Sales among the top 100 foodservice equipment and supplies dealers totaled $15.65 billion in 2023, which is up from $14.54 billion in 2022, according to the FE&S 2024 Distribution Giants study. In 2023, sales increased for 80% of dealers within the top 100, who shared their data.

After several years of peaks and valleys, it would seem things are starting to normalize among members of the dealer community. “When you think back over the past four years, what we’ve gone through, it’s been pretty crazy,” says Mason Greene, chairman of the board for Hotel & Restaurant Supply, a Mississippi-based dealer. “During the first quarter of 2024, things are starting to feel normal.”

Wild fluctuations in the supply chain in recent years, ranging from the inability to get equipment and supplies in a timely manner to unpredictable price swings, led to plenty of disruption in the foodservice equipment and supplies distribution channel. Many dealers, for example, made some short-term adjustments to their purchasing practices. “Money was cheap, so we told our people to build stock where you can,” Greene says. “We did not want to hold up any of our customers. We just wanted to serve them the best as we could during that time.”

But with those challenges came some opportunities, too.

“A good example of that is a walk-in manufacturer we work with. Back in the pandemic they were quoting a year lead time. And then if the price went up during that year you were going to have to pay the new price,” says Tom Rose, president and owner of Rose’s Equipment & Supply, an Oregon-based dealer. “So, we shifted gears and talked people into other products we could get. We tried to keep them with as good a quality product or at the very least keep it close. It gave us an opportunity to sell. That was a positive from all of the chaos. We got some orders we would not have gotten otherwise.”

Has the Supply Chain Settled Down?

“I would say it has but I would not say in every sector or with every manufacturer,” says Tracy Smith, president, Horizon Equipment, a Minnesota-based dealer. “I think manufacturers got caught off guard and had to catch up for a while. Dealers did the same thing. Now we have more realistic timeframes when it comes to meeting the customers’ needs.”

No longer feeling a need to stockpile inventory impacts the typical dealer in a variety of ways. “We were looking at getting more warehouses because we were busting at the seams. But now we have more room, and that’s a good place to be,” Greene says. “We are getting back into more normal patterns of ordering our jobs and our inventory. We had a good sales year, but our purchases may not have grown because we had so much already in house.”

Another area that’s seen a lot of activity in recent years is among manufacturers and their rep networks. Lots of factories continue to change their representation in various markets across the country.

“We saw a lot of churn a few years back, but it’s mostly settled down. We’ve seen some acquisitions in the market, and we are seeing some rep realignment in the market,” says Jameel Burkett, president and CEO of Burkett Restaurant Equipment, an Ohio-based dealer. “But most of that has already been done in the Midwest market. There are fewer rep groups with wider product lines.”

While things may have settled down in the upper Midwest, other markets continue to experience some disruption. “We’ve seen a lot of line turnover in the past 120 days,” says Tom Nash, president and CEO, Amundsen Commercial Kitchens Inc., an Oklahoma-based dealer. “For the past few months it has been a revolving door.” Turnover in the rep world can impact dealers and their operator customers in a variety of ways in the near term. For example, if a rep firm takes on a fryer line but has not sold that type of equipment in the past, they might not know how to operate it, Nash says. And that impacts the dealer’s ability to schedule product demos and even training.

Two related macroeconomic factors dealers must contend with are inflation and the higher interest rates aimed to curb it. “This impacts the way we quote and bid projects,” says Rose. “You have to build in that higher rate somewhere. Most of our competitors are no longer skimming the job for next to nothing because they have to pay these interest changes.”

For dealers, that higher interest rate can represent a significant added cost for companies that warehouse large amounts of foodservice equipment and supplies, Greene notes. “It took us a little time in 2023 to get more focused and reduce the inventory and get the project managers to time their jobs better,” he says. “We can do that now, and we don’t want to have too much inventory sitting around in our warehouses.”

Higher interest rates can also impact dealers’ operator customers, too. “The cost of ownership is definitely affected in a dramatic way. And the people who are trying to do any kind of startup, including those independents, it really hurts them,” Smith says. “It’s definitely going to have an effect for a period of time.”

Outlook for 2024

“We look at the business two ways: new orders coming through and orders shipping out. We had a tremendous amount of backlog that carried over from 2023. And with the mild winter, things have been moving faster than we would have anticipated,” Burkett says. “From a new bookings point of view, the first few weeks of January were pretty soft. But once we got past the Martin Luther King Jr. holiday things really opened up, and there is a lot happening right now. We see the day-to-day street business softer than the contract business. Our target customer is the emerging chain customer, and there’s lots of activity there, both with existing customers as well as new ones.”

Despite the headwinds the industry faces, Burkett says he’s “surprised by the number of new openings we are seeing. It’s definitely slower than it was after COVID and the PPP loans. It’s settled, but it’s settled at a rate that’s better than expected.”

Overall, the contract side of the business seems to be a strength for many dealers at the moment. “We focus heavily on the contract side. We do a lot of replacement side, too. But the contract and design-build business has really picked up for us,” Nash says. “Our reputation for handling these jobs well has grown and we get a lot of repeat business for that reason.”

One operator segment showing some resiliency is school foodservice. “There’s definitely an uptick in that area in replacement equipment as well as some new work,” Smith says.

The factors driving growth in this segment can vary by location. For example, Smith points to a Minnesota law that entitles every school-aged student in the state to a free lunch. “Consequently, there’s been a new effort to gear up in support of that and the increased number of meals that will be served,” he says. “And we’ve seen an uptick in other public money projects, too.”

As operators continue to wrestle with a variety of macroeconomic factors, what they ask of their supply chain partners continues to evolve. “They are asking us to be more of solution providers for them and see how equipment can help lower their operating costs at the store level, including labor,” Burkett says. “They are looking for us to help drive product consistency, too. They want us to be a solutions provider now more than ever.”

Operators continue to apply the lessons they learned during the pandemic as well. For example, when the supply lines got tight, some operators had to make do by trading down to cheaper brands. That’s not necessarily the case now. “While people are looking for solutions, they are cognizant of quality. They have learned that not all brands are the same,” Burkett says. “Yes, they are cost-conscious, but they are also total-cost-of-ownership conscious.”

“We’ve seen more business come our way from chains we’ve not done business with in the past, and that’s positive, too,” Greene adds. “All of our divisions are looking for opportunities for growth, either geographically or by serving new markets. So, we will look to expand in certain areas through physical growth and expansion in people.”