Foodservice Equipment &

Supplies’2014 Industry

ForecastOctober 29, 2013

Review data from FE&S’ 2014 Foodservice Equipment and Supplies Industry Forecast.

Explore the economic issues impacting the foodservice industry with industry experts Hudson Riehle and Darren Tristano.

Forecast the operating environment for 2014.

Answer your questions.

Today’s Agenda

Meet Our Panelists

Darren TristanoExecutive Vice President, TechnomicTwitter: @darrentristano

Hudson RiehleSr. VP, Research & Knowledge Group

National Restaurant AssociationTwitter: @HudsonRiehle

Foodservice Equipment &

Supplies’2014 Industry

ForecastOctober 29, 2013

These slides are part of a free webcast, available until October 2014. Click to access it here: http://www.fesmag.com/2014forecast

2014 FOODSERVICE OPERATOR OUTLOOK

Operators: 2013 Anticipated Sales Compared to 2012

Increase44%

Stay the same36%

Decrease20%

Net growth rate: 2013: +3.50%2012: +3.37%2011: +2.20%

Comm. Non-comm

Increase 53% 36%

Same 27% 50%

Decrease 20% 14%

2013 Change by Market Sector

Operators: Projected Gross Profit for 2013

Increase33%

Stay the same41%

De-crease26%

Net growth rate Gross Profit:

2013: +0.8%2012: +0.7%2011: +0.1%

Comm Non-comm

Increase 40% 28%

Same 20% 48%

Decrease 40% 24%

2013 Change by Market Sector

Operators: Anticipated Sales Growth for 2014

Increase49%

Stay the same 40%

Decrease11%

Net projected growth rate 2014: + 3.72%

Comm Non-comm

Increase 63% 40%

Same 27% 48%

Decrease 10% 12%

2014 Change by Market Sector

Operators: Projected Gross Profit for 2014

Increase41%

Stay the same43%

De-crease16%

Net growth rate 2014 Gross Profit: + 1.23%

Comm Non-comm

Increase 47% 37%

Same 30% 49%

Decrease 23% 14%

2014 Change by Market Sector

Operators: 5-Year Gross Profits

2009 2010 2011 2012 20130%

10%

20%

30%

40%

50%

60%

Increase Remain the Same Decrease

OPERATOR PURCHASING BEHAVIORS

Operators: Activities Planned for 2014

None of these

Dining Room Replacements

New Construction

Dining Room Renovation

Kitchen Renovation

Kitchen Equipment Replacement

0%10%

20%30%

40%50%

60%70%

80%90%

100%

25%

19%

20%

29%

33%

60%

Operators: Percent of 2014 E&S Budget by Activity Type

New Construction11%

Renovations24%

Replacement Purchases

59%

Green/Sustainable Initiatives

6%

Comm Non-comm

New

Construction 13% 10%

Renovation 30% 21%

Replacement 52% 62%

Green 5% 7%

2014 Change by Market Sector

Operators: 2014 E&S Budget

In-crease43%

Re-main the

same45%

Decrease12%

42%

30%

19%

9%

$2.5 million or more

$500K-$2.49 million

$100-$499.9K

Under $100K

2014 E&S Budget Growth 2014 E&S Budget

Comm Non-comm

Increase 40% 44%

Same 47% 44%

Decrease 13% 12%

Operators: Percent of E&S Budget by Product Category

9.2% 8.3% 8.7% 9.8%

14.9% 16.2% 17.1% 14.2%

4.4% 4.3% 3.3% 3.8%4.1% 5.0% 4.0% 3.4%

10.4% 10.0% 11.8% 11.5%

4.7% 4.5% 6.0% 6.3%8.0% 8.3% 8.0%

6.8%

9.8% 12.4% 9.6% 11.2%

5.0%5.5% 5.7% 4.6%

11.6%11.9% 10.9%

10.8%

17.9% 13.6% 14.9% 17.6% Primary Cooking Eqpt.

Refrigeration

Warewashing/ Safety

Food Prep Eqpt.

Serving Eqpt.

Storage & Handling Eqpt.

Smallwares

Tabletop Items

Furnishings

Paper Goods/ Disposables

Jan/San Supplies

2014 2013 2012 2011

Operators: Percent of E&S Budget by Product Category

10.3% 6.9%

17.8%

10.9%

3.1%

5.9%

2.6%

3.3%

11.2%

7.2%

5.3%

4.6%

8.4%

6.4%

9.9%

11.5%

5.3%

3.9%

10.3%

13.5%

15.8%25.8% Primary Cooking

Eqpt

Refrigeration

Warewashing/ Safety

Food Prep Eqpt.

Serving Eqpt.

Storage & Handling Eqpt.

Smallwares

Tabletop Items

Furnishings

Paper Goods/ Disposables

Jan/San Supplies

Commercial Non-Commercial

Operators: Percent of E&S Purchases by Channel

Traditional E&S Dealers

50%

Broadline Dis-tributors

26%

Direct from MFR12%

Cash & Carry/Club

Stores2%

On-line Catalog House8%

Other2%

Comm Non-comm E&S Dealers 43% 54%

Broadline DSR 35% 20%

MFR Direct 10% 14%

Club store/C&C 1% 2%

Online Catalog 11% 4%

Other 0% 6%

Change by Market Sector

DEALER OUTLOOK FOR 2014

Dealers: 2013 Projected Sales Volume Compared to 2012

Increase75%

Stay the same21%

Decrease 4%

Trend: (% Better)2014: 35%2013: 44%2012: 29%2011: 36%

Dealers: Product Categories Driving 2013 Sales Growth

Other

Janitorial/Sanitation

Paper Goods/Disposables

Furnishings

Tabletop Items

Serving Eqpt.

