It’s been another challenging year in foodservice.

Each year I like to provide all of our customers with a look back on the current year and a look ahead to next year. Many of you have seen these annual letters in the past, but I do want to welcome all of our new customers that may be reading this annual update for the first time.

It’s not always good to be right. Those of you that read my letter last year may recall that I predicted supply and inflationary challenges. While I predicted these challenges, I have to admit that the supply challenges had a more significant impact than I anticipated.

First and foremost, I want to say a big THANK YOU to all of our wholesale distributors and all of our retail operators for showing GRITT, determination, and perseverance through the past two years. THANK YOU for your commitment to PFSbrands, and THANK YOU for your commitment to our brands. Let me also remind you that PFSbrands is a 100% employee-owned company so when you do business with us, you are supporting nearly 200 owners that are completely dedicated to helping you and others be more successful! As some of our competitors position to sell (or actually sell) to equity firms, we’re committed to private and pragmatic growth.

Looking back on 2021, we started the year off strong by launching Hangar 54 Pizza and Wingman Pizza. We’ve opened over 150 pizza locations, and operators have provided unbelievable feedback on the product quality, sales revenue, and profit margins generated by these new brands. Our flagship brand, Champs Chicken, continues to strengthen in overall store count as well as year-over-year same-store sales. We also opened numerous Cooper’s Express locations, and their same-store-sales increased as well. In addition to those successes, we also launched our license brand Hot Mex Express to complement our franchise brand BluTaco. All in all, we will have opened approximately 315 new stores in 2021, pushing our overall count to nearly 1,900 branded locations across 41 states.

While there were great successes, they were accomplished in the face of significant challenges. Early in the year, we began to see inflationary trends creep up. As we rolled into the second quarter, these trends escalated, especially as they related to poultry. By the third quarter, poultry shortages were inevitable throughout the entire world. As time went on, we experienced more and more product shortages, even beyond poultry. These were primarily caused by labor challenges at the manufacturing facilities. Then we experienced transportation struggles: international shipping challenges began to really stack up at the shipping ports and logistical challenges occurred within the entire trucking industry. To state it bluntly, our entire international supply chain is in a massive state of disarray.

During the third quarter and fourth quarter, like most poultry brands, we loosened our sizing specifications in order to secure products for our operators. While this presented some sizing challenges within our chicken locations, we felt this was a better strategy than being completely out of stock. I deeply apologize for the challenges this presented and want to thank our Champs Chicken and Cooper’s Express operators that persevered through this. Many operators managed to show year-over-year sales increases. Over 90% of our branded chicken locations converted to our new SMART menu and took our advice as it relates to product and pricing changes. These changes position you very well for the future.

In the fourth quarter, we saw our poultry supply begin to improve and we are now in a good inventory position with tenders, dippers, and breast fillets. We continue to see challenges with livers and gizzards while continuing to search for solutions on these tough to source items. The USDA held up several truckloads of White Fish that we import from overseas. We also are continuing to see shortages of Catfish, and we ran into a shortage of an important ingredient used to produce our new fries. In summary, we are constantly battling challenges as it relates to product supply.

Looking ahead, the entire foodservice industry will continue to deal with supply, logistical and inflationary challenges in 2022. As a PFSbrands partner, you won’t be going at it alone. We are better together. PFSbrands is committed to providing high-quality products along with our 10 levels of support in order to help you be more successful in 2022 and beyond.

5 Action Items for Success in 2022:

Increase your inventory levels. We are asking our wholesale partners and all retail operators to carry more inventory. We’re increasing inventory levels at PFSbrands and we’re asking our suppliers to floor stock more inventory for us. If we all work together to increase these inventory levels, we can be better positioned to weather future supply challenges. While we are in a good position on most inventory items, I do expect supply and logistical challenges to continue throughout all of 2022. The United States is 80,000 short on over-the-road truck drivers and there is virtually nothing being done to address this problem. Further, the ports for international cargo continue to be overloaded and run with inefficiency while the USDA continues to slow down food imports because of the length of time they are taking to approve shipments.

Stay in close contact with your Business Advisor, especially as it relates to product mix and pricing strategy. All industries are facing labor challenges, the rising cost of labor, rising commodity prices, rising insurance costs, and incredibly high shipping costs. The cost of everything is going up. I fully expect to see most restaurants raising prices to consumers in 2022 in order to adjust to what I believe is a “new normal”. In 2022 it is important for all of us to work on getting our gross profit percentages to expected levels. Our Business Advisors are consistently monitoring food costs and selling prices in order to make recommendations for you.

Embrace technology. We’ve implemented over 12 new technological advances within our IT department this year. Retail operators that have embraced technology are seeing significant success. One Champs Chicken operator in Oklahoma experienced a weekly sales lift of $4,000 this past November simply by signing up with ezCater. Mobile ordering, self-order kiosks, third-party delivery services, and other trends are not going away. You can compete with QSRs and be more successful by embracing these technological trends.

Work toward EXTREME EXECUTION! The power in our brands revolves around QUALITY and CONSISTENCY. Work with your Business Advisor to ensure you are utilizing our resources as it relates to hiring the right people and implementing systems and processes that create this QUALITY AND CONSISTENCY. Be sure to purchase the required branded products while following our systems and processes as it pertains to preparing products. You can improve your year-over-year performance by placing a major emphasis here. In 2021, we added an entire team of Retail Training Specialists to open new stores and to assist our operators in becoming better. This Regional Training Specialist team works very closely with your Business Advisor. In 2022 we are also deploying an elite group of operational experts, our “Delta Force Team”, to conduct in-depth training and operational support for those operators that want to elevate their operational execution. This Delta Force Team will be comprised of our best training and operational experts from across the country. For more information or to schedule additional training from this Delta Force Team, please work with your Business Advisor.