My QuickPicks
Register now to activate

Contents At A Glance

FE&SEditorial Archives2003 — February — Feature

EAB Roundtable
State of Industry Relations

Edited By Mitchell Schechter In this continuation of the all-industry roundtable discussion printed in February 2003's FE&S magazine, participants share their (often conflicting) views on the state of communications and trust between various E&S channel partners, as well as their projections for our industry's future development.

FE&S: Today, we're going to discuss the state of industry relations. Now, there are many ways to consider how our different professions and channel partners both interact and are interdependent. We, all of us as an industry, rarely stop asserting how much ours is a people business and that business is in large part done based on the quality of relationships between various business entities. Yet, as all of us know, everybody in this room has strong expectations for the appropriate behavior of channel partners, their allied business firms, their member associations and even for their buying groups. And we've all learned that those who perhaps transgress those expectations often times pay a price.

So what we'll do here today is look at industry relations from four perspectives. The first is how current industry relations affect you individually in your business role as principals and executives of your organizations.

The second area we're going to look at is, what is the state of relations between you in your particular businesses and your channel partners. Third, we're going to look at how your membership associations are influencing industry relationships at this time, and what they could be doing better to help bring further progress to our industry.

Then, if we have time at the end, we're going to go and take a look at the optimal ways that dealer buying groups can work to improve industry relationships and what they're doing now. Bill, we'll start with you. How pleased are you today, given your role with EDI, with the state of industry relations, and why?

BYRNE: Well, I'll never be fully pleased, but I think there's more open communications between channel partners in our industry today. Communication is getting better and continues to get better. However, we have to acknowledge that every one of us has an agenda. Consultants are looking for specifications, credits and tracking records. The dealers are looking for the ability to control their jobs and to promote the products that they feel are best. Manufacturers, of course, are going to be doing what it takes to get their products out to the marketplace. So, naturally, there's an overlap of priorities and some conflict that's healthy and good for the industry. I do think, though, that communications vehicles, such as this forum, provide a good example of how we can bring things further along. Another example is the advisory meeting EDI holds every year to which we bring in a select group of manufacturers. John [McDonough] was the moderator last year. We bring the manufacturers in to discuss these very same types of topics we're addressing here today. And the discussion never, never disappoints me, due to the ideas and the insight you get into everyone else's goals and what they're looking for.

REID: Bill's right on target, I think, and industry relations must be seen as a process that will continually be improved. We're seeing tremendous strides amongst the various parties in wanting to communicate. Training seems to be an objective that so many people have targeted, whether it's from the manufacturer's standpoint, the dealer's standpoint or, certainly, the manufacturer's rep standpoint. We've even seen service people trying to get involved in that, so it's kind of a nice blend, and I think having one objective of each has been very helpful.

PEELING: I think from a servicer's point of view, we find that our relationships with manufacturers and their reps have continued to strengthen; I think that our services are seen more as a sales tool today than they have for some time. I have a lot of people coming to me now looking for sales and for my technical people to be out there assisting in those sales. I think one thing that CFESA has done, is we have just recently formed regions, and that is giving us a good avenue to interact with other industry groups on a regional level. However, I still feel as though the servicers and the dealers still have not come along as far as we have with other segments of the industry.

So, I think that's an area of concern. Why this is so, I don't know. I think there's always been a little bit of a friction between the dealer community and servicers.

I don't know if it's because, unfortunately, in the last few years, products have been sold with pretty slim margins, so there's not a lot left over to allow any kind of added payment to a service company to straighten a post-sale problem out. I think, as a whole, as an industry, we seem to work much closer with members of the other segments.

KAUFFMAN: The only thing I would add is that's one of the initiatives of CFESA is training and to invite other channel partners to our events and to include them when we have our conferences so that we can cross-pollinate ideas and to get to know each other better.

KAPLAN: Listening to what we have said, industry relationships are currently very good from the perspective of communication, dialogue and openness. The problem that exists is a problem that's existed now for a very long time. I still do not believe the different constituencies understand what the other does, the economics of channel partners' businesses. A manufacturer does not truly understand the economics of what it takes to be a foodservice consultant. I think many dealers don't understand the economics of being a servicer. I know the manufacturers that I have talked to really do not understand what a foodservice equipment dealer does. We've talked about that, but that level of understanding of function is a pre-requisite for going beyond the superficial to an even a deeper line of communication, because we'll understand each other's businesses, and that does not exist today.

SINGER: I think one area that has been strengthened significantly over the last five years has been the relationship between dealers and manufacturers. That's been driven by two trends. The first is manufacturer consolidation, which results in conglomerate equipment organizations that are looking for strong partners in distribution. And the second is consolidation that has occurred among larger distributors, which results in them looking for manufacturing partners to enhance their profitability and their share of the market. Those two trends have formed the basis for improved relationships between manufacturers and dealers.

FUCHS: I agree with Fred that industry relations have come a long way compared to where they were. From FEDA's point of view, as an association, I feel we've communicated a little better with the reps than previously, and made some strides due to the changes that NAFEM has made with Deirdre and by going self-op. So, I think we've come a certain way, but we have a long way to go, and I think that's just a matter of opening up continuing dialogues. In the last few years, FEDA has really worked hard to create some of the frameworks that we need though member education, and the better educated our people are, the better it is for us all in the long run.

TELL: I, too, agree that industry relations have clearly improved over the last several years. However, there is a lot of work to do and there's a definite misunderstanding, as was mentioned before, about what each of us do. Speaking from the perspective of a distributor, we are very concerned with margin erosion. We are concerned with the methodology through which channel relationships develop. I'm just not certain that each of the channel partners understand what their role is, and don't understand what their counterparts' roles are.

