Looking back 15 or 20 years, most foodservice equipment factories were owned by individuals or families but today large, publicly traded companies own many of our industry’s manufacturers. It is important to consider what this change in ownership does to the culture of the company and in what direction it heads. In many instances, instead of fulfilling the needs of their business and the customers they serve, the leaders of these publicly traded manufacturing companies now have to satisfy their shareholders who want a consistent quarterly dividend.
With the factories’ management teams focusing more on their balance sheets than their relationships, the guys that hire and fire us as service agents have probably lost some of their authority. They used to have the latitude to set discounts, rates, define warranty-related claims, etc. As a result, the way we work together today is more numbers driven than it is relationship driven compared to two decades ago.
As consolidation continues to affect the number of factories, it also impacts service levels and parts distribution on the street level.
For some factories, OEM parts sales represent a significant revenue stream. Through manufacturer consolidation and a desire to increase this revenue stream, the distribution of parts has expanded considerably. Factor in the dot com parts distributors selling generic parts at a much cheaper rate, and it’s getting more difficult to hold the line on pricing and margins.
The parts distribution channel may have expanded but the foodservice equipment manufacturers have not lowered the amount of inventory they expect service agents to maintain. So despite the dilution of our sales opportunities, the cash investment we need to make remains constant. If you are a service agent first and a parts distributor second, like my company, this development does not affect your business too much. For many other CFESA members, though, their business model is exactly the opposite of my company, meaning they function with additional pressures.
Of course, challenges also exist in the way foodservice operators approach the service and maintenance of their equipment. You have to manage the assets for maximum life cycle but sometimes the store operators’ incentives work in an opposite way, requiring them to manage costs on a daily or weekly basis.
Some foodservice operators also pressure the factories to provide extended warranties at no additional cost. Looking at refrigeration as an example, it used to be that factories’ standard warranty covered the parts for one year and the compressor for five years with no labor costs to make these repairs. Other competitors came to the market and offered different, more aggressive terms and everyone followed, creating pressure on the service agents.
What’s the relationship between the service agents and factories going to look like in five years or ten years? We service agents have always been servants but the smaller, more one-to-one relationships for service and parts represented the bedrock of our businesses. Unfortunately, these relationships have eroded over time, and we don’t necessarily see them moving forward in a spirit of partnership. Ultimately, the operator will pay higher prices and have fewer choices in everything from parts to service costs.
Like any other member of the foodservice industry, service agents have to roll with the punches with respect to the factories they support and their business plans. Leaders within these organizations need to examine things critically to determine if they want to continue to align their companies with their current factories.