Tag Archives: MIDD

Middleby 2Q17 Earnings Call Notes

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Selim Bassoul – Chairman and CEO

State of the industry

“Yes, Larry, I could give a lot of visibility on what I see. So let me start with talking a little bit about the state of the industry. I think we have an expanding economy that is helping restaurant sales continue to advance in 2017. Even as the restaurant operators face continue margin pressures, a tightening labor market and some lingering consumer uncertainty. So, 2017 projected restaurant sales are projected to grow at 1.7% gain over 2016 adjusted for inflation. This is slightly below what it was in 2014 and 2015, and in line with 2016.”

Menu trends have become more concept based

“in 2018, restaurant chains will focus on new menu trends to fit dietary preferences to bring customers back in the store. And the food trends have become more concept-based than ingredient-based, with an evolving focus on production, sourcing, and preparation. ”

In store baking

“So, Jamie, the reason you’re addressing this because it’s the dream of every restaurant and every chain to have in-store baking. It’s the aroma, the scent, it looks fresh. And the reason only one sort of restaurant have done it is the complexity and the consistency of making this happen, and margins; now you’re having to bring a baker and a chef — a pastry chef and whatsoever to do this, so very few have been able to do it. What we’ve been able to do is now through that, our technology, to reduce the cost, and the complication, and the complexity of in-store baking. And that’s why chains have talked about that have flocked to Dallas to see this, because everybody would love to be able to differentiate and say, I provide fresh-baked goods on premise, because remember, millennials want freshness, they want quality food, they want to think it’s healthy. And in-store baking is definitely better than getting frozen stuff if you could do it. The complexity of working with your supplier all the way to store becomes very complex. And that’s why, literally, we have bridged that gap from sourcing to industrial supplier to in-store baking becoming almost one line.”

Most chefs and operators are millennials

“Most of our chefs and operators in our customer’s kitchen are millennials. They want different type of equipment. And I will address that shortly what does it mean. Millennials eat out three to four times per week. They spend over 50% of their food budget out of the home. Seventy four percent of them prefer delivery. Millennials spend 11% more on food than baby boomers and 33% more in restaurants than baby boomers. So if you look at our industry in general, you feel good about it? I do. I think the trend is [indiscernible]. When you have a generation of people wanting to eat more at least three to four times more in restaurants, I feel good. However, there is a seismic shift in food service. Dinning will go from 70 billion to 220 billion by 2020, just in three years. Those are explosive valuation. So restaurant delivery and meal kits will be huge drivers.”

Most delivery has failed

“And I love the quote by Ken Taylor who is the Founder and CEO of Texas Roadhouse. He said we encourage delivery because we do not serve lukewarm food. Meaning that the only thing that has prohibited delivery to take place is the ability to deliver quality food the way Ken mentioned. Most of the food other than the pizza business most delivery has failed in United States. I am not talking about China. I am not talking about the Middle East where we’ve been a big player there. However, our delivery system and our equipment have been very innovative. And you could see many of them at the National Restaurant Show and the [indiscernible] Show early on this year. We have been forefront, ahead of everybody else in looking up those seismic changes and doing that.”

Middleby 1Q17 Earnings Call Notes

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Selim A. Bassoul – Chairman and CEO

Labor is an issue

“The next one where I’m seeing significant change flocking to us is about this labor. So, labor has become finally an issue that I’ve been talking about labor, we did Chili’s almost four years ago and Chili’s was most forward-thinking casual dining chain when they came in and said, I need to attack my labor tissue because it’s creating a climate of instability in our stores. Consistently people are churning out. We have positions in our field and our kitchen, and it’s cost us a lot of money. And they saw that prior to the minimum wage issue and now basically broadcast on every media that minimum wage has to go up in the restaurant business.

*We have more and more chains asking us to resolve labor with automation

However, many of our other chains were very slow to follow suit. Today, it’s not the case. We have more and more chains coming to us looking at how to resolve labor issue, how do we offset the higher cost of labor through automation. So, automation, grocery store and convenience stores, Mediterranean concept, chicken concept, pizza stores, coffee chains, Asian concept, are all a big driver in second half of this year.”

Automation isn’t just about robotics

“So, looking at that, we are seeing innovation being driving our customers in the middle of the chaos, and it’s creating opportunity for us. So automation is not just about robotics, it’s about [indiscernible], it’s about labor reducing equipment solution, it’s about speeding up the cooking, it’s about reducing the space in the kitchen, the layout space, and it’s becoming a major driver where many of them are testing new equipment lot. That is growing fast as non-traditional outlets are growing.”

