While much of the restaurant industry’s focus right now is on labor shortages and rising food costs, one problem remains and could persist for some time: the inability to source equipment.
Operators have to wait several months to a year to bring certain devices into their restaurants. The problem has caused headaches and has conspired with other problems, such as delays and a shortage of construction workers, making it difficult to build new sites.
“It’s the equipment, it’s not the building,” Dan Accordino, CEO of major Burger King franchisee Carrols Restaurant Group, said at the ICR conference last month. “We’re having a hell of a time getting gear.” He noted that fryers for Popeyes take seven to nine months.
Such problems could last much longer. In a report last month, RBC Capital Markets said the backlog “will never clear” unless something drastic happens to consumer demand.
“Personal spending would need to decrease by 15% every month for 10 months to unravel the spill,” the report said. “Given the strength of the average US household balance sheet, it’s difficult to see short-term respite unless the consumer changes significantly and cannibalizes spending on goods through services.”
There have been some reports that the backlog in the supply chain has improved recently. RBC noted that such “green shoots have proven to be red herrings.” Demand remains too strong, and if this continues, the ports of Los Angeles and Long Beach will “never fully overcome the logistical hurdles needed to remove bottlenecks in the supply chain.”
The supply chain problem, affecting goods ranging from bike parts to cars and trucks, has multiple factors. Most fundamental, however, is a shortage of employees coupled with intense consumer demand for goods.
One of the biggest problems is the lack of truck drivers. RBC estimates that the US is short of 85,000 truck drivers. Another factor is the zero-COVID policy in China, which among other things leads to temporary closures of ports there.
Omicron’s recent surge is likely to exacerbate many of the issues feeding into the supply chain problem. Starbucks, for example, said this week that one of its biggest problems of late has been related to a lack of drivers to bring products to its stores.
For many restaurants, equipment delays are causing delays in opening new units, which has conspired with permitting delays to thwart remodels and openings. Chicken chain El Pollo Loco scaled back expectations for remodels and new openings over the past year, in part due to equipment delays.
McDonald’s CFO Kevin Ozan told investors late last month that sourcing supplies — and dealing with construction companies’ labor problems — is delaying projects. “My feeling is that things are slowly getting better,” he said. “It’s still not back to where things were before the pandemic. From permitting to construction to providing all the equipment and technology we need to open and remodel restaurants, everything is taking a little longer.”
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