Good morning, everybody, and welcome to The Chefs' Warehouse first-ever Investor Day. My name is Lex Carter, and I'm Chefs' Director of Treasury. Before we begin, as a reminder, today's discussions will contain non-GAAP measures. A reconciliation of the non-GAAP measures to the corresponding GAAP measures can be found in today's presentation slides and can also be found in the Investor section of our website. Additionally, today's presentation and the Q&A session will be making forward-looking statements, which include risks and uncertainties. For factors that may cause outcomes to differ materially, please take a moment to review the slide here. Now is an exciting time in Chefs' Warehouse history, and we chose to host our first Investor Day to provide a more comprehensive view of the company, updates on our growth strategy, and more detail on our long-term financial targets.
We hope you will come away today with a better understanding of what differentiates The Chefs' Warehouse, the leading marketer and distributor of specialty food products for the upscale casual to high-end culinary segment within the broader food distribution industry. Today, we're going to hear from a variety of members from the Chefs' leadership team: Chris Pappas, Founder, Chairman, and CEO; John Pappas, Co-founder, COO, and Vice Chairman; Pat O'Callaghan, Executive Vice President for Midwest, East Coast, and International; Ari Pappas, Vice President, Digital Product and Innovation; Ken Klauser, Vice President of Pricing and Procurement; and unfortunately, our CFO, Jim Leddy, could not be here today. He's down for the count, so I will be here speaking on his behalf today. Following our prepared remarks, which will last about an hour, we will have a Q&A session.
Please note only those here in the room will be able to ask questions today. Finally, to end the event, we have an amazing lunch prepared for you, featuring a menu crafted by two of our celebrated chef partners, Rodrigo Campos and Danielle Ballou, showcasing some of the exceptional offerings from The Chefs' Warehouse and Allen Brothers. During the meal, members of our team will be available to take any additional questions you have. Before I pass it off to our first speaker, we do have a quick video that we hope will give you a better sense of who we are at The Chefs' Warehouse.
Chefs' Warehouse is the specialty food distributor servicing restaurants, hotels, country clubs, and fine food stores throughout North America and across the globe. The world's best ingredients for the world's best chefs. Our team of experts search the planet for the most superior and innovative products to ensure a distinct variety to meet the unique needs of every kitchen. From the finest meats, seafood, produce, cheese, charcuterie, pastries, oils, truffles, and everything in between, we've got you covered. We passionately consult, sell, and build relationships with our 70,000 customers through best-in-breed technology and unparalleled support for our long-standing and up-and-coming premium restaurants. We're investing in our facilities, technology, and teams, continuing to grow our distribution footprint via land, sea, and air. What started in 1985 as a butter and egg company in New York City has grown into the elite specialty food distributor.
This is Chefs' Warehouse, where we elevate excellence and shape the future of cuisine.
Founder, Chairman, President, and CEO, Mr. Chris Pappas.
Thank everybody for coming. As Lex said, it's our first Investor Day since we went public 14 years ago. It's also our 40th anniversary since we started Dairyland USA in New York with the dream of serving the finest chefs in New York with the finest ingredients. That passion led us into taking it nationally and then internationally. That burning passion still burns in all the CW family today. As you could see on this chart, we've grown a bit since we first opened our doors in Bronx, New York, with over 49 distribution centers today, over 1,000 salespeople on our team with 49 distribution centers, 4,000 suppliers domestically and internationally, our own fleet of over 1,000 beautiful trucks that you'll see up and down the streets, and over 88,000 SKUs going through our system.
You can see where our mission was to be in every major market and be able to touch every major market. We're closer and closer to accomplishing that dream. What makes Chef so unique? I get this question, you know, all the time. You know, it's a very competitive market. We have the large public companies who have a broad selection of products, and they cover a large geography. We go up against a lot of unique specialty distributors. There are thousands of them that do something in the food service side of the business. They're very focused on the chefs as we are. They're very relationship-oriented, and they're differentiated through their products. CW is a hybrid. You know, since we started the company, our goal was always to be more unique, more niche.
I still remember $500,000 was, I think, the first year's volume, and then it was $5 million, and then it was $500 million. Now we're marching to $5 billion. You know, I think the hybrid market, the hybrid plan has been working. It's hard to be who we are because you got to be nimble. You have to cover, obviously, a lot of the competitiveness that the big guys have. It's still our passion to be unique and act like we're the little guy. I think the team is doing a phenomenal job at that. How do we continue to grow? You'll be hearing more and more of that today from the team that's presenting. Obviously, we have to take market share, and we have to engage our customers.