Middleby 4Q16 Earnings Call Notes

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Selim Bassoul

People are focused on labor costs

Tim, we just saw hundreds of changes now from coming, looking for solutions. They were all people I’ve talked to, traditional restaurant and non-traditional which is convenient stores and outlets where they are expanding into menus where it’s movie theaters or non-traditional outlets like air force or stages or country club, they were all feeling good about their business in the future. And literally, what we saw, there was a lot of interest about investing labor costs. That’s I think the biggest theme I saw was labor cost. So as of the end, [indiscernible] there were lots of things about simplifying the menu and looking at solutions to say, how do I simplify my menu, so I can speed up the operation and service my customers faster. So, there was a lot of shrinking the menu.

Our products are about saving seconds and inches

“That’s a biggest thing that was interesting for me on all the people that came and that’s happening not only at the show, but it’s happening for the last 18 months is finally, our customers are doing what we do as if manufacturer, they’re looking at reengineering their kitchen in that process. They are now working the way we work in our factories and make foods at their kitchen or running smoother, then the work flow is doing well and that is something exactly where Middleby and where we position our company in terms of creating this work flow through the kitchen of casual dining, fast casual, because as you can see, you can’t survive today if you don’t optimize your labor and your work flow and we’ve seen that becoming prominent. I’ve been preaching that most probably through the last five years and we put a lot of solution that talks specifically the engineering kitchen. So when you’ve come to our analyst day meeting, and you talk about whether it was in Dallas or here, we talk about specifically how our equipment worked together to create a work flow and I’ve been talking about second and inches, I think it’s been my mantra now for most probably over five years, what makes Middleby unique is we’re about second and inches. That’s our motto and finally it’s resonating.”

How do I make my employees have fun

“I look at it and I say how do I make my customers, my employee have a fun job day in day out and that’s why it goes back to our retention of our employees. Over 90%, almost 98% retention in our employee across the board. Because we empower our people to get the jobs done and they’ve done a great job for us. ”

It’s not worth over-selling

“I don’t mind people that don’t oversell. I remind my sales people, do not oversell, because if we oversell something and it doesn’t work, I will take it back from our customer, I will take it back. And that’s been a commitment from me, morally I’m not here to sell people things they don’t need.”

Residential cooking asthetic is trending towards industrial

“Finally, another interesting thing is if you do lots of cooking home you need to make sure that it is going to heavy do, which is now everybody is going back to this industrial kitchen book. where everybody is going back to a professional looking stove and hood, that looks and made for industrial style kitchen. It has to be constructed of heavy-duty stainless steel. It might come in colors but people are looking for I want to cook to the way my steak ends up being as mostly. I want to be able to look at my griddle and look like the griddle that they have at Five Guys, or Culvers, or Steak Shake, or you name it.”

Middleby 3Q16 Earnings Call Notes

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The Middleby Corporation’s (MIDD) CEO Selim Bassoul on Q3 2016 Results

Have not seen tectonic shift in customer behavior

“From our perspective we do not see any indication in our customer base in the restaurant business that they are slowing down their demand for innovation. I don’t see that going away. The number of tests that we are performing, where people are changing the way they do they have kitchen and their processes and their automation in the kitchen is at the highest level we’ve seen at Middleby, in terms of testing and penetration of our customers. From that perspective, I can tell you that Middleby at this moment has not seen a tectonic shift that has been everybody has worried about, we have not seen it.”

Americans still eating out more

“So I am going to give you a vision of what I call 2017 to 2020. So let’s look at Foodservice, to answer your question. First, I will tell you that there is data that indicates that Foodservice will basically grow. I’m talking restaurants will continue to grow, because eating out in restaurant and eating and drinking is double in the U.S., have outrun those of grocery stores, and we think that trend is staying. And people are now eating out more than just spending on groceries. So again, while Americans have been consuming a larger and larger amount of their food away from home, it is now a pattern that a lot of them are spending it even more in the restaurant. So I’m going to give you data that looks, even why I am very excited about the restaurant business.”

