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WTF is Happening in the Restaurant Industry Right Now?
We spoke with service and repair management experts to better understand how current stress in the restaurant industry, like labor shortage and supply chain strains, impact restaurant operators.
Stress in the restaurant industry could not be higher. It’s no secret that there is a labor shortage across many sectors – manufacturing, construction, service – yet the post-COVID chaos among restaurants is attributed to more than just absent employees (although labor plays a huge role).
As the industry rebounds from a 20% loss in revenue in 2020 to 10.2% expected growth in 2021, operators are still playing catch up from shutdowns while simultaneously looking to optimize their businesses during reopening.
“If you look at the data, from a revenue point of view, the industry is coming back,” said Ken Goodwin, former food equipment manufacturing executive. “The hurdles are supply chain, parts, and labor. But the industry itself seems to be coming back quite strongly.”
As Goodwin noted, the current disarray comes in the form of three main disruptors:
- Supply chain strains limit access to raw materials, parts, and equipment
- Skilled trade labor diminishes availability of service technicians and strains the relationship between manufacturers and service providers
- Restaurant executives are forced to revisit their strategic plans rather than resort to pre-covid norms
In short, everything is, well… short. People, parts, equipment, training – all creating a perfect storm of stress amidst restaurant operators, manufacturers, service providers, and other industry players.
This boost was much lower than economists had anticipated. Vaccinations and lifted restrictions gave operators the green light to open their doors, but many are not adequately prepared to serve at full capacity.
“They (restaurants) just can’t get labor,” said Kevin Golden, owner of GMV Sales. “The demand is there, people do wanna go out and spend money… [Labor] is the biggest constraint right now. They just can’t get the help.”
Despite both front-of-house and back-of-house teams working longer and harder to fill the labor gaps, the distress is evident to restaurant-goers. Customers may face longer wait times and limited open hours.
Given how difficult it is to staff shifts, some restaurants are requiring deposits for reservations and charging in case of no-shows, Golden notes.
From forks and fryer baskets to copper and coils, parts and materials are hard to come by – even impacting food supplies. In an interview with The Wall Street Journal, Drew Brady, part of the management team at a New York City vegan restaurant, said that pine nuts are one hard-to-find food item at the moment.
“The issue now is we can get it sourced, we just can’t get the equipment,” said Golden. “Lead times have gone from 4-6 business days, and now… we don’t even know, it could be 8 weeks.”
I've heard the lead time for some fryers is five months.
We spoke to our team of Customer Success Managers who handle the day-to-day incident management for our customers and they’re seeing the effects of parts shortage across every market we operate in.
They agreed. The most common theme: “Things that used to take days, are taking weeks."
Unfortunately, this is the worst possible news for operators who are losing money every day a piece of equipment isn’t up and running due to a broken part that is now difficult to come by.
Several issues are contributing to these delays.
First, the supply chain has not recovered from its complete halt during the pandemic. Whether sourced domestically or internationally, there are global supply chain restraints on the raw materials needed to create equipment parts as demand resumes.
”You still have periodic COVID outbreaks [globally] that are creating problems with manufacturers in those countries,” said Robin Ashton, publisher/editor of The Ashton Report. "Some ports remain shut down completely.”
The cascading stress creates a domino effect of delays: suppliers can’t provide materials to manufacturers, manufacturers can’t provide equipment to customers.
“One company can’t get transformers. One can’t get the foam for insulation panels. Suppliers can’t even commit,” said Golden.
The demand for parts is amplified by service providers who trimmed down inventory throughout the pandemic to not face the sunk cost of carrying parts around for a declining volume of service incidents. Now, they’re needing to completely restock their inventory.
The lack of labor exacerbates this supply shortage, too. Not only are there fewer factory workers creating parts, but there’s also a big issue with distribution. Without enough drivers, logistics are a nightmare.
“It’s a combination of supply chain disruptions and huge logistics problems,” said Ashton, noting that the short supply of trucks and drivers not only increases delays but transit and shipping costs, too. He recalls one customer waiting weeks to receive an item that was only a four-hour drive away.
This takes a larger toll on smaller manufacturers and distributors. As larger manufacturers have continuously consolidated since the late 1980s, smaller sources are at a disadvantage.
As Golden explains, the “big players” have strategic relationships with the largest parts distributors, enabling them to track down specific parts, source faster, and juggle various quotes. Some manufacturers even went back to their parts distributors and bought back their own parts so they could complete equipment orders, further thinning out availability for service providers.
However, when there’s not enough parts and equipment to go around, the “big players” are left with what’s available, while smaller shops are left empty-handed.
“Everybody’s either trying to find new sources of supply or trying everything they can to expedite their logistics chain,” Ashton said.
Now, service incidents have returned tenfold, as restaurants reopen and put more demand on equipment that has sat idle – or they put off repairing or replacing before shutdown. With our own 86 Repairs customers, we’ve seen a 57% increase in service incident volume since January 2021.
Who do I call if there’s a problem? I want a phone number and a name.
Parts have longer lead times and higher costs. Operating with dysfunctional parts and without replacement parts means operators have to either go without the equipment or limp along with short-term solutions that would reduce the overall lifespan of equipment.
According to our Customer Success team, many customers are just making do with broken equipment. One customer’s grill would not turn on; after two hours of troubleshooting, it finally worked.
“People [can’t focus] on getting new equipment; they don’t have the capital,” Golden echoed. “They just barely got by … they’ll make the old equipment work well enough to stay in business.”
Operators are essentially living paycheck to paycheck – there’s not enough sustainable cash flow yet to support the ubiquitous challenge of things breaking down and needing repair. This results in continuing to wear down equipment, and ultimately spending more on either repeat repairs or altogether replacement.
