Pricing & Market Structure for Catering Engineering Service Companies

We were recently asked where Tower CC sits in the industry structure for commercial catering engineering service companies. It isn’t possible to be exact because businesses move into new sectors and address new markets. However, we see the market being split across 5 largely discrete groups / types of company or service provider.

Type 1 – National Service Companies

  • These businesses are generally the highest cost service providers because they carry significant overheads
  • They tend to employ engineers (possibly in the hundreds) to cover all sites / areas
  • All engineers will be fully qualified & accredited and the business will carry high liability cover insurance
  • Their service provision is 24/7 x 365
  • They are best suited to kitchens of multi-site, multi region, multi outlet businesses which can afford absolutely minimum downtime and which can benefit most from the nationwide cover available. Such clients include businesses such as: national fast-food companies, hotel chains / restaurant chains

Type 2 – Regional Service Companies

  • These businesses generally employ sales & administration teams and are often aggressively targeting growth and extension of the client base
  • They employ 5+ engineers, all fully qualified & accredited and the business will carry moderately high liability cover insurance
  • They might provide cover 24/7 x 365 for some contracts but not for all clients
  • They tend to cover regional contracts for example covering the Midlands rather than single counties
  • Due to somewhat lower overheads they tend to charge less than the National Service Companies but more than Local Service Companies

Type 3 – Local Service Companies

  • Employing, on average, 1-5 engineers all fully qualified & accredited
  • Like the Regional companies the business will carry moderately high liability cover insurance
  • These businesses generally restrict geographic cover (primarily to keep fuel costs down and maximise engineer service time availability)
  • There is not the capability in such businesses to provide 24/7 x 365 cover to their clients.
    • The cover provided to contract customers is controlled by the service level agreement negotiated at sign-up
    • Breakdown / emergency cover – subject to engineer availability within defined working hours
    • Tower currently operate on the principle of
      • Monday to Friday 8.30am to 5.00pm – subject to engineer availability
      • Out of hours, weekend and bank holiday cover at additional cost and subject to availability
  • Costs for Local Service Companies are generally lower than Regional primarily reflecting the smaller teams and lower overheads

Type 4 – Unregistered / Unqualified / Not Accredited

  • Identifying how many engineers are on the books isn’t always easy for these companies
  • The engineers may well have a great deal of experience but are not registered, qualified or accredited to meet the UK legal requirements
  • Consequently the services provided are not covered by insurance
  • These businesses can be categorised as Cowboys, operating on the wrong side of the law
  • The costs of the services provided vary considerably and are by no means always lower then the service companies listed above
  • Cover is provided when it suits them rather than to meet client needs
  • This approach may void / nullify any insurance cover and puts the organisation at risk from a health and safety perspective too

Type 5 – D.I.Y.

  • While this category are not service companies in any way they are a significant factor in the catering equipment service industry
  • The D.I.Y approach is generally restricted to smaller organisations run by people who don’t understand the law / legal requirements to use competent, accredited and qualified engineers
  • Lots of sports / members clubs etc where members know enough to fix problem but are not qualified
  • This approach may void / nullify any insurance cover and puts the organisation at risk from a health and safety perspective too

The market structure outlined above is only our view of the market in which Tower Commercial Catering Ltd operates. Beyond the issue of market structure the question of pricing is possibly less contentious. The factors which we believe impact most significantly on prices include:

  • Fuel costs
  • Costs of achieving and maintaining certification and standards compliance
  • Insurance and protection costs
  • Labour rates
  • Profitability