Tim Fitzgerald

Did have to take some price increases due to steel

“So I mean we have, we did institute some price increases on the commercial side, on the Food Processing side, just given the length of quotations, and for orders it takes a little bit longer to get those price increases rolled in, so that’s why there is a little bit more of an impact in that segment than others. But I mean I think we talked about the impact of 0.5% to 1% on margins and you saw margins come down slightly relative to the second quarter, but I think as we go into next year, I believe we think that pricing will largely offset that.

Middleby 2Q16 Earnings Call Notes

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Selim Bassoul

Restaurant business continues to do well

” On the domestic side, we continue to see the restaurant business doing very well. At least so far, the total restaurant same-store sales were up 2.4% from a year ago, and food away from home is up 2.6% from a year ago. We also believe that QSR and fast casual and casual dining are all in the positive category, and they will continue to be driven by the following, unemployment continues to trend down around 5%, and the most important is underemployment is now below 10%, which is the true measure of truly people who are no longer reported on the labor census is now below 10%.”

Trends should remain positive

“And then we continue to see gasoline prices trending down. I think that they will remain low for a while and will — they will continue to give consumers more money in their pockets. So I see that the Commercial Foodservice, while it could be that individual chains here and here could see some disruption, whether it might be in their operation or they might be implementing a online ordering system or changing menu items, but in general, I see the trends in the second half of the year to be — to remain positive.”

Gen Z wants speed, convenience and low prices

“So Tony, the — as a vision for beverage for me is literally targeting Generation Z. That’s followed by who is Generation Z? It’s the 13 to 23-year-old customers. It’s that population. And I have done a great effort in working, in designing product and helping our customers target that generation because that generation tend to eat out more often than the Millennials and the Baby Boomers. That generation want speed, convenience, low prices and customization, which is all excellent for Middleby.”

Most of our customers are doing well

“I would say many of our customers are doing very well. Let’s put it this way. First of all, commodity prices are manageable in terms of food prices compared to what it used to be I would say 2, 3 years ago. I would say also the fact that consumer confidence is pretty high in terms vis-à-vis eating out. As I mentioned, I would go back and I say food away from home is up 2.6% from a year ago, so we continue trending out where people are spending more of their budget and their dollar eating out. I think the challenges for our restaurant concept today is to continue to reinvent themselves, and I think that’s most probably the biggest issue. How do you reinvent yourself to cater to a changing expectation from a customer or delivering a great guest experience?”

Customers are coming back asking for help with new things

“we’re seeing significant, especially in our national account department where we’re seeing a lot of restaurant concept coming back to us and saying, Help us work out the rising labor cost. Help us make sure that we are efficient as we introduce more menu items or as we expand the hours. Many of them have extended hours. Let’s take the example of the all-day breakfast, which becomes very complicated. Help us get there.”

We look at the next three years

“I’ve never been sucked into a guidance or into a quarterly or even a yearly corporate guidance. What we’ve always looked back is the trend good over the next 3 years, not the next 10 years or next 5 years. I’m talking the next 3 years. If you are investing into Middleby, what is the trend over the next 3 years? And I will tell you that basically, I see our opportunities to be among the best”

We focus on what we do best

“Well, I have to tell you we’ve always faced competitors one way or another, and we’ve most probably stayed away from doing what they do. We’ve always been the contrarian. We’ve always been focused on what we do best, and I go back and say Middleby has always been very driven by its own corporate — or core competency versus trying to emulate what people want. We really have not been a company that goes by what you think the natural rationale will be. For example, all — most of our competitors, if not all of them, are really a full turnkey operators. They offer refrigeration. They offer freezers. Some of them offer dishwashers. They offer mixers. We’ve been very focused on what we do best.”

Middleby (MIDD) CEO Selim Bassoul

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Middleby (MIDD) CEO Selim Bassoul said he introduced the touch screen before Apple

“In 2006, we introduced the touch screen control.  Why did we introduce touch screen control?  Because there is 400% turnover in our customer’s employee base.  So we introduced touch screen when nobody had touchscreen.  I’m going to give you some perspective, Steve Jobs in 2006 did not have touch screen on his products.  If you remember the iPod, it was the wheel.  I was in touch screen before anybody else in the United States.”

Costco is his most admired company

“My most valued company is Costco.  What I like about Costco is you can return anything, including flowers.  So Jim Senegal who is the founder of Costco said to me, Selim, you are doing so much innovation, why don’t you create a no quibble warranty similar to Costco.  So since 1999, we were the only company to have a no quibble warranty.  If the product doesn’t measure up to your expectations for any reason, we take it back.”