CLARK: I'm happy with the state of industry relations and the diversity of our partnerships. We still have problems, but it seems to be going in the right direction.

HESSEL: It's often said you must break some eggs before you can make an omelet, and I think we came from an all-time low of many years, which we reached some five or six years ago, in terms of industry relations. And thanks to certain leaders, I refer specifically to Tedde with SEFA and Marc with FEDA and Deirdre's NAFEM, our membership organizations have all taken on a common goal, which is to meet the need to educate our industry, educate our people. So, I think through that recognized need for education, that's what has been the catalyst to bring us to a new level of cooperation. A perfect example of is that for the first time [last] year at the MAFSI annual meeting, NAFEM and MAFSI [worked] together, with NAFEM sponsoring one of our programs, our sales management forum, to educate the group as to the state of the industry and where we want to go. That's why it seems we're at an unprecedented high from what was a few years ago an unprecedented low, and it's great to see.

WHALEN: One point that we need to make is that we can't try to serve our own interests without having some channel conflict. But I agree with Ira's point, we've done a better job communicating with one another and managing the inevitable conflict that we're going to have in trying to pursue our enlightened self-interest, so there's got to be some give-and-take there.

And, because I've got a manufacturer's perspective, my view of what we have to do is to compete with 22 companies in all the major categories of cooking equipment that we sell. That's why a lot of times, we get so focused on that competition that we're not as tuned in to the dealer and rep and consultant as maybe we should be. I should add that John brought up a point about two years ago that, unfortunately, sometimes we can only be as smart as our stupidest competitor, and, you know, that is so true. That's true for every member of the channel. It's challenging, but I think as long as there is some give-and-take and we get together in forums such as this one and support one another's associations, we can manage it, but you're never going to have an ideal world.

FLYNN: I think that our communication has improved, but business has driven that communication process to improve over time. This is due to changes in leadership and operations, and with the stress and speed with which everyone has to operate in the industry today, which is giving us a benchmark of how we can improve communications and will force the organizations to work more closely together than they have before. Now, we have a chance to be more proactive in terms of how we're moving ahead and working together, and I think it was the state of business that drove us to the point that we're at now. I also think that our emphasis on education and training is greater than it's ever been, with each organization devoting a substantial amount of resources to gaining that understanding of what each other does, which is positive.

CARPENTER: NAFEM's been very active with all the allied associations, so I'd like to think we have a good understanding of what everybody's role is, but I have to agree that it's not necessarily the case. Currently, we are taking a slightly different approach, and we're spending a lot of time with an operator advisory council, getting their input in regards to their, needs, desires and frustrations. So, we're looking at what the various channel partners' roles should be or could be to enhance our ultimate customers' business, as opposed to just figuring what it is now.

VERMILLION: I agree that our relationships, and communications have really improved, and I think there's more mutual respect for each other than there has been in a while. I would really hate to think that we don't understand each other's roles, though. I would hope that we're a mature enough industry that we should have a good understanding of what each other do.

Our common challenges include the soft economy and a market that isn't growing, so it doesn't appear that any of us have good long-term business strategy. There's a lot of knee-jerking going on and changing strategies, which really creates some of the conflict and lack of understanding about different partners' day-to-day individual situations. WHITMAN: I agree from a macro standpoint that we've made great strides since I've been in this business. But I think going back to something Fred mentioned, there has been a fair amount of consolidation recently on the manufacturers' side, and I think, given that business like politics is mostly local, that has created a lot of turmoil and uncertainty in the marketplace. It's created difficulties and challenges in improving communications and maintaining our relationships because, sometimes, the person you're talking to is very uncertain in their own position, particularly on the rep side, and I think that's created a lot of challenges for us as consultants.

FRISHMAN: I also think communications have gotten better, but that doesn't make it easier to get to the next level. I think everybody needs to be more honest, but everybody's also got their own agenda for financial gain. Yes, communication has gotten better, education has gotten better, training's gotten better, but everybody's still sitting around the table saying, 'The industry's going to evolve.' Evolve into what? I don't think anybody at this table really knows the answer to that question.

McDONOUGH: I would agree that industry relations at the '50,000-foot level' have been improving over the years. I would agree that we're getting better within our various associations and amongst individual players at talking about key issues in an aggressive way, but I would like to respond to Ira's comment. I think that we still collectively fail to understand one another's economics and, as a result, spend a lot of time in conflict with one another over what constitutes appropriate levels of support.

Right now, while we are all in our 'lovefest' stage of industry communications, we are also going through a lot of stress because we're in the 30th month or so of recession for our piece of the economy. A lack of understanding of one another's economics in a recessionary period puts a lot of stress on the system. What's more, the only people who are really driving change in our industry are not sitting in this room, and that's the end-users, the operators. The operators will decide who provides value and how they provide it, and how much they're willing to pay for it, and we have to understand one another's economics well enough to be able to evolve towards a future answer. I don't think we have a handle on that.

BRADY: For some strange reason, we've always had great industry relations from our side, I guess because we're the next step to the end-user and the level of service and communication provided from most consultants has always been pretty good. The one thing that I've noticed that's improved relations, and this is not a disparaging remark about any of our predecessors, but I think the level of skill and talent and management ability of the people that are now running the industry, that are running the companies, running the various market segments, has elevated tremendously. It's not that the people who came before us were doing anything wrong or doing their jobs badly, it's just that I don't think we had individuals who had an understanding of communications and technology the way that the current individuals running these companies have.

