The service sector has seen major changes in recent years, including the rise of national parts distributors and consolidation that has created roll-ups which now serve massive areas of the country. But those are only a few of the factors that will shape the service sector in the future. From dealing with macroeconomic factors that impact their customers to addressing demand issues to finding new technicians, today’s service agencies have a lot on their plates. 

Economic Indicators

Worries about the economy have been widespread for months. One service agency executive says many customers are slow-rolling payments, resulting in his company carrying an accounts receivable load that’s twice as high as normal. Financial worries trickle down to repair work and purchasing decisions in many operations, too.

Rusty Parke, vice president of operations at Indianapolis-based Vanco and a 37-year veteran of the foodservice equipment sector, points out one industry-specific indicator of a slowdown: Greater caution among fine-dining operators, who are taking a slower approach when deciding to purchase new equipment and even replacing faulty units.

“Generally speaking, that’s where we are seeing the retraction at first, in high-end restaurants. There’s a ripple effect from there. It goes from high-end to casual dining. Normally, business among quick-service-restaurants will actually pick up during tighter economic times. People will buy a cheeseburger if they’re not going to spend the money on a rib-eye steak,” Parke says.

More cautious operators will now ask for repair estimates when they would previously have simply authorized the fix on the spot. Operators will also explore other options to either repair or replace their equipment. For example, they might explore if the kitchen can operate without a specific unit for a few months thanks to equipment redundancies.

When it comes to an essential piece of equipment, say a fryer for a chicken wing concept, some operators will balance the cost of repair against replacing the unit with a comparable item or a lower-cost item, Parke says.

Thomas “TJ” Coker, director of operations for Coker Service, sees similar hesitancy across the board. Many of his customers have put capital expenditures on hold, and frown upon major repair more so than usual. Some operators ask about small fixes that will let them just get by. Often, if a big fix becomes necessary, operators may wait until the next month or next quarter to authorize the repair, he adds. 

One big question during an economic slowdown is what happens to planned maintenance agreements. Here, service agents report different experiences. Coker says this represents one of the first expenditures operators cut. Nathan Miller, vice president of Coastline Cooling, says his company has not experienced a decline in its planned maintenance business. In fact, he reports Coastline Cooling is experiencing more demand for planned maintenance, as operators recognize the value of keeping units up and running.

However, Miller does see price sensitivity among his planned maintenance customers. To overcome this, he’s working to add value to Coastline’s planned maintenance deals, such as guaranteed emergency response times and waived trip charges if the client is willing to schedule a few days out.

Tech Recruitment

Not surprisingly, most leaders of service agencies say that a lack of skilled technicians remains one of the biggest challenges they face. The age of the technician workforce is one source of the problem. John Schwindt, general manager and vice president of operations for Hawkins Commercial Appliance Service, notes that his firm has 10 fewer technicians today than it did 20 years ago due to retirements alone. 

Companies continue to struggle to replace techs one-for-one when someone retires. James Mylett, CEO of Smart Care Solutions, estimates that for every five technicians that leave this sector, only two join. What’s more, he adds, the foodservice equipment repair sector seems to be especially prone to turnover. Compared to other industries Mylett has worked in, such as building automation and HVAC, Smart Care’s turnover rates are 10 points higher.

Several factors seem to be contributing to this shortage. Carrie Toth, Smart Care’s chief marketing officer, cites the pressure younger people feel to go to college, giving no consideration to the skilled trades. 

“I think about my kids going through high school and the process of answering ‘what am I gonna do afterward,’ and there’s so much peer pressure around college and which college you’re going to,” Toth says. “It almost feels like the only path for the kids and the only path for the parents to push.”

Other factors are more structural. Clark Service Group President and CEO Glenn Clark sees the demand for training in the trades but cites a lack of spots in trade schools slowing the flow of qualified technicians.

Schwindt, meanwhile, notes that foodservice repair companies are often at the bottom of the list when it comes to recruiting from these institutions. “The trades [these students] are going into are all union-based: the HVAC, the electricians, the plumbers, carpenters. They’re the ones that get that first grab into the student body, so to speak, because they’re heavily invested in those schools,” he says. “A small company doesn’t have that. I may not even be able to interview anybody because everybody’s already got a job offer before I ever even get there.”