Storage & Handling Eqpt.

Smallwares

Warewashing/Safety Eqpt.

Food Prep Eqpt.

Refrigeration/Ice Machines

Primary Cooking Eqpt.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

3%

7%

12%

27%

29%

32%39%

39%

51%

54%

72%

74%

Service, Fabrication

Dealers: Projected 2013 Gross Profit

Increase45%

Stay the same39%

Decrease 16%

Net growth rate Gross Profit: 2013: +1.80%2012: +3.76%

Dealers: Projected 2014 Sales Growth

Increase80%

Stay the same15%

Decrease 5%Net projected growth rate 2014: + 6.48%

Dealers’ Booked Business: Next Fiscal Year Compared to This Time

Last Year

More46%

Same43%

Less11%

Net rate ahead of last year: 2013: +3.80%2012: +2.41%

Trend: (% More)

2013: 46%2012: 49%2011: 45%2010: 34%

Dealers: Product Categories Driving 2014 Sales Growth

Other

Paper Goods/Disposables

Janitorial/Sanitation

Furnishings

Tabletop Items

Serving Eqpt

Storage & Handling eqpt

Smallwares

Warewashing/Safety Eqpt

Food Prep Eqpt

Primary Cooking Eqpt

Refrigeration/Ice Machines

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

4%

14%

19%

28%

33%

37%

37%

47%

47%

56%

70%

77%

QUESTIONS FOR OUR PANELISTS

What impact, if any, did the government

shutdown have on the foodservice industry?

Assessing the shutdown:Impact was mostly regional and probably did more

damage to the consumer’s psyche. 21 percent of consumers expect the economy to

be better in 6 months, while 26 percent expect things to be worse.

Restaurant operators see things in a similar light: 23 percent expect improvement, 22 expect things to be worse and 55 percent anticipate the status quo.

FE&S 2014 Equipment and Supplies Forecast

Consumers’ mindset:Consumer confidence has yet to rebound Slightly more cautious with spending but feel

better about their own situationsFacing a handful of key concerns including gas

prices, grocery prices, their own financial health, healthcare costs and job security

FE&S 2014 Equipment and Supplies Forecast

What will 2014 look like for the

foodservice industry?

Technomic’s take:2013 will see industry sales grow by 3.8 percent,

down slightly from 2012’s 5.2 percentIn 2014 the industry will experience 4.1 percent

nominal growth, 1 percent real growthContinued mixed results in the coming year

FE&S’ 2014 Equipment and Supplies Forecast

Technomic’s projected growth rate by segment:Limited-service restaurants will grow by 4 percent

in 2013 and 4.5 percent in 2014Full-service restaurants will grow by 3.5 percent in

2013 and 2014Bars and taverns will grow by 4.5 percent in 2013

and 5 percent in 2014In other words, restaurants will be in a take-share

mode in 2014.

FE&S’ 2014 Equipment and Supplies Forecast

What are some industry bright spots heading into 2014?

Three reasons for optimism:93 percent of consumers say they enjoy going to

restaurantsOne out of two consumers say they are not dining

out as often as they would likeIndustry hiring up; 294,700 positions over last yearRestaurants report sales and traffic numbers up

FE&S’ 2014 Equipment and Supplies Forecast

Fast-casual remains a beacon of hope:Technomic projects growth rates of up to 10

percent in the next 3 to 5 yearsLots of demand for fast-casual restaurantsFranchising is a key factor in growthSegment resonates with Millenials, the top dining

out generation

FE&S’ 2014 Equipment and Supplies Forecast

What are some reasons for concern heading into 2014?

Three reasons for concern heading into 2014:1. Potential for more government gridlock after

the first of the year2. Industry growth rates still below pre-recession

levels3. Job creation still slower than previous

recoveries

FE&S’ 2014 Equipment and Supplies Forecast

Five Biggest Business Challenges Facing Operators:1. Increasing food costs2. Unknown healthcare costs3. Labor costs4. Retaining quality employees5. Energy and other operating costs

Source: FE&S’ 2014 Operator Forecast Study

FE&S’ 2014 Equipment and Supplies Forecast

How are operators adapting to today’s business climate?

Ways operators are adapting:Getting overhead under control, which includes

doing more with less square footageDeveloping new prototypes to gain access to new

geographic marketsContinuing to invest in their businesses to serve

other dayparts and take advantage of off-premise dining opportunities

Driving revenues through sales of menu items consumed off premise

FE&S’ 2014 Equipment and Supplies Forecast

Ways operators are adapting:Managing food costsLooking to drive greater efficiencies into their

businesses

FE&S 2014 Equipment and Supplies Forecast

Questions?

©2011 Foodservice Equipment & Supplies – 2012 Industry Forecast

2013 will be a good year but not as good as 2012

Uncertainty continues to cloud the industry’s outlook

2014 will bring minimal growth, resulting in a take-share environment for restaurants

Operators have held off as long as they can and need to start replacing key pieces of equipment

Margins remain compressed for operators and suppliers alike

Key Takeaways

You can download today’s slides by clicking on the green folder below.

This webcast will be available in archive format shortly via www.fesmag.com.

View past FE&S webcasts at:www.fesmag.com/resources/webcasts

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Reminders

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©2011 Foodservice Equipment & Supplies – 2012 Industry Forecast

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