Fred and Gene Clark have devoured a fifth of the $18 billion industry by following the Amazon playbook. Now they’ve cooked up a plan for greater growth.
By Jeremy Bogaisky, Forbes Staff
On a snowy January morning in Lancaster, Pennsylvania, a flat-screen monitor in a former Mennonite elementary school displays the vital signs of WebstaurantStore, which, excepting produce, sells everything a restaurant might need, from $25,000 walk-in freezers to 15-cent takeout containers. Business is booming. By 9 a.m., WebstaurantStore, the Internet storefront of Clark Associates, a 53-year-old family-owned firm, has already rung up $800,000 in sales. It bagged $8.6 million the day prior.
In a former classroom nearby which still has a chalkboard on the wall, employees run demand projections to ensure Clark’s warehouses remain well-stocked with 35-pound buckets of peanut butter, boot-shaped beer mugs and the rest of the 420,000 products the website offers. It’s a struggle to keep up. Clark Associates’ sales have ballooned from $80 million in 2009 to $4 billion today—an eye-popping growth rate of 32% a year. Over the same period, employee headcount has gone from 350 to 7,000. Hence buying the elementary school. “We were desperate for space,” says Clark’s CEO, Gene Clark.
Clark, 39, took the helm in 2020 from his father, Fred, a blunt-talking 65-year-old former electrician and self-taught businessman with a penchant for bucking conventional wisdom. In particular, everyone thought restaurant equipment was too complicated to sell effectively online. A standard two-door refrigerator, for instance, can be configured 150 ways, depending on if you run a busy seafood joint or sleepy neighborhood cafe. Fred disagreed—and it paid off handsomely.
Before WebstaurantStore launched in 2004, Clark Associates was one of hundreds of regional distributors of restaurant equipment and supplies. It also built commercial kitchens and operated a small chain of brick-and-mortar stores. WebstaurantStore, which accounted for more than 80% of the company’s revenue last year, has transformed it into the industry’s behemoth. Clark Associates has taken roughly 20% of a U.S. market worth at least $18 billion, mostly by marrying its digital storefront with a warehouse network and a “pick-and-pack” system that enables it to make deliveries nationwide within one or two days. By 2022, Clark’s revenues were roughly a billion dollars ahead of its closest competitor, Trimark USA, according to a ranking in the trade publication Foodservice Equipment & Supplies.
The Clarks say they’ve done it without a penny of outside capital, funding expansion by reinvesting profits, with a modest $275 million in bank debt now. Like any distribution business, profits haven’t been fat—experts estimate them to be under 20% gross—especially given its reliance on e-commerce compared to the value-added design services that make up a greater portion of competitors’ business. But it has been enough to turn the Clarks into a billionaire family. Gene and Fred own most of Clark Associates, which conservatively is worth some $1.2 billion. Three other executives hold small stakes.
“This was never a master plan,” says Fred, sitting in the bright, white-tiled breakroom at headquarters, a quarter-mile down the road from the nerve center in the elementary school. The all-important WebstaurantStore, for instance, began life as a summer project for Gene, a college student at the time, who snapped pictures of a few hundred products while home on break.
By 2004, of course, Amazon had already transformed how Americans shop, but change has come much slower to the food world, where restaurateurs have customarily met face to face with salespeople from local distributors. Getting the right equipment in the right configuration isn’t simple, leading to distributors that specialize in niches like school cafeterias, family restaurants or big venues like stadiums and theme parks.
HOW TO PLAY IT
by William Baldwin
There is a movement afoot, beginning in progressive states, to force up the wages of restaurant workers. Bad news for the corner pizzeria, and probably bad news for the company that sells it napkins and saucepans, but good news for the manufacturers of food processing equipment.
Surviving restaurants will be axing employees and spending more on automation. Take a look at Middleby, which makes everything from conveyor belt ovens that produce 74 pizzas an hour to robotic bread baking machines. On the side, it sells $6,100 Viking ranges to home chefs. The stock is up 25,100% over the past 30 years but remains cheap at 14 times expected 2024 earnings. e.
William Baldwin is Forbes’ Investment Strategies columnist.
Does your fridge need glass doors so cooks can see inside, or should it be solid, with better insulation? Casters or legs? Is your restaurant in a humid spot like Houston? Compressor on top? Or on the bottom?
To combat the confusion, the Clarks have produced hundreds of detailed buying guides to walk customers through their choices, with high-fidelity images and video shot in-house. Still have questions? Pick up the phone. The company has a well-trained support staff of 400.