Middleby (MIDD) CEO Selim Bassoul described his legacy

“I’m going to tell yo what my legacy is.  1 out of 3 restaurants around the world uses our products.  4 billion people around the world scavenge for wood and debris to help feed themselves.  They are mostly women, children, and girls.  In Lebanon alone, we have about 2 million Syrian refugees.  Our legacy at Middleby is to create technology that allows people, with very little money, to create a cooker that will require very little debris and be solar powered.”

 

 

Source: https://www.youtube.com/watch?v=iL-jQwpZ5Ag

December 3, 2014

Middleby’s 4Q15 Earnings Call Notes

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The Middleby’s (MIDD) CEO Selim Bassoul on Q4 2015 Results

Two restaurant trends are rising wages and delivery

“if I look at what’s going on in the industry business, it bodes well for Middleby. One, we continue to see the pressure on labor wages. That’s number one. You get labor wages rising, and it’s an unstoppable aspect of a restaurant. Their costs are going to go up on labor wages, which basically have to do automation. Number two, you are seeing delivery is becoming a big thing. Everybody wants to deliver product. And delivering product requires flexibility and speed, so we’re looking at speed of cooking and delivery. Both of those are unique for Middleby, because we own the automation. We are the largest automated equipment supplier to the restaurants. Speed, we have the largest speed of cooking in that space.”

Capital budgets are free to spend more in kitchen again

“The third thing that’s going to help everybody in the space is that the fact that the last five years, restaurants have done a lot of investments in online — basically ordering, social media, texting, ability to text an order and receive it, into what I call making it easier for people to order online. They’ve made so much investment, and those investments are already done and sunk. Now you are seeing more money being freed up back to the back of the kitchen, where they have to start upgrading their kitchen, to allow for menu rollouts and flexibility and speed, and to figure out a way to corner that rising labor cost”

Another trend is more cooking

“I see another trend, which is the trend of, basically, more cooking. So you’re going back to healthy cooking food, more vegetable, grilling vegetables, steaming vegetables, just because people are walking away from a lot of the proteins that have hormone issues, bacteria issues, and the cost of rising beef. So you are looking back to chicken, you’re looking back to vegetables.”

QSRs doing breakfast

“Then another two trends is breakfast. Breakfast is also becoming more and more popular. You’ve seen, at one of the QSR, making breakfast an all day event. People are starting to emulate, because it has been very successful for them, and everyone is looking at breakfast again, to say, how do I take breakfast, and make it more of a revenue driver for me.”

Supermarkets and convenience stores have been growing customers

“Then you see convenience stores and supermarkets, which is a new entree for Middleby, is our growth in supermarkets being very, very strong. The last two years, we’ve invested significantly in going after supermarkets, because they are doing more and more take-out, and they are doing more prepared food. And the growth in that segment went from almost nothing, to now, we’re basically, I think, $15 million to $20 million, in two years, in that segment. Then convenience store is — we are playing a major role in convenience stores. And we are seeing that becoming even a strong competitor for food delivery.”

It’s business as usual at restaurants, if not even a little better than usual

“I think it’s business as usual. In fact, we are very excited, because not only low gas prices, low heating oil and natural gas prices, and we’ve had basically a warm winter throughout, even in Chicago. We’ve had a few days, but it’s been mostly warm in comparison to the previous years. And it’s having people spending in restaurants. I think also, I think the biggest thing that I see is literally, wholesale food projects have gone down about 5% in 2015, and — boosting margin for our restaurant operators. So they’ve been having improved cash flow and margins and it has really translated capital spending. So I think that we all see it. I give you a perspective. Our national accounts business has been growing, basically double-digit growth, every, the past three years. And I would say that this year, it will not be different. ”

The only thing they’re worried about is rising labor costs

“So we have no reason to indicate that there’s, nothing changes. We think that operator environment and the restaurant environment is, continues to be good for us. Now, the only thing they’re going to have to face, and they’re worried about it, is, literally, rising wages, labor cost.”