And I see that mutual respect is flourishing now. I think that's one of the drivers in a very competitive market, where there are inherent conflicts of interest, it's then up to the integrity and the ethics of the individuals running the organizations to maintain those relations and that communication, and I think that's a major factor.

STARLIPER: Jumping in at the tail end, the industry right now, I'd say, is at an all-time high of awareness, whether or not that's being carried out in practice. Economics, of course are at the root of everything. It comes down to the awareness I mentioned and we all have the common goal of financial success and we all want to better that, but it comes down to time and economics and awareness of each other's time. How it seems to me is that we're all trying to establish our brand and that's how we prefer to go to market. As consumers, we all shop by brands, we buy by brands, we know what everyone's wearing by brands, and that's how we go about it every day. The same is true of our customers, who are the ultimate end-users of our product, who endorse that market association by brand, so they become loyal to a brand. That's why our goal should be the promotion of our common brand, all the way down from a manufacturer to the consultants through the reps, which would allow us to improve customers' brand awareness. With that would come continuity of communication through our whole distribution chain.

FE&S: I have to say that despite the optimism voiced here about the state of industry relations, everyone is still aware that there's a certain amount of discord in our channel, a certain amount of discontent with how relationships between various professions, various associations, still transpire. Why do you think this discord still exists, and what specifically can be done to reduce the level of discord amongst our industry members and segments? FUCHS: Well, I think that sometimes people aren't worried about their own business, they're worried about somebody else's business and what they're doing. And I agree that each segment doesn't really understand what the other segments are doing. Each of the segments does not really truly understand what John said about the economics; how do we make it work, how do we make money, how do we establish a comfort level and how we go forward as an industry. And I think we've made great strides in that, but we have so much more to do and, so, a long road to go.

FRISHMAN: My question to the group is, 'Who's the customer'? In other words, from our perspective, the customer is the end-user, followed by the end-user, the rep, the dealer, the service agency, and the consultants. They're all customers. They all work to get the end-user the piece of equipment or the supplies they want, and that sort of alignment has worked and, I believe, it has to keep working. But today everybody's in the channel is a customer, yet everybody has different wants and needs they must fulfill if they're going to get the ultimate customer, the end-users, the widgets they need. So the question arises, how does everybody participate, because there have been issues on the table in this industry for a long time and, maybe, maybe, we're finally starting to get at that reality.

CARPENTER: I think we can get past the issue of what everybody is doing; I think the harder question is what should everybody be doing, and that goes back to the operator, and that's where the change is occurring. I don't think that we're collectively sitting down with the end-users to see what their needs are and then determine who can best fill all those needs, provide all those services, and get paid for it, because I think we're still trying to defend doing things that nobody wants to pay for, and that's creating issues.

SINGER: I think we're confusing two terms, and those are 'constituencies' and 'customers.' For example, every organization has three constituencies: shareholders, employees and customers. Their interests are not always immediately aligned, although we can clearly see that if we work together, everyone benefits.

What I just heard from John, that who the customer is quite clear, I have to disagree with. Dealers have customers; those customers are end-users; because they buy from us, they are our customers. However, to most manufacturers, the dealer is the customer; we cut the purchase order, we pay the bills. That doesn't mean the end-user's not a critical and important constituency, just like each of the channel partners in this room are each other's constituencies. But I don't want to confuse the term 'customer' with 'constituency,' because it blurs the lines. And I think it also affects the way we discuss each other's interests and roles in the channel.

FE&S: Do you think that dealers have the capability of setting priorities for the manufacturing community the way John mentioned that end-users can?

SINGER: I think dealers and end-users are both setting priorities. But in terms of setting priorities, for distribution, clearly I think the dealer is the person that the manufacturers keep an eye to in that regard.

KAPLAN: First of all, we have a lot of hang-ups about the definition of terms, because we use words like 'brand,' like 'customer.' This was exemplified by a recent FE&S 'Parting Shot' column authored by an interesting fellow by the name of Gary Licht who, in your October 2002 issue, told a wonderful story. It was a story of a dealer who got into a little side business as a product maker and who, as a result, learned the value of manufacturers' representatives. This caused him to come away with a whole different view of what a rep is.

I thought it was a very courageous thing for Gary to do to be so honest, telling us all what he'd learned about his own dealer segment. Having been a consultant now since July, I've been fortunate enough to have one client who happens to be a manufacturers' rep, I have several clients who are manufacturers and I have one very large client who is a dealer. Until I looked at the numbers, I will tell you, I've been in this industry for 36 years and I consider myself to be reasonably bright, but I hadn't a clue what it took to run a rep business, though I thought I did. I had no clue what it took to run a dealership, but I had thought I did. Manufacturing was pretty close. And that is why it is so important that we create some definitions; not necessarily for agreement, but for understanding.

PEELING: I'd like to note what Ira was saying and he was making a list of industry professions, but he never mentioned the one represented by CFESA. That makes me feel as though, because we don't bring sales to the equation, that sometimes we are overlooked as members of the distribution channel. And, as I said earlier, when industry members recognize us as being able to drive sales, I have a lot of people slapping me on the back and coming to visit me. So it's just the nature of the beast, that our whole industry is driven by sales from each other, somebody's always driving sales, whereas the servicer's not seen that way.