Our digital platform is allowing us to really put an exclamation point on how we reach our customer, how we communicate, and how we teach them more and more about the products that we have. The team today will be talking more and more about, you know, how we're gaining customers, you know, how we continue to win market share. I mean, you see our growth. I mean, it's coming from market share gains, placement growth. It's the investments that we've made in our sales force over the past x years, especially coming out of COVID. We really ramped it up. You know, you hear a lot about--I've been talking about team selling for a while. You're starting to hear a lot of people talking about team selling.
You know, when you sell so many unique products and you're selling, you know, the best chefs in the world, they need to speak to experts. It sounds easy, and it's not. It takes a lot of training. We need really talented people. We have been investing, continue to invest in the training capabilities and the talent to really make that sales force unique and our website, our digital platform unique. We're driving the adoption more and more. It's really working in our favor. We're scaling our investments. Shareholders who have been with us for many, many years, you know, know how much we have been investing, especially coming out of COVID. We were backed up. We had many acquisitions in the hopper. They went on hold. We did a lot of acquisitions.
As soon as, I say, the lights started to turn back on, COVID was very hard, obviously, for companies like ourselves, when all our customers closed. We came out, you know, we came out punching, and we had facilities to build. We had people to hire. We really hit the ground running. We are scaling those investments. You'll be hearing a little bit more today about some of the markets. Northern California, you know, we consolidated our COP facilities up there. We bought a company years ago that had multiple facilities. It made no sense. Now they have a world-class facility to leverage. We're expecting great things. You'll hear me talk about Florida a lot. You'll hear the team talk about Florida a lot. It's one of our big investments and really exciting market for us. Same in Southern California.
We have a new facility, a great growing business, able to do tuck-ins and category expansions. The same's going on in New England. We have multiple businesses up there. We have not put them under one roof yet. Texas, very similar, you know, probably top three market. We bought a bunch of unique companies up there. We're still putting them together. I could go on and on. You know, Pacific Northwest, we still have two facilities. We have two separate buildings, two separate companies. That unification is still coming. Metro New York, our biggest market, our biggest business, you know, we have a unique spot in the Bronx that we don't want to leave. Taking pressure off that building has been real important for us because, you know, we're bursting at the seams. Building a new facility up in New England soon.
Actually, we're almost done retrofitting a facility in South Jersey outside of Pennsylvania, which is allowing us to really grow that business and take the pressure off New York. We're able to store a lot of our international merchant that's coming in now and create a lot more space in the Bronx to really grow, continue to grow New York. To enter a lot of these markets over the past 10 years, you know, we've had to buy companies. The great thing about Chefs' Warehouse is that's very unique. There's really nobody like us. The bad thing about it is that there's nobody like us. Whoever we buy, we're piecing together companies, and we have to, what we call, chef-ify them, right? You know, we have to give them the training. We have to build their army. We have to give them our SKUs.
Really, the work begins, you know, when we start looking at somebody who we think fits in and then how we're going to really create a true Chefs' Warehouse. Obviously, the team is just getting better and better at it. Two of the companies I just wanted to, two of the markets I wanted to point out, actually, Florida is the beta market for what I feel is the future of what Chefs' Warehouse should look like in just about all major markets. My dream was always to put everything under one roof. Not so easy, you know. You have a lot of departments. We actually built a world-class facility to cut fresh fish and all our proteins, as well as a room for our produce department and, of course, our specialty and our CW broad line.
It's a building that has the capacity to expand. You know, the worst thing is to have to move again, you know, once you make these kind of investments. I'm proud to say that business is just killing it. You know, you always believe it's going to work, but it really does work for us. That business is growing 10% plus a year. We're continuing to hire. We started with a really small business there. We've expanded in multiple buildings. Just putting it together under one roof, it kind of unified the team, and it really allowed to take it off. That's the model that really we'd like to do in Texas. Texas is another giant market for us. There was nobody like Chef to buy. We bought a little specialty business.
We bought a produce business that had multiple facilities that, you know, which is really what we were looking for: access to the market, truck routes. It allowed us to enter Texas and then build an Allen Brothers cut shop. I'd say we're in the first inning. I mean, we have great results. We've been hiring incredible people. We think we're going to have the same success that we had in Florida in the great state of Texas. When I say there's really almost nobody to buy like Chef, the closest thing we found actually was pretty far away. It's a company called Chef Middle East that when I first looked at it, I said, I think it's a little far. It was really the closest thing to what we built in New York.
It had a similar supply chain, similar suppliers, which is very rare. They were servicing, you know, the upscale casual high-end like we do. They had a great sales force. They had a great facility, great leadership. It kind of filled out all the boxes. They were growing. We finally pulled the trigger on it. It is probably one of the best investments we ever made. That business has been growing 10% plus. We had to double the size of their warehouse, okay? Probably the nicest state-of-the-art kitchen that we own in any of our facilities for training because they do a lot of training. They have a lot of international people coming there. I think there are 100-plus new upscale hotels, you know, opening up, you know, besides everything that we inherited that is there. We could not be more excited. They have a great management team.