Chef driven fast casual is giving an entree into fine dining

“We’ve not been strong in the fine dining. We’ve not been strong as an institution as much. So if you look at the chain business, it is something happening in the fast casual and the QSR. Casual dining — you think things like chef-driven fast casual is becoming a big part of the restaurant movement, which is fantastic for us. So if you look at literally what is happening with all those chefs opening fast casual, and they are all flocking to us, because literally, they don’t have the R&D that they need. They want to open restaurants. They know how — the menu they want, but they are coming back to talking to us. And as I visit around the country, if you look at Paul Kahan with his Big Star. You look at Rick Bayless with Xoco. We look at Tortas Frontera and Frontera Fresco, and you looked at Danny Meyer with [indiscernible]. And I can name them. I can call Bobby Flay. We can talk about dozens of other high-profile chefs. And basically, you look at — that movement has become very attractive for us.”

Middleby 2Q15 Earnings Call Notes

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It’s taken discipline to grow the Viking brand

“We’ve had many recalls. We’ve had legacy issues on quality. We’ve had pricing all over the board. We’ve had people on the Internet basically offering pricing where you could buy a Viking product almost heavily discounted. We stopped all of that, and the results have been twofold. One, the brand is coming up and I will basically in my closing comments talk about all the awards we’ve gotten since. It was very difficult for us, because it’s easier to go and get orders. I can tell you today, I can ship truckloads of orders if I keep the Internet the way it was and managed. If I go out and sell every dealer out there, because Viking is a very strong brand, if I go and allow people to basically discount one product to move our cooktop or our ranges that are very popular, and we stopped all of that.”

We will not discount, we will grow by being the best like we did in commercial

“Our number one competitor is out there discounting heavily even though they have a great brand, and they discount. And we refuse to meet and match the prices, and we’ve lost some projects because people are testing our resolve and we’re saying no. And as we continue bringing the new products, the Middleby technology, we hope to do what we’ve done in Commercial. We are basically – we will grow by being positioned at the highest price but great features, great benefits, in the long run, a great cost of ownership. And that’s what we’ll do.”

Rising minimum wage is having a big impact on the way that people are designing their kitchens

“Well it’s having a big impact. I will tell you one thing that people are all nervous about it, and it’s driving two things. They are driving – well in fact, they’re driving – it’s impacting three key areas, which is design, design of the kitchen, the equipment and the workflow. So everybody is now, they know it’s reality and everybody’s trying to figure out a way of redesigning their kitchen. And we’re seeing the impact in the fast casual. We’re seeing the impact in emerging chains.”

It’s tough for the big chains to move because they have to convince their franchises

“As you know, the big chains take a long time. It takes a long time for them to try to change their workflow and process, not because they can’t, the problem is you take a chain that has 5,000 stores or 30,000 stores or 10,000 stores, usually they have to go and convince their franchisees to invest in that technology. That’s number one. So you have a corporate R&D team that really believes in it, but they might own only 200 stores. So there’s no point for them to say, well, we’re going to only do it in our own stores. So they need to go and convince the franchisees.”

People have been investing in apps front of house and now they’ve done that, they can invest in kitchen

“I went and asked many CEOs, and they say, Selim, we’ll get to it. I promise you this will be our next impact. But we’ve been spending time, money, basically upgrading our technologies so that we can be literally digital leader. We can be able to order our customers order and pay online, to be able to create technology, to be able to create a more enjoyable dining experience. So a lot of money went into technologies.”

We are at the end tail of people investing in apps

“I did my own research, and people were honest and said, Selim, it’s on our docket. We will have to use automation in our kitchen. We need to change the workflow. We need to change the labor cost, and you are the solution and we know it works, but we could not spend the money before becoming technologically advanced.”

“When I can’t be a pizza chain that I can’t have our customers order online or text message and be able to track where their pizza delivery is. And they had to invest in all those technologies. And I think we are at the end tail. Maybe it’s another quarter or two, but I’m looking forward to saying 2016 will be a big one for our Kitchen of the Future.”

A customer we lost in the recession when we wouldn’t discount has now come back to us because they realized that the total cost of ownership was lower

“We lost the domestic business. So a year ago they decided to come back to us. Why? Because over the five, seven years they realize there’s a cost of ownership was a lot bigger, higher than the discount they got up front. And they realized that Middleby in those five, seven years in the domestically they did not benefit from the speed of cooking, from our ability to create a better bake, a better pizza, and ultimately they came back.”

People are now spending more money eating out than at grocery stores

“The number second biggest event is that it’s the first time ever that sales, food sales at bars and restaurants surpassed sales at grocery stores according to the U.S. Department of Commerce. Big, big number for us, meaning people spending money eating out has now surpassed in actual dollars people buying food in grocery stores.”