FUCHS: Yes, but the truth is, servicers, you also solve problems sometimes for dealers when they need help, for consultants when there is a problem, for reps. So I think that everybody understands, it just can be hard to bring your role to the forefront. But you know something? I'd rather be the guy that everybody's feeding and who's making money no matter where he is in the chain. I really think everybody touches you guys in one way or another, because you guys play an important role. But sometimes I feel that you play such an important role, since you're in front of customers so much, that it's very important you understand the impact of what you say and how you say it, because you can go into a restaurant or foodservice and destroy a manufacturer in a second by saying, 'Oh, God, that part on that piece, that's not working,' or 'Why did the dealer sell you this?' I mean, there's a multitude of ways you can hurt the rest of us. And that's why if you're looking to know why our trust factor's not there, it's because sometimes your people don't know how to control what they say to end-users.

KAUFFMAN: But I think that view is changing. Someone commented earlier about how the generation of organization and company leaders that is now sitting at this table is more tuned into communication and technology. Most leaders of service agencies started out as technicians who then began to be managers, and many of us still have the technician mentality of, 'I want to show you how much I know and so I'm going to show you, you made a stupid equipment decision here.' But because I don't come from the technical ranks, I know that's not smart. That's why we teach our people never to tell a customer they made a bad decision or the dealer sold them a bad piece of equipment or the manufacturer's got a faulty design to his product. That's not our role. However, as you said, we're in a position to take the knife out and stab somebody with it.

FUCHS: You never talked about this before.

KAUFFMAN: But that is something that we, as an industry, are changing as newer people come into management.

WHITMAN: We all have the same challenge in our respective businesses, which is how should we deal with our customers no matter who they are, and we all get better at it the more we do it. Still, it's only through discussions like this when we'll say, 'Oh, maybe our people shouldn't be telling our customers that that guy's an idiot.'

BRADY: Marc, that's an interesting comment you made, because, first of all, we all have our little part of the industry universe and I can hear you speaking with passion because, obviously, some service person has walked into one of your customers and made the sort of comment you just mentioned. And that's important, because I don't think that's the only relationship in the room where that happens. If you look at it from our perspective, when a project goes from a consultant to a dealer, now there's a struggle for profit and there's a spec that's supposed to be maintained and there is a possibility that items that we have chosen may not be the most profitable within a category for a particular dealer. So, if you can relate to a service agent occasionally challenging the decision that was made by somebody within your company who made a recommendation to a client, you can imagine the challenge that we face from multiple partners as our projects are designed 18 months or so before construction. That means that the majority of the labor that we put into those projects is forgotten for a period of time while the structural steel is going up and all of these project partners have the ability to communicate back to the end-user while we have gone on to the next project that is going to become a sale for you two years from now.

Then we arrive back during the construction management phase and look and say, 'What the hell happened during the last 12 months?' There's something in the preamble of our spec saying that if anyone wants to make some adjustments, they should call us first because we engineered a system. We didn't buy pieces of equipment from different manufacturers and throw them into a kitchen arbitrarily, these items are connected for a reason.

And, that fact may not be known to everyone involved. I'll give you a case in point. We were brought in to fix a project in the Southwest and, after we fixed it, the client came back to us and said we want to use you to litigate against the original project team, and we said we would never do that, and they said why not, the problems are so blatantly obvious. We said we would never do that because we weren't here when it was originally put together, we don't know what the original team's mandate was. For all we know, the people who were working on this project as the owner, as the client, gave directive to do it this way for a budget reason or a space reason or self-interest. We weren't in those meetings. We're not qualified to do anything except to fix what we did. We cannot go upstream and critique the people that were here before us, even though their efforts generated this mess. We can't tell you why that was generated. And it's very akin to the comment that was just mentioned.

FE&S: Jeff, you had a point?

HESSEL: We recently wrote our opening for the 2003 MAFSI conference, and that statement said that all of us, as sales executives, whether we're in manufacturing, at the dealer end or the rep end, we all get up in the morning and we try to do several things. The first thing we try to do is build brand awareness, as Eric said. The second thing we try to do is gain market share. The third thing we try to do is attain our sales goals. And all of those things lead to profit.

Now, the only way to attain all of those things is to influence who we all individually consider to be the decision-maker and that depends on the brand involved. With more complicated technical products, the decision-maker is probably the consultant or the operator. However, with more commodity-type items, the decision-maker is probably the dealer, who has a choice in what he determines to stock, what he determines to mark up, what he determines to profit most from and who he determines to ally himself with as far as a buying group.

So, there really are two different issues as far as the actual identity of decision-makers. If I'm selling toasters, my decision-maker is, I better be pretty close with Mr. Singer; but if I'm selling combi ovens, I better be pretty close with the operator's dietitian or chef. Now, with that being said, I agree with Fred's definition of the customer, except for all of us, we all only have one common customer. The only common customer we all have is the guy that might buy it again, meaning the operator.

FUCHS: Everybody in the channel has the right to influence the end-user, and I think that's tremendous, but I also think that if our communication was better, the person who was influencing the end-user would communicate to other channel partners about what the end result should be. That way, everybody would walk away with a little better experience. That goes back to what was asked at the beginning of this discussion, is communication working? It's working better, but it's got a long way to go.

SINGER: I agree with Marc, because if Jeff actually believes that dealers are primarily toaster salesmen, he needs to take a much closer look at what dealers are doing.

CARPENTER: You know what, I think Jeff threw an interesting comment onto the floor. While he picked an example, toasters, what I heard him say, and I think he speaks for more than just himself, is that we tend to look at the dealer as being someone who can just sell commodity-type items. If it's a sophisticated or challenging product, you better have a manufacturers' rep or a manufacturer or a consultant calling on the operator. And if I'm a dealer, I'm a little concerned about that image still being held by our channel partners.

