Growth Starved

As 2014 comes to a close, there’s plenty of optimism among the members of the foodservice equipment and supplies community. And why not?

Next year kicks off with The NAFEM Show, taking place February 19-21 in Anaheim, Calif. Nothing quite compares to this biennial event. Everyone from operators to consultants to dealers to service agents to reps gather under NAFEM’s big top for a group hug and to discuss what’s hot and what’s cool in terms of the latest foodservice equipment and supplies innovations. Following the show, everyone will return to their various ports of call hoping to convert into sales or profits the energy and enthusiasm the NAFEM Show generates.

If only it were that simple.

Unfortunately, the business climate for the foodservice operator community remains, in a word, complex.

Outside pressures continue to mount, affecting how operators run their businesses. As Hudson Riehle of the National Restaurant Association pointed out during FE&S’ 2015 E&S Industry Forecast webcast, wholesale food prices are on pace for their largest increase in three years.

One of the things that works in the foodservice industry’s favor is its relative maturity. During the height of the recession, the industry declined only 3 percent or 4 percent. As Technomic’s David Henkes pointed out during FE&S’ webcast, such a setback would have crippled other industries.

Shareholders and industry analysts expect operators to keep growing and out-performing the competition. Period. Early projections indicate 2015 will be better than this year but will result in moderate growth at best.

So expect operators to get even more innovative with their growth plans. Technomic reports the number of mergers and acquisitions totaled 46 through the first 9 months of 2014, up from 21 in all of 2013. Some well-funded operators may look to boost their earnings via acquisition in 2015, too. Other large operators, such as TGI Fridays, keep selling off company locations to franchisees in an attempt to boost earnings.

Other operators will implement technology, both tableside and in the back of the house, to boost their sex appeal in the consumers’ eyes, while secretly hoping to boost check averages and a better return on their labor investment. Others will tinker with their menu, focusing on regional favorites or limited-time offers to help differentiate their concepts.

Collectively, these efforts represent short-term fixes that will satiate companies’ hunger for growth until things improve for middle class and lower income consumers. When their lot in life improves, so too will the fortunes of the foodservice industry.

To continue to compete in such an environment, members of the supply chain will need to keep their pencils sharp and make sure their definition of value remains in line with their customers.

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