades building showrooms and brick-and-mortar locations to allow customers to shop, ask questions and rely on knowledgeable experts in the field to help with their equipment sourcing needs. COVID forced them online. In-person shoppers know more in advance of their visit through online research and have often purchased some or all of their equipment online without ever having stepped foot in an equipment dealer’s showroom. But fulfilling online orders is far more difficult.”
Barber says supply-chain issues continue, but what’s most difficult is having the right inventory at the right time at the right price. “Customers want equipment right away, forcing dealers to maintain significant inventory levels at all times. There are millions of SKUs to meet the needs of the foodservice industry. But does a dealer buy today or wait for shipping costs to come down next month? What about interest rates? It is all unchartered territory.”
According to Stan Dabic, CEO of Russell Hendrix, managing inventory and resources effectively across regions to address demand fluctuations is an ongoing challenge. “We have strong relationships with vendors, so have been able to consistently maintain supply for customers, limiting the impact of supply-chain shortages and are now focused on returning to a more balanced stock position.”
Hiring and staffing also remains a huge challenge. “As with other industries, we’re struggling to find and retain good employees,” says Barber, adding that on top of retention, wages have increased significantly, while profits and revenue have dropped or stayed stagnant.
While Dabic says manufacturer price increases have slowed somewhat, limiting the impact of inflation for Russell Hendrix customers, Barber adds that some manufacturers increased their pricing throughout COVID by 30 to 40 per cent.
“That is a huge increase. Keep in mind that the food-equipment industry is a low-margin industry. Staying competitive today is extremely difficult, especially if one of your competitors is selling older stock that was purchased at lower prices,” she explains, adding the cost of borrowing has increased with multiple increases of key interest rates, which impacts both the dealers and the end customers.
“The cost of doing business has increased across the board, from wages to fuel, rent to inventory and everything in between – yet how much can the price of equipment be increased? Usually not enough.”
In order to overcome those challenges, Dabic says his company continues to focus on providing solutions for customers, whether they’re looking to expand their restaurant operations through new builds, upgrade their equipment, replace equipment or are in need of everyday kitchen essentials that help reduce labour and food costs for them. “We’ve always been a customer-first organization and that has not changed.”
Barber says some Canadian dealers are diversifying their products or categories. For example, some have a domestic chef or residential side to their business, and have seen positive gains in that category with more people renovating to enjoy their spaces at home. Other dealers are streamlining their offerings to be more competitive with certain items or brands and others have grown to service areas outside their core geographic region.
Reducing operating costs by reducing inventory in general is another strategy Barber has seen. “Many brick-and-mortar locations traditionally have had large showrooms with millions of dollars of inventory at any given moment. A reduction in this expense has been a strategy to ensure operational costs are met. But, to my point above, it’s essential for dealers to have the right items in stock at all times or risk losing a sale.”
But dealers aren’t the only ones facing challenges, as foodservice operators struggle with balancing profitability and labour demands.
“Hiring and employee retention in foodservice causes a lot of stress, as does the high cost of ingredients,” says Barber. “As a result, many operators are looking for ways to reduce labour costs and/or save time in doing work that has been typically done by a person in the past. Many end-users are finding the benefits in new food processors that can cut prep time in a kitchen to a fraction of what it was with an employee doing that job. Combi-ovens and high-speed ovens have made huge strides in our industry because they can reproduce excellent results without a chef doing the line work to make it happen. And even service robots are making strides in food delivery from kitchen to front of house in many applications.”
She says as dealers, one of the biggest jobs is making sure you’re staying ahead of the curve and learning how these new products on the market can benefit your end-users to make their jobs easier and more efficient and profitable.
“In this time of high costs, efficiency is key. If we show an operator how a piece of equipment cuts labour in half, or reduces operating costs in other ways, it’s pretty much sold,” says Barber. “Availability and pricing have always been top of mind for any operator and COVID has not changed this.”
Dabic says the top customer demands he’s hearing recently are for commercial-kitchen design and new equipment. “During the pandemic, some customers held off replacing equipment and are now looking for similar options as well as the new innovations that have come to the market in the last few years,” he says. “Customers are also looking to expand into new locations or to add new restaurant options to their portfolio. The Russell Hendrix Design Team created more than 400 new concepts in 2022. Many of our customers have very specific and unique needs in their restaurants and owning Quest Metal Works gives us the flexibility to manufacture those custom products needed to fit their specific designs and requirements.”
But while shopping local may be top of mind for operators in terms of ingredients, when it comes to large-sticker purchases such as equipment, Barber says although North-American made products are favoured by some operators, the pricing needs to be comparable to be considered for purchase.
“European companies are a strong player in the market with the increase of different types of equipment such as combi-ovens that are now common in the North American market. Off-shore imports have traditionally been cheaper but have provided challenges with availability or serviceability,” she says, adding all factors need to align and, with more savvy, knowledgeable operators and changing buying habits, price, quality and accessibility to a product all play into decisions for equipment purchases.