Catering Insight speaks exclusively to Serviceline’s managing director, Steve Elliott, about what the future holds for the equipment repair and maintenance specialist.
If you look at the traditional supply chain from manufacturer to dealer, where does Serviceline fit into the picture?
We work on behalf of a number of equipment manufacturers, so we carry out their installations, commission the products and we look after the warranty period, dealing with any warranty issues that may arise during the first year or two years of the warranty. We are also then, thereafter, involved in the whole of the rest of the life of the equipment. With clients now increasingly looking at longevity of life and whole life costs — which are the big watchwords now — they will often want to know right from the time that they specify the manufacturer and the type of equipment that it can be looked after for the life of the product.
Do you only provide maintenance services for brands you officially represent?
No, we work on every manufacturer’s products once they are the property of the end-user and when they are not under warranty from the manufacturer. We do work for about six or seven manufacturers’ warranty support. At the point where the product goes from warranty to out of warranty we would move from looking after it for the supplier to looking after it for the client.
What is the breakdown of your business these days and is it changing in terms of the type of services you provide?
Yes, it is. Because more customers want to look after their equipment in the longer term, the benefits of preventative maintenance — real preventative maintenance — and discharging their responsibilities or their risk to a proper business has become increasingly the case. We are seeing an increasing growth, year-on-year, of people who want to take out a preventative maintenance agreement for their equipment to be looked after in the long term. Many customers buy a piece of equipment and don’t expect it to ever break down, then panic and flap when it does — and it will often cost them a lot more money. These days I think people are much more conscious of the need to look after the equipment properly in the long term.
Do advancements in product quality mean catering equipment is breaking down less frequently these days?
That is almost an impossible question to answer. There will still be component failures, there will still be customer usage issues, there will still be equipment installed in environments where changes happen which means that the equipment is under enormous pressure. For example, many fast food restaurants are now open for breakfast and every hotel now has some form of restaurant in them. For caterers to get their money back on their investment in the equipment and catering environment, they have to have facilities open for longer. There is no quiet time anymore, so they want the equipment to work all day, on the max, and never break down. Well, that’s unrealistic.
You employ more than 120 engineers. How do you strike a balance between having sufficient capacity to fulfil demand and ensuring you don’t have lots of staff sitting around?
That is the $64,000 question! And I mean that, because that is the balancing act — dealing with supply and demand. Our guys are very flexible, number one. Flexible working is built into the service engineer’s psyche. Mostly, they are self-motivated characters who operate very flexibly and will often work weekends or night-times in order to meet customer demand. And while we have a set number of people based on call volumes, work volumes and skill, it is the flexibility of the service engineers that allows the business to flex up and down by 5% or 10% without the need to change recruitment necessarily. Having said that, we have something like eight or 10 more service engineers this year, overall. Some of that is our own apprenticeship programme because we always maintain a minimum of four people on the programme, and currently we have five.
Are these engineers all directly employed by the company or do you work with sub-contractors?
They are all direct employees. For us, sub-contracting is only done where the customer wants us to manage another activity. Sub-contracting is less than 2% of our total activity, it is very small. It is specialist trade, maybe a welder or somebody in the north of Scotland that wants a refrigeration job done.
Your services staff carry more than £1m worth of spare parts with them every day. How important is the spares business to your bottom line?
It is as equally important for our bottom line as everything else we do — no more, no less. Where it is important is the fact that it is our lifeblood. If we don’t have spare parts with a service engineer, he is just not able to complete the job. Spares is an integral part of our business. It is a third of our turnover, so it is crucial to everything we do.
How do you rate the level of competition in the market?
It is very fragmented, either geographically — from local suppliers who look after things locally — to people who look after specialist trades to facility management companies who sometimes employ their own staff. Obviously there are dealers and distributors which have their own service engineers, and there are people who focus just on refrigeration. We will often come up against a fridge company when it is a fridge-only issue, but they can’t do the catering. One of our strengths is that we do fridge and catering, and we do it nationally. And because we are heavily based in the south-east we are also very strong in London. We have more than 20 service engineers in the city every day.[[page-break]]
What are the main challenges facing the maintenance market?
I guess the customers have obligations for their equipment that they still don’t fully understand and don’t put enough money into protecting, so while the market for preventative maintenance is growing, there are still far too many national and large users who do no preventative maintenance at all. That is not good because they are not getting the best of their equipment and they are too reliant on the emergency service. We still have to operate at the emergency end of the market far too often. I doubt if there is a car driver in the country who doesn’t have his car serviced sometimes, but there are lots that don’t have their catering equipment serviced!
The next challenge is poor service, poor maintenance and too many operators in the market place — some offering cheap maintenance. There is no such thing as cheap maintenance. You wouldn’t take a Mercedes Benz to a back-street garage and ask them to maintain it, similarly if you have spent £15,000 on a combination oven why would you not spend £100 getting it serviced properly? The discrepancy in valuation is a great barrier.
What are the key areas you are looking to grow in this year?
Contract agreements — where we service and maintain a whole kitchen — is the bedrock of our business. It is more than half of our business, so that is always the focus: persuading customers to invest in proper maintenance for the longevity of their kitchens.
What sort of growth targets are you setting the business?
We look to do a proper job for our existing customers — we are not looking to grow the business any more than what our customers feel is justified. We are looking for our existing customers to provide us with growth and they are our best customers. Half of the new contracts that we signed this month, for example, were with existing customers adding on other bits of business. I will give you an example: We work for a relatively new contract caterer that came into the UK about six years ago and runs a very big stadium. They have moved into airports and we have gone with them. That relationship, which started as £20,000 or £25,000 a year, is probably going to top £100,000. That is what we are looking for — customers that we can grow with.
Are your sales guys getting measured on their ability to sell these add-on services then?
No, our sales get measured on retaining the customers we have already got. And that is what we do. We are a nominated supplier to a number of the contract caterers and facility management businesses, and they provide us with all the growth we need. If we do a good job then they will take us with them somewhere else and provide us with the growth. The sales people are targeted at satisfying our existing customers with new requirements.
Eloma deal marks shift in strategy
Serviceline recently struck a service partnership with European combi oven maker Eloma — a sister company within the Ali Group — in a move that managing director Steve Elliott admits is a “divergence” for the equipment maintenance company.
Serviceline will commission new Eloma combis, handle warranty and technical requirements, and source spare parts directly from the vendor’s factory in Germany.
Additionally, it has also been made the exclusive agent for Eloma’s Multi-Clean detergent and rinse-aid, which are designed to offer the highest quality oven cleaning.
Elliott told Catering Insight that such a full-on agreement encompassing the commissioning, servicing and sale of accessories is a game-changer for the company.
Although a distributor or dealer or may sell the product, from the day that it is installed Serviceline then looks after it on behalf of Eloma,” he says. “That, if you like, is an enhancement of the relationship with a manufacturer that we have moved into. It is unusual, but I think it is quite possibly the way for others to go in the future.”
Elliott says Eloma’s competitors operate a different services and accessories structure to the one introduced by the manufacturer. Asked if Serviceline would be looking to develop that sort of relationship with other brands, he replied: “If that is what they want. There is no point me trying to sell that to them. They have got to make the decision.”