“I've heard the lead time for some fryers is five months," said Ashton.
This can be especially challenging for seasonal businesses. With long lead times, operators may simply miss their window of opportunity to open back up for the season or refresh their menu, simply for no other reason than they can’t get the equipment they need.
“From an operator point of view, they’re experiencing food price increases along with labor shortages and the inability to get parts… in a lot of cases, they’re just restarting,” said Ashton.
Based on his experience with QSR brands, Golden noted how restaurant chains opting for expansion or remodeling are struggling to follow through on plans. “They would know pretty precisely what equipment they need [in a new location],” he said. QSR franchisees can choose to wait out the lead time for best-in-class, or choose a lower quality product - bringing them right back into the cycle of repeat repairs.
As parts become less available and incident volume increases, the stress on service providers should not go unnoticed. Subsequently, with manufacturers facing their own stressors, there’s strain on not only the customer-technician relationship but the manufacturer-technician relationship, too.
“All manufacturers have to have service providers,” said Goodwin. “Most have authorized service networks for in-warranty type of work… Generally speaking, the relationship was always a good one – we relied on them, they relied on us.”
However, the current chaos has left manufacturers focusing on supply chain woes, and less so on authorizing and training service providers.
For example, a manufacturer’s preferred tech walks into a hot kitchen in the middle of dinner service. After standard troubleshooting, the fryer’s not working. They call the manufacturer and remain on hold for… who knows how long, as line cooks and waitstaff rush around them.
Here’s how 86 fills the gaps:
We optimize relationships between manufacturers, service providers, and operators.
- With increased demand and decreased service provider availability, expect longer lead times. Yet many times – based on our experience, roughly 1 in 5 – a service provider isn’t needed to resolve an incident. We fill the gap through our Customer Success Team’s industry expertise and our historical equipment data to troubleshoot nearly 18.7% of incidents.
- When a repair is required, scheduling a service provider is time-consuming. Once a work order is finally submitted, you may find that even your preferred provider is behind schedule and unable to show, or missing the parts you need. We fill the gap by managing work orders from start to finish, leveraging customers’ preferred providers or our own trusted network to help source and line up alternative vendors when preferred providers are not available or short the parts needed.
- Most restaurant operators do not realize that they’re potentially voiding the warranty when they send out their preferred service provider independent of the manufacturer. Sourcing the correct service provider or tracking down a specific part should not fall on operators. We fill the gap by tracking manufacturer warranty per equipment asset in-platform to avoid confusion and additional costs, and contact manufacturers directly if needed.
- To hammer the point home, parts are in short supply. Time spent by technicians tracking down the right pieces means less time resolving the actual incident. We also order parts for self-installation or installation before service providers arrive on-site to save both time and money for providers and operators.
“Customers don’t want to hear, ‘Go to anyone,’” said Golden. “‘Is it under warranty? Who screwed this up last? Who do I call if there’s a problem? I want a phone number and a name.’”
Today's restaurant equipment is more technologically sophisticated, requiring even better-trained technicians, in an already tight labor market.
“There are about 20,000 technicians out there,” said Dennis O’Toole, founder of FSGenius, a technician training platform developed for the food equipment service industry. “Equipment complexity is rising, and the pool of experienced technicians is shrinking. As an example, most of our technicians have never encountered IoT and remote data collection, and now those systems are being installed somewhat routinely.”
O’Toole notes that as systems become more technologically advanced – think point-of-sale touchscreens, self-order kiosks, digital menu boards, temperature monitoring devices, contactless payment – room for errors and repairs increases.
“Automation kept many restaurants alive during the pandemic. Technology implies a higher level of knowledge for repairs needed if and when it fails. More and more equipment is becoming automated, more tech makes equipment smarter and more connected – all of these benefit the operator,” echoed Goodwin. “All of this is positive, but sophisticated electronics require more sophisticated knowledge for repair.”
“Our industry’s training was deficient beforehand, and then the pandemic just stopped everything," said O'Toole. Now we see cases where service organizations need to rehire and train dozens of technicians as quickly as possible.”
“There is an end in sight,” said Ashton. “Beats last year, just remember that.”
Operators are experts in strategically adapting; the pandemic proved so as patios, walk-up windows, and delivery services kept businesses afloat. Automation and adaptation are the key strategies moving forward.
“Off-premise percentages are still robust, even while they drop with more dine-in,” said Ashton. As operators adapt to accommodate, there has been an increased demand for holding equipment to optimize delivery, automated equipment like fast convection ovens or small conveyor ovens, and more from QSR chains and FSR operators alike.
Most economists say that based on the job market's slow rebound, the industry will be facing these issues for at least six months to a year more.
“The supply chain is shut down,” said Goodwin. “It’s gonna take months for it to get smooth again. Same thing for the service industry.”
Our Operations team notes that it’s difficult now for customers to care about the bottom line, when equipment is so rundown at the moment, that revenue is at risk. Sure, some operators may have the capital or cash flow for a quick fix, but long-term plans aren’t being made.
We recommend focusing on controllable expenses. Restaurant equipment repair and maintenance is a $26B industry. Ask any operator — they’d tell you repair and maintenance is the largest controllable expense on their P&L, coming in right behind labor and food costs.
Your staff needs to focus on serving hungry customers. Let us take the headache and stress of R&M off your plate. All that tracking down of available parts, comparing vendor quotes, staying on hold with manufacturers, troubleshooting, determining a repair versus a replacement – let us handle it all.
Our solution includes our expert team to manage every step of the process for you. At a time when resources are at their absolute slimmest, we maximize each dollar and moment to ensure efficiency in your business.