We're really glad to make them part of The Chefs' Warehouse. I'm going to pause there and come back a little later. With that, I'm going to turn it over to Mr. Pat O'Callaghan. Okay. All right.
Good morning, everybody. I appreciate the opportunity to speak with you about our sales model and some of the investments that we are making to facilitate our growth over the next few years. The Chefs' Warehouse is, to state the obvious, a company that's built on great people. We have so many great people at this company, from night pickers to truck drivers, from purchasing people to inside salespeople. I'm going to focus on all the great people we have on our sales team. It starts with our regional sales leaders, this veteran crew who are relatively young.
They're mostly in their 30s and 40s, but they've been in this business longer than a decade. These are passionate people who know how to instill culture and know how to develop people. They're also pretty strong salespeople in their own right. They also understand that they need great people on their team to be successful. We've put a lot of effort over the last few years into upgrading our sales talent and building out these teams. Unfortunately, in our business, as Chris mentioned, it does take some time for a new salesperson to become productive. We have so many products to sell. The mechanics can be tricky. It takes a little time to get it right. We've tried to speed up that process. I'm proud to say that we have made a lot of strong investments in recruiting.
We now have a full-time sales recruiting team. What they do all day long is they scour the country for the best sales talent. Sometimes these individuals, all of them have great natural attributes. Some of them have culinary experience. Some of them have sales experience. Ideally, they have all of the above. Those recruiters are helping us find the best people. Similarly, we have made major investments in training. We now, just in the second half of the year of 2024, that is, we now have a full-time training team. They have developed a robust curriculum that we call CW University. This is something that we've implemented around the country. We have better people, and we are training them better. Having said all of that, we know that they still need more support when they get out on the streets.
Now, when I started in sales many, many, many years ago, I could put a lot of menus on that. The model was, albeit not at CW, was to take people like myself and throw us out on the streets and say, figure it out. Some of us did, but it always took a lot of time. Again, we're just not that patient. We have to move faster. Even though we have the best talent, even though we're training them better than we ever have and we believe better than our competition is, we still give them all kinds of support. That, again, it starts with our regional sales leaders that they themselves, despite the size of their businesses, they have personal relationships with each of these salespeople, and they're always available to help them.
We also have local sales managers who help them on the street, provide answers, provide support. Most importantly, perhaps, we have product experts and specialists that are on the street trying to help our sales team sell some of the trickiest placements that they can. Our results are excellent. One of the things that we love about The Chefs' Warehouse is the number of different ways that we can approach an account, the number of different ways that we can help them. We are in a solutions business, and we have a lot of solutions to provide. We love working in categories where we have unique expertise. The Chefs' Warehouse was built almost 40 years on the specialty products that we have and the specialty expertise, selling to the finest chefs in the country. We have also been a pastry company for just about as long.
We have a vast product offering of pastry products and a lot of people that are really good at selling it. That is a tricky category. We also, over the last 10 years, have become a very strong protein company. The reputation that we've built over those 10 years is, again, we are seen as an ideal partner to some of the best chefs in the country. We love working with those categories. We've also added additional categories like produce. These help us to go deeper into account. Obviously, the more that we sell accounts, the deeper and stronger that relationship gets. As Chris often says, we build a moat around our accounts, makes it awfully tough for our competition to penetrate that. Obviously, there's financial benefits as well.
The more product we put on an order, the more product we put on a truck, the better off we are. As I said earlier, when you have all this talent, really what it becomes about is how do you align and leverage all of that talent best? How do we achieve the sales synergies that we can do from having all these great pieces? That is why we have arrived at this aforementioned team sell that Chris mentioned. This is an arrangement where we take experts from different disciplines and we put them together, and they help each other grow each other's businesses. This has been especially effective in the protein and specialty world where we have a protein expert working with a specialty expert. It has become a math equation that is more like 1 + 1 = 3 or 4 or 5.
When we take those holes together and they work together, it's given us a lot of additional account opportunities. The early results, again, they've been great. I also want to talk about our commission model. This is a model that we think really aligns the goals of the salespeople and their performance with the company's overall goals. We reward high achievement, but it's high achievement towards company goals. Despite the fact that we are aligned from a compensation standpoint, our managers still manage by certain KPIs very closely. Really what we're trying to do is make sure that our salespeople make the most of these opportunities because there is so much opportunity for us out there. Finally, our digital platform, this is an area where I think it's safe to say we've made quantum leaps over the last couple of years.