Reliance on eating out grows with each generation

“The third data shows that reliance on eating out grows with each new generation. And the millennials are considerably heavier users of Foodservice than baby boomers, which spends well for our industry and our segment.”

Premium fast casual remains very hot

“Finally, premium fast casual remains hot, hot, hot, where Middleby is extremely well positioned.”

Everyone is trying to elevate the dining experience

“I tell you, everybody is trying to elevate the dining experience, whether it’s a McDonald’s, whether it’s a Chipotle, whether it’s a nursing home. Some fast casual concepts are now hiring corporate chefs to take their menu to the next culinary level.”

QSRs are fighting back by fast casualizing

“QSRs are fighting back by fast casualizing. Seeing their market share getting squeezed, fast food chains are responding by renovating both their physical operations and their menu items. Taco Bell just introduced several upgraded menu items and they are working with Miami chef, Lorena Garcia, to come up with items that will compete with fast casual rival, Chipotle.”

Middelby 1Q15 Earnings Call Notes

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Chains have to reinvent their kitchens to meet consumer tastes

So most chains will have to invent their kitchen with significant shifts and I can give more color to that. The fact casual will continue to push fresh meat to order menu items. I will give an example. Let’s talk about the burger chain. Let’s talk about Five Guys as one example. Five Guys Burgers and Fries, which is a Number 8 burger chain will only — offers only fresh beef with customers able to order in so many different ways their burger….You have to have very sophisticated equipment, which Five Guys buys from us because we have a unique patented technology that’s designed for them that allows them to deliver that customized burger pretty fast, pretty quickly, warm and tasty to their customer across over 1,000 stores that they have now.

I was worried about Europe, but Europe is doing better

I would say that literally I was worried about Europe a little bit more. Europe is doing quite better. Now the only problem there that we are facing as a company is in fact that the dollar has become very strong.

Overseas, restaurants use more microwaves

one of the biggest things that’s helping us in implementing the kitchen of future overseas versus the United States is amount of usage of microwave.
So if you go around and I’ve been visiting many, many chains around the world, you see even though they have very good equipment in their kitchen they could have decent chop board or decent griddle, decent convection oven and in some cases combi, they cannot stay away because their staff is not trained enough and there is a big turnover in those countries to recruit is that they end up relying on the microwave as crutches.

its possible to create an emotional connection even in kitchen supplies

The difference between us and most probably most of our competitors is emotional connection that people have to our innovation.
I think that has been the biggest driver for us. Now we don’t have the packages that for an ITW package where they could come in a package a nice machine with a refrigerator with a display cases, we don’t have that. In the case of ITW that can even do the dish washer.
So what made it unique for us versus our competitor and will continue to be is the focus on innovation and not only innovation that addresses energy and addresses okay, ease of use, the biggest thing that we’ve done in my honest opinion that made us unique is the fact that we have an emotional connection to our customers.

Food quality is the number one concern, then labor, then speed, then energy efficiency

They’re truly looking to improve the following. The number one concern on a local equipment is can you help me improve the food quality I am serving to my customers, that’s number one.
Number two is can you help me save labor. I will tell you three years ago, two years ago it was not a number, it was there, if you can help me save labor, but now it because number two. It went from being maybe a number six item to number two.
The third one is speed. Speed continue — now speed at one point used to be number one. Now speed is number three. So food quality improvement, if you can get me a touch to improve my food, you give me some labor saving, I love you. If you give me speed on top of that, I adore you and if you give me on top of that energy efficiency in auto saving all together, I worship you.

Small chains don’t have food laboratories like MCD or Burger King

Okay. So let’s talk about the fast casual, let’s talk about those small chains. Those small chains do not have on site corporate lab okay, they might have a small one but they don’t have the lab that a M have or McDonalds or Burger King have. Those people have engineers on staff. They can test my product. They can test menus.
So what those people have done, they’ve outsourced all their R&D to us, so basically they come to us and we know I’m going to give you a great example is the fact that some of those fast casual I can illustrate a chain that came to me specifically it’s the chain that 200 store and say to me, Selim we are thinking of introducing this type of menu item. Can you help us implement it?

