August 27, 2003
BY SANDRA GUY
SUN-TIMES COLUMNIST
An Elgin company is keeping new technologies cooking for the
restaurant industry.
Middleby Corp., which got its start 115 years ago as
Middleby Marshall Oven Co., makes ovens, ranges, fryers, griddles and toasters
for the food-service industry, including schools, hospitals, fast-food chains
and fast-casual eateries.
A key part of Middleby's growth strategy is selling
jet-impingement ovens, which use forced air to reduce cooking time for pizza to
5 to 6 minutes, a fifth the time of a conventional oven's 25 minutes. The
technology appeals to fast-growing fast-casual chains such as Culver's,
Fazoli's and Potbelly Sandwich Works that cater to harried customers who want
food that's a cut above burgers and fries.
Since speed and sophistication are critical in today's
restaurant industry, Middleby is testing two other concepts to try to satisfy
its customers:
**Self-cleaning ovens and ranges. Restaurant owners are demanding
the ovens because they don't want to penalize their managers by forcing them to
stay overtime to clean ovens, said CEO Selim A. Bassoul, who has led the
company's overhaul since 1999.
**A toaster that "senses" whether it is toasting a
bagel, a slice of bread or French toast, and adjusts the time and temperature
so it doesn't burn the food. It toasts bread in 10 seconds.
The company's development of innovative products continued
apace despite Middleby's overhaul, which started in late 1998 with new leaders
and a purge of non-core products such as commercial mixers, refrigerated deli
cases and sink sanitizers. In 1999, Middleby closed several international
distribution centers, including those in Japan and France, to pursue
faster-growing overseas markets.
After Middleby bought the money-losing G.S. Blodgett Corp.
from Maytag Corp. for $95 million in December 2001, Middleby closed two of
Blodgett's single-product plants and cut the work force. The companies have
reduced their combined work forces by 36 percent since late 1998, and together
employ 1,025, 20 percent of whom work outside the United States.
Middleby, already the No. 1 or 2 player in ranges, ovens,
fryers, toasters and broilers, is leveraging Blodgett's faster-cooking
equipment to gain share in the $900 million U.S. commercial cooking equipment
market. The acquisition also more than doubled Middleby's revenues in 2002, to
$229.1 million, from a year earlier. The change, along with the company's
restructuring, boosted earnings 370 percent, to $6.1 million, or 67 cents per
diluted share, in the same time period.
The moves have led analysts to be bullish on Middleby's
stock, which has nearly tripled in price since last October. It closed Tuesday
at $20.68, up 19 cents.
Middleby is now positioned to take advantage of an improving
economy, which may prompt more people to eat out, and the growth of fast-food
chains overseas, said Richard Rossi, managing director at Morgan Joseph, an
investment banking firm in New York.
Tony Brenner, an analyst at Roth Capital Partners in Newport
Beach, Calif., said Middleby has done well in squeezing costs from the
acquisition, but could still find savings in corporate overhead and in buying
and distributing supplies. Middleby, which grew in the mid-1980s by selling
conveyor ovens to pizza chains, has built a small service and distribution
center in Mexico to make ovens for Central and South America, and opened
another this year in Shanghai to take advantage of the burgeoning Chinese
market.
Yet its focus remains updating and improving its
bread-and-butter product lines.
Here are some of its recent innovations:
**A steamer with no boiler, eliminating the need for removal
of lime residue, which gums up the cooking process. The steamers are
increasingly popular because people are demanding healthier foods such as
steamed vegetables, quesadillas and wraps, said Bassoul, the CEO.
**A patented energy management system in the ovens. The
system can cut energy bills 30 percent, and that's important when restaurants
face rising utility bills but cannot risk raising their menu prices, Bassoul
said.
The average restaurant of less than 1,000 square feet in
Chicago spends roughly $450 to $600 on monthly utilities, one third more than
it did in 2000, he said. Yet menu prices at many chains have remained stable
for 10 years.
**A range with refrigerated drawers beneath it for quick
access to the food.
**Toasters built specifically for hotels that serve communal
breakfasts. The toasters stay cool on the outside and have no exposed elements
so people cannot get electrocuted when they stick forks inside.
The company is now cutting the debt from the Blodgett
acquisition. It recently announced that it has prepaid $16 million on notes due
to Maytag and reduced its interest rate on certain borrowings to a floating
rate--now 4.1 percent--from the prior 12 percent.