Restaurantpro treats new users to PCs

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Attempting to turn up the heat on competition, an outfit called disclosed plans to give independent restaurant operators free computers, Internet access and credit services in exchange for their trade.

The move could provide a template for other industries anxious to get unwired professionals to link up, experts said., San Francisco, enters a market already crowded with Internet alternatives.,, Instill Corp., The and are among existing exchanges rapidly building markets.

Yet is focused almost exclusively on about 200,000 independent restaurant operators in the U.S., who spend in excess of $34 billion annually on fruits, vegetables, bread, meat, linens and other culinary items, according to Allan Hickok, managing director, senior research analyst at USbancorp Piper Jaffray, Minneapolis.

That market of independent operators, said Chris Hemmeter, CEO of Restaurantpro, represents the greatest opportunity for food-service suppliers. "That's where the suppliers make all their money," he said. "It is also where the greatest inefficiencies are."

Other differences between and competitors are neutral ownership--one of the industry's powerful distributors does not own a stake--and such services as free computers and Internet financing, Hickok said. Today, about 80% of all food purchases made by independent restaurants are done via credit card, which means it won't be too big a jump for operators to begin using the Web to complete sales, he said.

By giving away computers and access, the trading exchange seeks to jumpstart a large number of potential customers still doing business by fax and phone. Only 31% of restaurant operators used automated systems to purchase products in 1999, according to food-service research firm Technomic, Chicago.

"This might provide a model for other fragmented retail markets," said Raj Chaudry, restaurant and food-service equity research analyst at Credit Suisse First Boston, New York. "If you are talking about the four largest automakers, you don't need to give away computers. If you are talking about dry cleaners, this model makes a lot of sense."

Radical changes

Hickok said a rule of thumb in the restaurant industry is that about 80% of invoices between independent operators and distributors are contested. "There is tremendous waste in the system," he said. "Operators spend a lot of time just trying to manage inventory and receiving."

One thing is certain: The advent of trading exchanges in the restaurant industry will radically change sales departments, if not overall marketing efforts, Hickok said.

Today, on a daily basis, foodservice sales representatives take to the streets to resolve problem orders, alert owner/operators about discounted product or shortages and follow up on payment issues. As Internet exchanges take root, the salesperson's job will become far less hands-on and far more strategic, Hickok said. An emphasis on trade shows as a primary marketing vehicle will continue, he said. launched with a group of strategic partners at the table, including Bank of America, Commerce One Inc. and Cambridge Technology Partners. The trio provides financial services, trading infrastructure and consulting services, respectively.

The company also has signed with LMKI Inc. to provide broadband computer access to restaurant operators, as well as to provide reservation and customer analysis tools.

Channel marketing and print advertising will help drive's customer base, but a 24-person sales force has been built to reach restaurant operators at their restaurants, Hemmeter said.

"Managers at restaurants will tell you they have 80% turnover," Hemmeter said. "A restaurant manager's life is staffing. They don't have time to surf the Web to find a buying site. The role of an account executive is far more than pitching the idea. In our case, sales is responsible for setting the restaurant account up, providing the Internet access and training."

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