HESSEL: The point is simple, dealers are certainly capable of selling technically advanced items; they do not need a rep attached to them to sell advanced items.

Marc's engineering department is as good as any rep organization there is in our territory, but the point is, that in order to attain the sale, we need to influence the end-user. Not that the sale can't be made without us; it will be made without us, just not our brand. And remember, we all get up in the morning to build brand awareness.

CARPENTER: With our Customer Advisory Task Force, nearly every discussion begins with economic issues such as the cost of service or how long it takes or is the part readily available so equipment can be fixed quickly and turned around, but the key point is, service, service, service. For NAFEM our response is going to manifest itself in a number of different ways, such as maybe we redo the way a spec sheet is written, so better life cycle expectations are outlined.

A warranty of a year may be a good thing to one operator and a horrible thing to another, based on the amount of time they use a piece of equipment. So, we're taking that feedback and trying to learn from it but, again, service is absolutely the key from the operators' perspective, yet we seem to focus more on the sales than the service.

FE&S: What I want to ask you next is, What are the key points that need to be clarified so that there are no misconceptions, and what role should the associations that are represented here in the room today be playing to help foster better communications?

STARLIPER: The market might not be growing, but there's still business to be had and we're still seeing growth in our numbers.

Backing up a minute, though, and listening as a second-generation rep firm owner, what I have always heard is that it was always better in the past -- the communication was better, there were better relationships. A rep would go pick a DSR up, just make four sales calls with that salesman where, today, that same rep has to make 20 calls and he's looking over his shoulder to make sure his numbers are okay because pressures have increased.

I think we're all aware of one thing, which is that at the manufacturing end, ownership has changed. Now, we're looking over our shoulder to make sure we've still got our job because, increasing, our factories are publicly held companies whose bottom line is making returns for the shareholders. It's no longer as typical a scenario for two individuals or a partner owning a company.

And I have the best of both worlds, I have publicly held companies that I can do a lot of things with and that call me every month and say, 'We're off on our numbers, maybe you better sell some stuff at a discount, go after it.' Then, I have factories that I can still call up and have lunch with when I'm coming into town, meet with the president/owner of the company and the guy will personally call and take care of a service problem for us if it's important.

That mixture is what's affecting the industry and how I go to market every day, because I have so many varied relationships I have to juggle. Usually, that private owner cares about the CFESA end of the business because he has the time and he knows that if a problem doesn't get fixed, he knows the name of that service manager at that service agency. But that publicly held company more often says, 'We have a service manager, call him, he'll take care of it,' but he's out this week, so there's nobody else to talk to.

I believe that's the root of our problem -- that public manufacturers are managed mostly for the shareholders, that the companies' leaders are primarily focused on that, and it's taken it away from the grass roots this industry was built on. The best companies we represent today, most of them, I have to say, are the ones that are privately held, because they communicate with you because they have the time and it's in their interest to communicate. For the other, public ones, their managers want to better themselves in the organization because they are looking at a ladder in front of them that leads up the corporate structure, so they're just working to get up that ladder and build that company and then jump out.

FE&S: All right, let me pose Eric's comments to the manufacturers and the publicly held companies in the room. Do you feel that having shareholders as constituents, as well as customers, makes it more difficult to serve your end-users as well as you'd like? Mark?

WHALEN: I've worked for three publicly held companies, and we've always done crazy things. I've been through the crazy things we've done at the end of a quarter to make the numbers and all that kind of stuff and, really, that's a short-term fix for a long-term problem, most of the time. But I think now, from my perspective, we try and balance the needs of the shareholders of the company, the people that work for the company and our customers, the people that pay the bills. And our customers include our dealers, but I look at end-users as our mutual customers. I look at my primary customer as the dealers and our end-users as our mutual customers. And that's the best definition I can come up with.

However, whether you're a constituent or a customer, I think you have a role and a responsibility if you're in the channel to add value, and I think you have to add value up, down and across the channel, so it's a two-way value-added proposition. In other words, Fred, as a dealer, is supposed to add value back to me and through to the end-user, and the same thing's true with the reps and the consultants and everybody else. But the source of our conflict, I think, is revealed when somebody perceives another guy's getting a free ride and not taking the burden of adding the proper amount of value. So, that's where the communication and the understanding need to come in.

FE&S: Do you think that's the widespread perception, that somebody's trying to take a free ride, someone's looking to get part of a sale without adding value.

What other perceived conflicts are we seeing? Dealer perspective, consultant perspective, rep and service agent, what conflicts do you see that cause you to have conflict with your partners? Go ahead, Roger.

KAUFFMAN: Well, I hear a lot about how service is improving but, oftentimes, I don't feel it. People talk about how service agents meet with customers and we have the last say many times, but we have never had a dealer walk into our shop and say, 'Hey, let's sit down or go to lunch and talk about our mutual customers.' I've never had a rep stop by, either. We try to associate with other professions by going to their meetings and events, because if -- you can associate with other channel partners, you can build relations. However, if they don't really want to associate with you, if they only call you up and say, 'Hey, I have a problem over here and you go take care of it,' but then nobody's willing to take accountability because the customer thought the dealer was going to pay for it and the dealer thought the customer was going to pay for it, and our service company winds up writing it off, then nobody is trying to work together in that situation to deal with the end-user. When that happens, service agencies don't feel like we're very important.