Like other companies, tech recruitment is a challenge for Smart Care. But Mylett says his firm does have an advantage in this area because it is a roll-up of several previously independent service agencies. Smaller firms are often family-owned, and the next generation is waiting in the wings to assume leadership roles. Smart Care, meanwhile, doesn’t pass leadership from one generation to the next. In addition, the company’s multiple branches offer more opportunities to ambitious techs who want to move up the ranks.

Managing Demand

The lack of techs results in another challenge facing service agencies: demand for their services in professional kitchens is greater than they can supply. In this situation, many service agents become selective about who they work with. Hawkins, for instance, doesn’t service operators if they’re too far from where its techs are based, Schwindt says.

“We don’t spend all this drive time going to all these faraway places because it’s taking that one technician out of the loop for one customer for a whole day, whereas that technician could be in town here and take care of four or five customers,” says Schwindt. 

Clark, meanwhile, stresses that service agencies can’t be everything to everyone. Techs simply can’t know how to repair every piece of equipment and companies can’t train techs to cover everything. Service agents, then, must choose how they go to market, both in terms of level of service and the type of operation served.

Parts Stocking and Sales

Another major shift service agents are adjusting to is parts availability. In earlier times, authorized service companies were required to stock parts for their manufacturer partners. That requirement has largely been discarded, says Schwindt.

Large national parts distributors that provide replacement parts to almost anywhere in the country overnight played a role in that shift, Schwindt notes. Many service agents that used to stock parts have stopped. The investment in money, time and expertise just wasn’t worth it to them, adds Schwindt.

Those service agencies that still stock parts can see a benefit, though. Schwindt not only sells parts to his customers, he also sells to competitors in the area that need to complete a repair quickly.

The downside of this change, though, is the lack of parts availability in rural areas, Schwindt says. Hawkins used to have sub out warranty repairs in far away, rural markets to service agencies that stocked parts. Those companies simply no longer stock, so operators in the more rural areas of Wyoming and Montana, for example, may have no same-day parts availability at all, he states.

And while same-day parts availability may not be a reality in all markets, where that is an option parts distributors are actually enabling better customer service. “Can I get something shipped out at 7:00 on a Friday evening and have it for my technician on a Saturday? Yeah, because I’ve done it. Were you able to do that in the past? No. Was that customer extremely happy they were up for the weekend? Yes. To me, it’s a win-win,” Clark says.

Even with all the change in parts distribution, more change may be coming, adds Schwindt. Some dealers, he says, are starting to get into parts distribution themselves, driven by tight margins and commodity equipment. “The competition for selling a new fryer is really tight,” he says. “They have to expand. If they have to give away the fryer, they want to make money on the parts to repair that fryer.”

Roll-Ups and Independents

Of course, no conversation taking stock of the service sector would be complete without exploring the impact consolidation and roll-ups, such as Smart Care Solutions, Tech24 and Unlimited Service Group, have had on the industry. Many members of the service sector cite the ability of roll-up companies to service national chains across multiple markets as one of their biggest value propositions. 

Roll-ups, Mylett argues, can bring greater consistency to a national operator’s service program as well as provide deeper insights into equipment performance, downtime and maintenance costs.

Independent service agents, for their part, are smaller entities, and often more nimble.

Schwindt notes that Hawkins can change its practices and even its pricing based on what’s happening in its market, for instance, and adjust its offerings based on the on-the-ground conditions in Colorado.

The company, for instance, has retracted out of serving some far-flung areas in order to better serve operators in larger markets. That type of change would be very hard to implement at a roll-up, Schwindt adds.

As the leader of consolidated firm Smart Care, Mylett concedes it is easier for independent service agencies to be nimble. He also notes that many roll-ups across industries try to “rip and replace” business practices of their constituent companies. That’s not a winning strategy, he says.

Smart Care, instead, takes a “freedom inside a framework approach” with the service agencies it acquires to maximize flexibility while still functioning as a cohesive organization. “When we sit down with the owners, we talk about the things that are non-negotiable, like the way we account for the business,” he says. “In terms of the way they run their local training, or the way they interact with the customers, what we bring them is a buffet of resources to choose from to help them get better at it, as opposed to a ‘rip and replace.’”

Consolidation is certain to continue in the coming years. Whether operators work with a roll-up or an independent, this trend changes how they partner with service agencies. Other factors, like technician shortages and parts availability, are also shaping how equipment repair and maintenance is provisioned. Service agents and their supply chain partners will need to stay nimble in order to thrive through all these changes.