Restaurants Lacking Appetite For Expensive Equipment

Recession-battered restaurants are looking for new menu items to attract customers, but don't have much appetite for big investments in equipment, executives for commercial kitchen equipment makers said Monday.

Relatively inexpensive types of equipment such as panini grills are drawing interest from cost-conscious restaurant operators searching for menu ideas at this week's National Restaurant Association trade show in Chicago.

"They're looking at ways to conserve cash and they want to have menus that allow them to make money," said Selim Bassoul, chairman and chief executive of Middleby Corp. (MIDD), which makes ovens, ranges, grills and other cooking equipment.

Sales of commercial food equipment in North America, a $9 billion a year industry, are expected to contract about 6% this year as consumers opt to dine at home more often to save money. The pullback in spending has exposed years of excess expansion by restaurant chains that has left the industry bloated with locations, particularly in the sit-down casual category.

Nevertheless, Bassoul said casual restaurant chains remain interested in adding food items to boost sales as long as they can be prepared with a minimal amount of new equipment.

Middleby's recent acquisitions have targeted companies with unconventional cooking technologies that Bassoul believes will become more popular with restaurants in the coming years. Last year, the Illinois-based company acquired TurboChef Technologies, which manufactures ovens that require no special venting. In April, Middleby bought CookTek, maker of cook tops that generate heat through an electromagnetic reaction with metal pots and pans.

Other equipment makers also have been adjusting their product lines for a less robust restaurant industry. Illinois Tool Works (ITW) food equipment group is offering smaller-size models of its ovens for space-constrained restaurant kitchens.

"We're certainly not in the typical position we'd like to be in," said food group President John McDonough, adding that food equipment has traditionally been one of the ITW's most profitable businesses with operating margins near 20%.

Restaurant owners at the show said the reduction in customer traffic is forcing them to try new approaches to their businesses.

Melanie Briscoe, owner of a pizza restaurant in Homer, Penn., for the past 20 years came to the show to learn about offering more dessert items at her restaurant.

"I don't want to compromise food quality," she said about one of her options for raising profits. "I'd rather have something new to offer."

-By Bob Tita, Dow Jones Newswires; 312-750-4129; [e-mail]