So, from our perspective, we'd love to have our reps stop by and dealers and have them come in and really get to know us and want us to get to know them. What it comes down to is that we prefer to do business with people that we like, we do business with people that we know. You don't do business with people who call you up and say, 'Hey, this is so-and-so, take care of this problem down the street,' click, and that's the only time you hear from him. My point is, to develop good working relationships with service agencies requires channel partners willing to say, 'Let's get together and talk about some stuff that we're doing over lunch.'

PEELING: I just was going to add that service agencies are really evolving and ours is no longer a profession dominated just by smaller firms. Instead, a great deal of our business is currently done by a couple of handfuls of major companies. There are now major service companies that have all sorts of computerization and information technology going on. It's not like it was in the old days. That's why I really feel that service companies can work with other partners to come up with real added value for our customer, I mean, complete programs that are seamless to the customer.

FE&S: Can they do this on an individual, firm-by-firm basis or is this something your association has to help with?

PEELING: I think our association needs to promote the ideal, yes.

WHITMAN: If I was going to describe the relationships of all of us in this group with the ultimate end-users, I would describe it as circular and highly interdependent, with the customer in the middle. I also think that service companies do, in fact, have a lot to do with what falls off a factory floor and into customers' kitchens. Because if a piece of equipment is not functioning well in a kitchen, ultimately that finds its way back onto the factory floor.

KAUFFMAN: It would be nice, for example, if the manufacturer would invite servicers in on panel discussions about product development and serviceability of products in the field before they develop, because somebody's got to fix it some day. When we've got to fix something and you've got to pull it out from the wall and take out 15 screws and get to the back of it, that's very expensive to service. That hits the manufacturing warranty, it hits the customer after it's out of warranty. Servicers would be more than happy to sit down with manufacturers and talk about that stuff before it goes out into the market. Fortunately, I think some of that is starting to happen, which is very encouraging.

McDONOUGH: I would agree. I'm thanking my lucky stars we have our own service organization at the moment, because of that need for pre-launch feedback that Roger mentioned. Just the service feedback into the product development cycle is a critical component, and we're fortunate to be able to have that.

KAPLAN: One of the things I've learned in Europe is that a lot of European manufacturers design for serviceability. They recognize what the cost of service is and how to help the servicer get in, out and do the job faster. And I wonder, how many times in our foodservice equipment and supply industry is service brought in at the design stage? Because, a simple thing such as if you have a compressor, just put it on little rollers. That's been around in Europe now for years and, yet, still very few companies in the United States have compressors that can roll out. All it takes is one service call to make that little nuance very inexpensive.

FE&S: I just wanted to ask Ursula because you have an interest in both NAFEM and FEDA, given the manufacturing component of your organization, do you see that there's an opportunity for greater cooperation and closer relationships with other channel partners?

VERMILLION: There's always opportunity for better communications. The biggest challenge we see right now, however, is that the market is not growing. And that makes this a stressful time. We shouldn't underestimate that; I mean, it is a very stressful time, because everybody's trying to figure out how to grow their businesses. And, certainly, those companies that are publicly held have a greater challenge because they're forced to make shorter-term decisions, which are not necessarily good long-term business decisions. We also shouldn't forget that the biggest part of the customer base today is also publicly held. So, end-users are making the same short-term decisions that are not necessarily good long-term business decisions.

The one thing that has come out of these discussions is that the end-user is the customer and the customer ultimately will decide. Well, if we don't understand amongst ourselves what each of us does, do you think a customer has any concept of what each of us does or what the economics of our businesses are? I mean, there's no way they understand that if we don't understand it. So, to ask them to be the driving force as to what we should end up looking like as businesses, that's got to be the most dangerous situation for the industry.

McDONOUGH: Like it or not, I think the comments that have been made about publicly held companies are on target in many ways. We are larger organizations, which means that the interface points for customer service are different and we have a propensity to not develop the same kind of personal relationships that smaller organizations might.

Looking at the economic issues, some publicly held companies are in very dire straits right now and they're doing really irrational things; and I would again agree with you on that. By contrast, however, a large part of our industry is still privately held, and one of the things that emerges out of the privately held environment is that many of those companies are 'lifestyle' businesses, and when you run a lifestyle business, the expected returns from one period to the next can be more fluid: You buy one less Cadillac this year or you buy a smaller boat or you do whatever you're going to do. However, when you're running a lifestyle business in very stressful times, margins start to go to hell and behavior can become as irrational as that seen in some larger publicly held companies. When somebody starts to run their business into the ground to hit short-term numbers, that impacts us all.

FE&S: Bill, Tedde, you two, you represent dozens of dealers. In your group roles, is there any way that you can minimize conflict, increase understanding, build harmony?

BYRNE: I think a lot of the people in this room have always viewed our industry in layers. You've got the top-level manufacturers, the top-level dealerships and you have the top-level reps and service agencies. And they tend to nestle together. You generally don't have a C-level rep group representing an A line, calling on A dealers. Likewise, the A dealers are not calling on as many mom and pops, they tend to take care of the full-service chains and larger institutions. So, I think there's a lot of communication that already goes on between all the As and all the Bs, though probably less at the C level. I'd like to see the factories recognize that they can't be all things to all people, and same with the reps, and very much the same with the dealers and buying groups. There are alliances. We profess to have them, yet it's very difficult for any one of our partners in this channel to get up and say in front of the group that we are aligned in certain ways. Even when it's with their peers at the A level, they still can't be all things to all people. And I think a good example is ITW with their 80/20 philosophy, and they are willing to stand behind that and say to the world, 'We're not going to be everyone's partner.'