Another advantage: low prices. Clark Associates’ sheer scale gives it leverage with manufacturers. “Their purchasing ability versus the others is extreme,” says Robin Ashton, a well-known industry consultant.
It has also invested heavily in building a lineup of private-label items, which now account for roughly 20% of its offerings. That includes basics like paper plates and frying pans but also cheap appliances like fridges, convection ovens and kegerators. There have been rumblings about equipment quality—leading to a reputation as “the disposable brand,” says Crystal Weaver, who owns coffee shops in Lancaster. “They don’t tend to last as long.” (The company insists it hasn’t found a major difference in defect rates between its private-label equipment and other brands.) But for many restaurants operating on razor-thin margins, saving pennies today might matter more than a repair bill tomorrow.
For many years, WebstaurantStore’s core customers have been mom-and-pop restaurants and small-scale operators. But fast-food chains have taken notice after franchisees started buying items on the site that were cheaper than what the parent company’s suppliers offered.
“We were starting to get calls from these chains saying, ‘Can I talk to your national accounts division?’ ” Gene Clark says. “And at the time I was like, ‘Well, we don’t have one.’ ”
They do now. Clark Associates is working with Domino’s, Chick-fil-A, Subway and Disney. So far, it’s supplying them only with smaller items like cookware, kitchen implements and disposable items such as napkins and cups. But it has made equipment sales to smaller chains including Duck Donuts—and the Clarks are keen on the market. The top 500 chains account for roughly 60% of U.S. food-service sales, according to the consultancy Technomic.
“We’re a little pimple to what Amazon does. But what we do in our pimple, we’re really good at.”
And Gene Clark is looking beyond the kitchen. The company is studying if it can use the WebstaurantStore infrastructure to sell some of its products—janitorial supplies, say—to other industries.
“A griddle. . . . Only so many places need that,” he says. “A mop bucket, boy, show me a commercial address that doesn’t use one of them.”
But the competition isn’t standing still. The restaurant supply industry has been consolidating, with food distribution giant Sysco buying Clark’s second-largest competitor, Edward Don, in December. Then there’s Amazon itself: The internet’s biggest retailer sold a half-billion dollars of restaurant equipment and supplies in 2022, according to Barry Friends of Pentallect, an industry consultancy. Fred Clark isn’t worried.
“We’re a little pimple to what Amazon does,” he says. “But what we do in our pimple, we’re really good at.”
Fred went to work at his father and uncle’s electrical contracting company—the first incarnation of Clark Associates—in 1976 after “barely” graduating from high school. He was a disinterested student. “School was standing in the way of me and making money.”
Tourists began flocking to the Lancaster area in the 1970s to see the Amish, and they needed somewhere to eat. Large family-style restaurants sprang up in the area, and the Clarks developed a healthy business repairing and servicing their appliances.
Sometimes they needed to be replaced. A young Fred started driving the 80 miles to Philadelphia, trucking back stoves and other equipment. As sales gathered steam, he opened the Restaurant Store in 1993, selling appliances, pots and pans and tableware in Lancaster; there are now 11 locations clustered in the Mid-Atlantic that the company expects to bring in $320 million in sales this year.
Gene Clark, whose office is a cubicle in the back of the Lancaster Restaurant Store identifiable only by the CEO nameplate on his desk, says they could easily take hundreds of millions from a private-equity firm to finance their brick-and-mortar expansion plan into Florida. Outside money would let them open a dozen new stores in two years rather than ten. He won’t take it. “We’re going to grow within our cash flow.”
That has also been the approach with WebstaurantStore. When it went live in 2004, it had a staff of four housed in a plywood shack inside the Lancaster Restaurant Store warehouse. They filled orders from store shelves.
Most restaurant supply companies were tiny, operating with small margins. They were in no position to experiment with online sales. One company that did take the internet seriously, Denver-based FoodService Warehouse, imploded in 2016 after aggressive overexpansion. Competitors drew the wrong lesson—that online sales didn’t work—says Steve Leaman, who runs the Restaurant Store. “People were asking when WebstaurantStore would go away, too.”
After stepping back to become chairman in 2020, Fred Clark says he knew he had to find something to do to stay out of his son’s hair. His idea of retirement? Build new businesses to supply Clark Associates.
He’s spooling up three small, heavily automated plants in Maryland to produce toilet paper, paper towels, cups and napkins. The aim is to onshore production of items Clark Associates currently sources overseas, and at lower cost. “I love the game,” he says. “I’m not stopping.”