To help get some better answers to this question — answers based on actual data from actual members of the foodservice industry — Foodservice Equipment & Supplies surveyed its dealer and operator readers to get a better idea of how they continue to cope with market conditions that seem to fluctuate almost by the hour.

Indeed, it seems as if individual members of the foodservice community appear to have a greater awareness of the state of their businesses but seem anxious to benchmark their performance against other organizations in the same business segment. The constantly changing and conflicting reports about the economy have left business leaders, specifically those in the foodservice community, with an uncertain view of their individual industry's larger context.

The leaders at those foodservice companies having a good year to date, and there are some where this is the case, are left looking around their industry segment trying to determine who is in the most pain. And those companies having off-years are wondering how many other organizations are in the same boat. But nobody, it appears, wants to be the individual to first raise their hand to indicate a successful year or one that's slightly off the mark.

And the data we collected as part of this midyear study sheds some light as to why the uncertainty remains rampant. For example, in the usually conservative dealer segment, 52 percent of the surveyed companies project their 2008 sales will be more than 2007. In addition, 28 percent said this year's sales will remain flat, while only 20 percent of the participating dealers indicated their 2008 sales will be less than the previous fiscal year.

This represents a significant change in the dealer community's outlook since FE&S fielded its 2008 Industry Forecast Study, the results of which were published in the magazine's January issue. At that time 78 percent of dealers indicated their 2008 sales would be higher than 2007 levels and only 5 percent projected a dip in their 2008 sales. These declines over the first six months show that a healthy dose of reality continues to make its way through the distribution chain.

Still, the fact that 80 percent of dealers participating in our midyear survey feel their 2008 sales will be equal to or greater than the previous year is not only surprising but also in contrast to the harsh realities their operator customers continue to face. For example, 39 percent of participating operators project an increase in sales for their 2008 fiscal year and an equal percentage expected sales would remain consistent with 2007 levels. Only 22 percent of the participating operators indicated their sales would decline in 2008.

More indicative of the mixed bag of results operators face might be in the traffic counts they reported. Only 25 percent reported an increase in traffic for the first six months of the year. In contrast, roughly 38 percent reported a decline in traffic and 37 percent said customer levels were flat.

Both dealers and operators remain relatively optimistic about their fortunes for the remainder of this year. In fact, 41.5 percent of dealers surveyed still anticipate their sales for the rest of the year will exceed their expectations. Another 30 percent of dealers surveyed expect the final six months of sales levels to at least meet their expectations, while 28 percent project a shortfall. Among the operators surveyed, only 12 percent anticipate their sales levels will exceed expectations. A solid 59 percent of the operators expect sales to meet expectations, while 29 percent expect sales will fall short.

The green movement appears to be gaining more traction among operators. In fact, 58 percent of those participating in the survey indicated they plan to add energy-efficient equipment as a way of lowering operating costs. This provides more of a business rationale to the green movement, which previously gained interest for more social than fiscal reasons.

“Operators are finally going green because they see the opportunity to save money on operating costs,” Tristano says. “They need to find a way to save money and I am sure that operators don't think customers are willing to pay more for green initiatives. It's a nice to have but not need to have.”

Labor costs remain a critical issue across the board for operators. Of the operators surveyed, 61 percent reported their staffing levels remained consistent with previous years, while 11 percent reported adding personnel. And 28 percent reported decreasing the size of their staff. “I am not sure you are going to see layoffs. You might see some cutbacks,” Tristano says.

At first glance, these cutbacks may not seem too obvious to the consumer. But when they see a dining room with empty tables and are still told there's a wait for a table that could be an indication that the facility does not have the server power to accommodate those customers at the moment.

As the economy continues to adjust to its new set of circumstances, retaining high-quality talent, already a concern for most anyone in the industry including operators, could become a more pressing issue. “You will have some turnover issues,” Tristano projects. “The GM will not be happy because his bonus will be affected as a result of less business. Servers will be unhappy because tips will be lower. So, you may see some labor issues where people might start looking to other industries in these tough times. It will make it more difficult to maintain the service levels you need to keep your customers.”

The purchasing patterns of most operators continue to react to rising food costs. “In terms of food product, they are looking to minimize spoilage whenever possible,” Tristano says. “So instead of ordering 20 of a fresh item at one time, they will only order 15. We are seeing more frequent orders of less so they can reduce spoilage and not lose profits.”

And as a way of maintaining profitability, operators continue to look at portion sizes and the structure of their menu. For example, some operators may go from offering a 10-ounce portion to an 8-ounce. That gives them the opportunity to reduce their food costs by 20 percent while being able to maintain 90 percent of the revenue, Tristano says.

Small-plate menu items, such as tapas, represent another opportunity to increase value in the customers' eyes while keeping check levels at similar or larger levels. “You can buy an entrée at one price but with small plates customers are willing to buy two or three and pay a premium for it because they get the variety,” Tristano says.

Despite changing market conditions, the triggers for purchasing equipment remain consistent. For example, dealers report 52 percent of their equipment sales this year are the result of a customer's need to replace an item. Menu developments continue to be another factor that prompts operators to add equipment, with 24 percent indicating this was in their plans for some time this year. “With regards to equipment, operators are looking for more equipment that will do it faster, conserve energy and space,” Tristano points out.

The frequency with which operators purchase equipment and supplies mirrors the continued fluctuations within the overall market. Approximately 31 percent of dealers report an increase in the size of the average order operators place. In addition, 39 percent of dealers report average order sizes remain consistent with 2007 levels, while 23 percent report a decrease.

So if they are not eating at restaurants, how are consumers adapting their eating habits to work with the economic realities of the day? “Mainstream America is getting hit hard and they are learning how to eat at home again. And they are realizing there are more options for them at the supermarket. We will also see new opportunities for takeout.”

As a result, customers continue to trade down from casual to limited-service or fast-casual restaurants. To help offset this transition, many casual operators continue to offer takeout as an option.

Consuming food purchased away from the home at home continues to grow in popularity for a number of reasons, such as being able to save on the gratuity and adding more choice into the overall meal. “For example, if you want Gatorade and the restaurant does not sell it, your choices are not limited to what's on the menu,” Tristano adds. “That's why we've seen takeout on the rise.”

Given the many different challenges operators face, foodservice equipment and supplies dealers have ample opportunity to help their customers traverse these turbulent times. “They should be looking at how they can reduce cost for the operator in any way possible without decreasing the value they can provide,” Tristano says.

Ultimately, what will most likely spare the industry from going into a full-blown tailspin is the industry itself. “You have a lot of entrepreneurs in this industry who will figure out a way to make themselves better,” Tristano says. “You are forced to make yourself better. There's no alternative. When you look at your bottom-line results, you have to challenge yourself to understand why they are not what you wanted and how you can make it better. You do because it's not just about retaining your customer. It's about getting better. It's also about value.”