REID: I think we have a commitment to go out and approach our channel partners. We've done a very good job with our NAFEM people. In fact, I hate to say this, Marc, forgive me for this one, but probably our biggest customer base is our manufacturers, that's who pays our bills. That's a real important thing for us, and we are very committed to making sure that our manufacturers are treated at least as well as the dealers in our group.

The other organization we've reached out to is MAFSI. We have some wonderful relationships with reps. You wouldn't believe the recommendations we regularly get from reps for new members or new ways to help our current members. It's a wonderful thing.

With FCSI, our relationship is developing and it's a very important one to us. Granted there's a lot of change, but If consultants can work with a dealer who's going to fulfill that spec responsibility earlier on, we both can be a part of making the decision or stopping the decision if it needs to be altered.

As for CFESA, we haven't done much with, so that's my next target.

FUCHS: I want to thank the buying groups that are here, because this year FEDA began an initiative where we actually went to each of the buying groups and met with their members, whether they were FEDA members or not, not only to meet our own people but also to further the message of education to nonmembers, and we were welcomed with open arms and this was a tremendous advance in communications.

FE&S: What are the mechanisms that are going to make people more aware of the reality of the work being performed by our various channel partners and foster better cooperation between dealers and reps, service agents and manufacturers and consultants? What has to be done?

KAPLAN: Tell the stories. The stories are action statements. So, my answer to you, based on the challenge that you've posed, is how do we get them out? Somebody has to initiate the stories and then the rest have to spread the stories, but when you tell the stories, it's a wonderful learning tool, and then people say, 'Hey, I think I'm going to copy that idea.'

FE&S: Marc Tell, you're a third-generation dealer, what can your association do to help you gain more cooperation and better understanding from your channel partners?

TELL: Well, I agree 100%, 'Tell the story,' and FEDA News & Views does tell the story, it brings us together. We should also invite other channel partners to tell their stories so that we know exactly what they're doing, how they do it, why they do it, how they got there and where they expect to be.

FE&S: Do you all think there should be more interaction between associations, perhaps up to and including annual meetings of all the associations' leadership? Deirdre?

FLYNN: I think the only way we can continue to move forward is to stop thinking only of our individual and very boxed roles in the process. Until we do that, we're never going to get anywhere.

Yes, we have to have a better understanding of each person's role in the process, but the process from factory to that customer can only be optimized if every partner participates. So, in most instances, because of how the factories go to market, we can't possibly do that job and service the customer who we are all working towards satisfying unless we are all working in concert with each other, more so than I think the industry does at the moment. Because we tend to start that process and then we go back into our own little niche areas, depending on what hat we're wearing, versus building a better consensus.

KAPLAN: Oh, but it's a matter now of determining actual pragmatic steps.

FLYNN: Right. But everybody is involved in that process, and if we're not all sitting at the table together collectively, even if each person has a specified role or task in the process, I don't think we get anywhere. We tend to carrier-pigeon messages around the industry that get changed or altered slightly. So, meeting collectively would be much more advantageous.

FE&S: OK, but what we're concentrating on now is how can we align our roles? If each one of us is playing a separate role, how can they be brought together? It's already been said, you had no clue as to the economic models of several of the clients you're now serving. How can that change?

FUCHS: In the past, there have been all-industry meetings. I will tell you that everybody that went to an all-industry meeting had their own agenda going in and coming out. However, I think that if all these -- and I think the associations are talking more than they ever have before, and I do think there are common concerns that probably we should meet on, for instance, education. NAFEM has an education issue, MAFSI has, CFESA and FCSI. Everybody has an education initiative. You know, we could all benefit from something as simple as sitting down and saying what each of us are doing and finding out if it can it be used together.

BRADY: In answering your question, we first have to recognize that the people that get together in the room like this are usually on the leadership side of things and really do not represent the demographics of our industry, which means that sometimes we can misplan a strategy when all of the opinions come from us because we are the minority within the professions we work in. Ultimately, however, the definitions of our roles will drive our communications strategies, because our customers are never going to understand the things that are being spoken about in this room. If you think that we're going to get people that are buying the equipment or people that are buying our designs or buying your services to have any clue of what we're talking about in this room, it's not going to happen. So, I think there also has to be a definition of what are we trying to fix: Is it the understanding of our customers about how our industry works or is it to develop an internal solution for these interrelated concerns?

FE&S: Fred, you're a FEDA member. What's FEDA doing or what does it need to do to improve your ability to succeed?

CLARK: Some of its training initiatives are really positive. But what I'd like to see more of is new initiatives. More forums like this. I mean, just bringing this many people together in a room on a Saturday morning would create a benefit for the dealer community. There is not always that much agreement among dealers about how we go to market and how we operate our businesses. That's why more communication at this level would be helpful.

STARLIPER: I was just going to add that everything that I do every day in practice and business is not confined to our contracts to take care of bringing our manufacturers to market. And I think we all do what we have to do to make money every day, but that is not clearly defined anywhere. Whether it's a CFESA member, a service agency going out and taking care of a warranty call and doing it on overtime and not billing for it or whether it's myself having to call the service agencies to assure that you'll follow-up on something or begging for an extra discount so I'm asking a factory to bend beyond a buying group program and build a piece in shorter than a standard lead time or to replace an item for free because it was a great consultant that put us there in the first place. So, we're all doing roles that aren't clearly defined to begin with to survive.

