Free On Loan resurfaces

Whenever I have discussions with owners and senior managers of other coffee manufacturers the conversation invariably turns to that of "Free On Loan" equipment (FOL).  FOL is the practice of coffee suppliers to place coffee machines and POS material with the coffee shops in return for exclusive arrangement between the two parties.

 

FOL is now common practice in the industry with most of the mid-sized coffee shops being on the end of 'freebies" from coffee companies in return for their exclusive patronage.  The largest coffee users have worked out that they can get a better deal by owning their own equipment and retaining their supply flexibility.  The smaller users do not have the volume for a supplier to justify investing the equipment.

 

The coffee shop operators don't like the aspect of the practice which locks them into the supplier and creates a lag time when they start to experience price rises and unsatisfactory service.  FOL is a barrier to change.

 

The suppliers don't like it as it increases their capital investment as they expand the business and places a constraint on growth rate.

 

Gilkatho has for the past 7 years stayed away from offering FOL equipment to coffee shops.  Instead encouraging the operators to be incharge of the quality of their equipment, the ownership of their business assets and most importantly - not to become the coffee suppliers most profitable customer!