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SPECIAL REPORT: Most FER Top Dealers Saw Strong Sales In 2012

Foodservice Equipment Reports Top Dealers had a very good year in 2012, at least on the top line as a group. The 46 companies that verified their volume this year, in our third annual listing and analysis of the size, scope and service offerings of the leading foodservice equipment and supplies dealers in the United States, had combined revenues of nearly $4.4 billion last year; half of the group reported double-digit percentage gains.  

Combined revenues increased 11.4% in 2012. This exceeds the combined revenue increase of 10.3% from the 44 dealers verifying their volumes for ’11 last year. In our first Top Dealer Report, 31 dealers reported a combined increase of only 1.4% in ’10. Combined sales of the 37 other leading dealers who reported, but did not verify or that we estimated, grew an estimated 5.8%, though we, of course, have less confidence in these numbers.

The largest dealers in the United States now have experienced two consecutive years of strong sales gains coming out of the Great Foodservice Recession. And they have significantly outpaced growth of the broader industry in both years. Current FER estimates of the total E&S market have the market growing 4.7% in current dollars in ’11, slowing to 3.8% growth last year. 

Chains And Internet Drive Growth 

The factors driving these gains have been clear and consistent since the end of the recession. First, it’s a multiunit world. According to Technomic, more than 65% of all restaurant sales are controlled by the Top 500 restaurant chain concepts, up from 53% just 15 years ago.

As the U.S. foodservice market continues to be increasingly dominated by multiunit operators, including chains and foodservice management companies, many of the leading dealers have learned to serve these large, diverse and demanding customers. The maturing of the industry and the dislocations of the recession also have led many chains to outsource more of their equipment and supplies functions to dealers, boosting sales. 

Even a cursory glance at the lists makes it clear that the selling of equipment and supplies online is having a dramatic impact on the business. Clark Food Service Equipment, whose WEBstaurant Store is ubiquitous online, increased sales by more than 50% last year. Other Internet-centric dealerships, including Instawares Holdings, Tundra Restaurant Supply and KaTom Restaurant Supply all had gains exceeding 20% in 2012. Burkett Restaurant Equipment also employs a significant Internet presence. It grew 12% last year.

But offering Internet options, including online catalogs and ordering capabilities, online order and inventory tracking systems and custom websites for chains and other customers, are becoming commonplace among the leading dealers. The only exception is dealerships that are very bid oriented. Only nine of the 46 Top Dealers do not list Internet-ordering capabilities as part of their service offerings. 

The migration of E&S sales to the Internet has impacts in several directions. Just as electronics retailers and automobile dealers discovered earlier, the Internet drives comparison shopping and pricing transparency. But it’s important to remember that buyers of foodservice capital goods are a much more diverse lot than the average TV or car shopper. Chain buyers and their franchisees have very regimented specifying and purchasing procedures. This limits much of their flexibility in shopping around. Many institutional foodservice E&S buyers place orders as part of complex facilities projects that are carefully specified and bid out through the dealer network.

And, in fact, as Fred Clark, CEO of Clark Food Service Equipment told FER last year, the typical buyers at the company’s WEBstaurant Store are generally, though not always, smaller, independent operators. 

There’s no question that the proliferation of dealers on the Internet has complicated pricing. With multiple online E&S vendors easily accessible through search engines, the ability of buyers to comparison shop has been dramatically simplified. And the Internet makes the concept of regional territories irrelevant. Such comparison shopping involves not just independent restaurant operators but school systems, corrections facilities and other publicly funded institutional operators that are required to entertain competing bids.

The use of “loss leaders” or specials on Internet sites is almost universal, further complicating pricing issues. In fact, pricing has become a key topic whenever dealers gather together. Manufacturers have attempted to level the playing field with “Minimized Advertised Price” and “Minimum Sales Price” programs. But there is no doubt the new models create problems for many dealers. 

Mergers, Cash & Carry, A Better Bid Market Also Growth Factors 

Chain business and Internet sales are significant drivers of the growth of leading E&S dealers, but they are hardly the only strategies that lead to expansion. Cash-and-carry concepts continue to show above-average growth. This includes specialists like Ace Mart Restaurant Supply and Columbus, Ohio-based Restaurant Equippers, which just announced it will expand into the Philadelphia market. But it also is a niche that many full-service dealers employ as an adjunct to their regular stores. 

The consolidation of the market also continued last year. The number of mergers and acquisitions accelerated last year with 10 major deals closing during the year, driven in part by anticipated changes in capital gains and estate tax rates. TriMark USA acquired two specialist houses, Century Concepts and Federighi Design. And this spring, it announced its largest single acquisition to date, Strategic Equipment & Supply. The combined organization also will certainly become the largest single E&S dealer organization in next years’ Top Dealer Report.

Many of the other combinations that occurred during the year were driven by typical business life cycles as family businesses look for a way to cash out and smaller dealers look for a way to expand their resources and scale to compete. A good example is Premium Supply acquiring Tassone Equipment on Long Island, N.Y. The combined business grew by nearly 50% to a reported $30 million. 

A number of leading bid dealers also saw big gains last year. Johnson-Lancaster Associates, the combined Duray and Baring and Alack Refrigeration all saw substantial growth in 2012.

Two other aspects of the Top Dealer lists are equally important. While the channel may be consolidating, it also is quite dynamic. While some of the companies on the list are 100 years old and older, others didn’t exist a decade ago. And while new technologies are changing the business, the old models still work, given the great diversity of the foodservice market. 

In addition to the Internet-oriented companies we mentioned previously, other companies showing significant growth during the past few years are primarily “traditional” full-service dealers. Though some of the growth is boosted by acquisitions, much of it is organic. Singer Equipment, Hockenbergs Equipment & Supply, Mission Restaurant Supply, Mobile Fixture, Birmingham Restaurant Supply, Buffalo Hotel Supply, Arizona Restaurant Supply, Culinex and Federal Equipment Dealers all showed growth exceeding the norm. Done right, the old models still work. Check out our June 2013 issue or digital edition to see the full roster.

Chris Palmer contributed research assistance for this article.

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