KAUFFMAN: Just to speak to your question, CFESA's focusing a lot on training, improving training for both the technicians and the managers within the service industry, which results in us having a more informed view of what a service company should be and how they should act, and I think this will lead to us throwing off some of the old stereotypical thinking. And I today have been realizing that in the service industry there's still a lot of the old thinking about the reps and the dealers, and I know in my company, the culture and attitude of the organization comes from me down through the people that I directly interact with to the people they interact with, and so it will start with the headquarters and myself to start sending that message out.

STARLIPER: What I'm saying is that in our association there are companies that still haven't made that transition and I can see how it's now the role of our organization to really start to promote that.

McDONOUGH: I want to come back to clarify what I meant when I said I think that end-users are going to end up driving our development and cooperation. I think we will really miss the boat if we think that that means we have to get the end-user to understand what we do. That's not the point. The point is that the end-user's definition of what they require from us, what they need from us is changing, and what they're willing to pay for as value-added services is changing. How we provide those services as an industry, we'll figure that out amongst ourselves. Where I think stress is being created in the distribution channel today is we are, as organizations and as an industry, too slow to change; we're behind the curve of what the end-user's asking for. The end-user is looking for services, but is willing to pay less for them. Many of our dumbest competitors don't understand the value of what they're providing and don't have the ability to get paid for it. And, as a result, our industry is quickly learning to give away value-added services to our detriment. If, at the point of contact, whether it's a factory rep or a dealer or whomever is providing a value-added service to that end-user and cannot get paid for it, we should be turning around and saying, 'Well, you know what?, if I can't get paid for it, I'm going to modify my model, I'm going to change my cost structure, I'm going to do something differently.' Rather than doing that, though, what we're doing is we're kicking our costs upstream and asking the upstream folks to subsidize our inabilities to get paid. That's where the stress in the system is coming from. End-user definition of value is changing and individual players are not adjusting their business models, and their profit stream starts to go to hell and they look for subsidies up the stream. And, finally, those of us in the factory community still do not know how to say no to that pressure. So, all the profit streams are starting to collapse. Add to that the perception that one entity or another within the channel is not doing its job, that's where the negative energy comes about. Everyone agrees that there can be no more free rides, but none of us believes that it is our sector in the supply chain that needs to adapt when, in fact, we all do.

BRADY: One of the contributing components to this from the consultancy side is that there are A, B and C consultancies just like there are factories and dealers, with varying degrees of professionalism, and some are extremely intent on their design and their product specification and their brand selections and everything else and they'll hold it and they'll defend it to the death. And then we have others who basically put A, B and C products in there as equivalents, and their entire intent is to create a war of economics between distributors to win that end-user. Then, we're all suddenly opposed to one another, we're antagonists instead of partners.

WHITMAN: The question was, what can our associations do to help us all get to know each other better? I was trying to think of something practical, and I was struck by the fact that recently I had lunch with one of the principals of one of our local dealers in the Mid-Atlantic area. It was a very pleasant lunch and we talked about a project we were working on, but it struck me in retrospect how valuable that was because it allowed me to develop a more personal relationship with this company and its principal in particular. Why is this relevant? Because most of the business that we do is local, and our associations do a great job of talking about global issues and partnering and synergy and all that kind of stuff. And it seems to me that there ought to be a way that our associations can get us to more of a local level where things are happening. I need to know people like Fred, like Mark, who I'm going to be doing business with. And if we have issues, we need to be able to talk to each other and fix them. I can't do that globally, but I can do it personally.

BYRNE: One thing that that I think Ray Kroc started years ago and some companies have emulated is, he had all the employees, including himself, work several days in a McDonald's, flinging those burgers. That way, they all learned a lot about what their business was truly about at the grass roots.

Having been on the factory side for a number of years and on the dealer side a number of years, I'd like to encourage getting someone such as Marc Fuchs to work in a factory at an executive level for a few days. I don't know how it would be done, he'd probably ruin their margins, but he'd learn. And the same on the dealer side, we should get into a service agency for a few days. I'd like to see our reps work in a dealership, and I'd like to see the dealers also appreciate what the factories go through, particularly the ones that have a strong directive from their shareholders and investors. You get a whole different appreciation for the needs that drive such companies, and that's profit. And once we get that understanding of each other's daily concerns, your level of appreciation will go up. And I would encourage FEDA and NAFEM and CFESA and MAFSI all to do some kind of exchange, give up a couple days of your year to sit in your partners' seats and wear their shoes.

CARPENTER: A number of manufacturers already have programs where they bring dealers and consultants in to educate them about their brand and why their brand should be specified and sold. Maybe part of those programs should actually incorporate going out and working in the manufacturer's shop or, better yet, in customer service.

You may also like...
Panini Stations: Panini Proves Popular
- September 1, 2005
2005 Dealer of the Year: The Boelter Companies
- May 1, 2005
2004 Dealer of the Year
- May 1, 2004
NRA Show Returns For 85th 'Performance'
- May 1, 2004
2003 Distribution Giants
- April 1, 2004
2004 Distribution Giants 91-100
- April 1, 2004
2003 Dealer of the Year, TriMark United East
- May 1, 2003
2003 Distribution Giants
- April 1, 2003
Dealer of the Year
- May 1, 2002
Simply Indispensable
- May 1, 2002
Copyright© 1999-2006 Reed Business Information, a division of
The Reed Business logo, Restaurants & Institutions, R&I, Chain Leader, Foodservice Equipment & Supplies and FE&S are registered trademarks. All rights reserved.
Use of this web site is subject to its Terms and Conditions of Use. View our Privacy Policy. .