Issue link: https://www.e-digitaleditions.com/i/339857
6 FEDA News & Views Industry Insights How Important are our Firms to the Manufacturers we Represent? Two troubling trends suggest there's a disconnect between worth and value Jack Lewis, FEDA Convention Chair President, Mission Restaurant Supply JackL@missionrs.com L ike most FEDA dealers, Mission is a small to medium-size business that provides us a nice living and we are blessed with the opportunity to employ many great people in an industry that provides real goods and services to the marketplace. Our customers are some of the nicest, most hardworking people on this earth, and I know that many (if not most) of them rely heavily on us to keep their businesses running properly. When you strip down our job and get to the very essence of what we do, it is ultimately about providing service; service that comes in many shapes and forms and requires a huge investment on the dealer-side of the equation. Most of us have spent a great deal of time and money training and educating our salespeople. We have warehouses full of inventory so that there is local product availability for our customers' needs. We have showrooms full of products avail- able for sale, installation crews and a fleet of trucks to haul products. Some of you have service technicians and service vehicles to keep all that equipment running properly. Most of you carry receivables 30, 60, 90 days after the sale. A number of you have fabrication shops to custom fabricate pieces, many of which are adaptable to buy out equipment. And most impor- tant, we all have genuine relationships with customers that are nurtured daily. Some of them we count amongst our closest friends. As the face of these products in our local community, I am certain that our manufacturers not only understand but appreciate the costs associated with each of the services we provide to bet- ter sell their product lines. Then, why is it that I find myself wondering just how important dealers are to the foodservice E&S manufacturer community? Hard to Swallow Stats If I was to ask each of you to identify the No. 1 concern we all share about the profitability of our business and our place in the market, I bet "MARGIN PRESSURE" would be at the top of the list. Why is that? If you take a look at our FEDA Profit Report, you might be amazed to see that the typical FEDA dis- tributor had a 1.2 percent profit before tax in 2011, and 2 percent in 2012. Let's call that 1.4 percent after tax. Wow, think about that. Of the 77 firms that par- ticipated in the FEDA Profit Survey, we took just 2 percent of sales to the bot- tom line and that is before taxes. So for each $100,000 you sell after taxes, you make $1,400. For each $1,000,000 you sell, you make $14,000. There should be little wonder that we worry a lot about shrinking margins. In an effort to understand this, we must try to pinpoint the root causes of the shrinkage. First, I think we should start with ourselves. We all want to grow so we are tempted to cut prices to win a sale from a competitor, because at least we will get a "rebate." By rebate, I mean a deferred profit or additional discount but it is money at the end of the day. Maybe we can also blame the margin erosion on the boom in ecommerce sales, which as you all know has changed the dynamics Editor's Note: FEDA Convention Chair Jack Lewis provided much food for thought at the 2014 meeting when he delivered the following speech. continued on page 16