Moving to all day breakfast adds a lot of complexity to a kitchen

So they turn to lunch and what happens today is they’re all trying to differentiate themselves by taking breakfast as a competitive advantage and extending it almost through the whole day. A huge, a huge complexity in the kitchen which works in our favor because we have the equipment, we are a very leader in breakfast equipment between start, we have significant ability to provide breakfast offering versus our competitor.
So they turn to lunch and what happens today is they’re all trying to differentiate themselves by taking breakfast as a competitive advantage and extending it almost through the whole day. A huge, a huge complexity in the kitchen which works in our favor because we have the equipment, we are a very leader in breakfast equipment between start, we have significant ability to provide breakfast offering versus our competitor.

Generation Z likes to order in

So one I’m very excited about something that position us very, very well, which is Generation Z. Generation Z is those 21 years of age or younger and I’m sure many of us on the call have children that fits in the Generation Z. They are quickly emerging as a formidable group of consumers. It makes up 47% of the population and they will be again moving into gradually trickling into the work force over the next ten years.
In larger — there will be larger number than the previous generation of millennial. What is unique about the Generation Z that we love for Middleby specifically is they’re big on ordering food to be delivered.

More people are going out for lunch

The next one, the next interesting thought according to Technomic, three in five consumers today purchase lunch away from home, which represents 58% at least once a week eat away from home that means go out to lunch, 58% of them.
They predict that this group will grew considerably higher and lunch will have a major, major growth in the next few years. Again that stimulates cooking equipment so from a macro trend Technomic thing, lunch is going away. In fact lunch where people are cooking and ordering a lot of stuff is going to drop.

There’s a backlog of cooking equipment from the recession

So over the years as the recession took place and people didn’t want to replace as the economy slowed down so now we’re sitting at over 150,000 Middleby Marshal oven that are over 15 years old, big opportunity from a replacement business for us.

Middelby 4Q14 Earnings Call Notes

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the mood in food service is strong

” the mood, the mood for the commercial foodservice is very strong. In fact restaurant sales especially in certain categories which are the sweet spot for Middleby continues to do well. Casual pizza chains are doing very, very well so I think that we will continue seeing foodservice doing extremely well.”

Expanding budgets

“31% of all foodservice operators according to F&S report and research are expecting to increase their budget for equipment by renovating their kitchen which is roughly in line with what we’ve seen in 2014. So in general, the commercial foodservice will be very, very strong.”

Didn’t realize how big the quality issues were at Viking

“We need to be honest with everybody, we did not expect the quality issues to be as big as we saw, even though we did the due diligence, I don’t think we expected the quality issues to be pervasive as much as it’s been on almost every product line, So we’ve turned the corner by introducing all those new products.

We’re basically starting to win over dealers, to come back to Viking and we’ve started to win builders.”

Everyone is getting into fast casual

“Today everyone wants to be the [indiscernible] the Five Guys or the Pot Bellies, even star chefs like David Chang, Roy Choi’s, Danny Meyers are joining the fray by opening fast casual. A friend of mine and one of the most respected chefs in Chicago, Paul Kahan has also started opening fast casual stores. Those concepts have capital to grow; they can open a lot of stores.”

Restaurants are focused on waste management

“The final trend in restaurant is waste Management. It is now at the forefront of most restaurant operators. Legislation in Massachusetts, in California and ultimately in New York is driving the implementation of food and solid waste solution ”

Value, speed and nimble menus

“When I look at the casual dining and I look at the customers that have been succeeding in the last two years is casual dining. I talk about Buffalo Wild Wings, Cheesecake Factory, Darden, Bloomin brands which is Outback, Carrabba’s and Bonefish, Brinker with Chili’s, they offering this on it well with their customers which is value, speed, nimble menus that keep on changing and they all have something in common, they are big users of Middleby equipment.”

Americans love pizza

“If Americans would choose to eat only one food for the remainder of their lives, I will assure you it has to be pizza. Americans eat an average 100 acres of pizza daily or 350 slice per second and this is happening now and all over the world in China, in India. Just to give you a perspective, pizza is a $40 billion industry in the U.S. and it makes up approximately 17% of all restaurants in the nation”

Pizza has been the first to innovate in social media

“the pizza business and the segment has been the first to innovate in social media, to place order online, document that there’s many articles on Dominos, Papa John’s, Pizza Hut what they’ve done and even Little Caesars. They have been very, very strong in outdoing their marketing strategies for website and e-commerce.”