Our capability is so much better than it was. I think we're at an industry best level now. Our adoption rates have grown exponentially. Now we have this hybrid model where in a lot of our facilities, more than 50% of our orders are coming in digitally. What this allows our salespeople to do is spend time working on new products, working on acting on the business intelligence that we have, and growing their business and letting the system do a little bit of that work for them. I also want to talk about, on our business model, our sales approach, we really like it. We've tweaked it a little bit over the years. Where we are right now feels really good, and we are having great success. It makes us very optimistic.
Talking about the investments that we're making, and I do see people taking notes and taking pictures. Will these slides be available afterwards? Just so you know, please keep taking pictures. Hopefully, I look good today. Also, we will provide all of this information. There's not much to these slides anyway. Speaking to these investments, I would say more than once, I have heard Mr. Pappas on our quarterly earnings announcement say, I don't have a crystal ball. Of course, he's right. He doesn't have a crystal ball. However, when I look at these investments that we've made over the last few years, and some of these decisions were made five to 10 years ago, these line up so perfectly with where the biggest opportunities are today that I question whether Chris did have a crystal ball because he really nailed it.
We nailed this a few years ago, and we are now in such a good position to realize the benefits of these growing markets. I'm not going to get into a lot of the specifics on here. Chris mentioned some of them. John Pappas will also share some additional information about them. Suffice to say, in these growth markets, we've built enormous capacity. We have bought, acquired companies that we feel are a great fit for us or give us an opportunity to enter a new category. We have built facilities that have a lot more capacity. We've also talked about the sales talent we've added. We have teams on here that are completely remade over the last four or five years. We would argue with much better talent, much more productive people than we've ever had before.
We've made investments in Northern California, Southern California, Texas, in the Northeast where we started. We're making great strides. Chris, by the way, I hope you have trademarked Chef's Eyes. Can we look into that? That's what we've done. As Chris said, in New England, we are taking these acquisitions. We are taking these disparate businesses. We call ourselves a family of companies because we have put all these pieces together over the years. We are creating one big strong Chefs' Warehouse in all these markets. As Chris mentioned, in Florida, it's a little bit of a poster child for us in that we do have everybody under one roof. This is a team that was very small just two or three years ago. Now it's a big, mighty team doing a lot of business.
We have built huge capacity in markets where there really is, I would argue, unlimited upside. With all of these investments that we've made, despite the fact that we are proud of the year we just had, and we are happy with the momentum that we're entering this year with, these investments in people, in facility, in structure, they're just starting to pay off. These are going to reap major benefits for us over the next few years, and they make us very optimistic about the future. I really appreciate your time. Now I'm going to call up Ari Pappas to talk about the great progress we've made in the digital realm. Thank you.
Morning, everybody. Thank you for joining us for our Investor Day today. I'd like to talk to you about some of the opportunities my team is working on the digital front. My team is responsible and lucky to be building out a window into The Chefs' Warehouse. It's really one place where all 50,000 of our customers can go to experience what The Chefs' Warehouse is, what do we do, what's our culture, what do we sell, what are we all about.
We spend every day trying to make that experience representative of the high standards that our customers have come to love with The Chefs' Warehouse, the high level of service, the support that they get from their sales team, the support that they get from our operations staff, and the product expertise that our team has. We didn't want to just throw up a catalog on a website and say, here's access to everything, go and shop. We felt like we had to represent ourselves, so we didn't get commoditized with everybody else that has a website.
We are constantly pushing the boundaries of innovation and what that means online to provide our customers with an intelligent, intuitive, and inspiring experience when they log in. The work that we've done has already led to increased SKU penetration from customers shopping online and higher profitability. We are excited to see those trends accelerate as we continue to build out the platform and get more customers shopping online. Currently, about 60% of our specialty customers shop online every month, some regions as high as 70%. It has been adopted. That adoption is expected to grow. That is kind of the best feedback mechanism we have of, are we building this correctly that customers continue to adopt and they use it, and it becomes something that they visit many, many times a week to understand what we have, source products.
In the simplest form of what are we trying to do online, we're trying to help our customers understand this big, complex business that we have with many moving pieces and break it down to its simplest form. At the same time, our website and our customers' behavior and the data that we're collecting is helping us understand who our customers are and what they want. Maybe the things that they're not telling us, we're better to understand who they are so we can provide a better level of service to them. Other than just being a tool for our customers, it has become a very powerful tool for ourselves, for our team, for our sales team to leverage and help us sell better and service our customers. The word digital transformation is thrown around a lot. Maybe it's a buzzword.
I think in a lot of ways, it has become that where you put customers online and you've transformed something. We wanted to avoid just having a buzzword around digital transformation. What that means is by putting customers online and by introducing this new way that our customers can communicate with us and we can communicate with them, we are transforming different parts of our business. Pat touched on the sales aspect of it. We're transforming our sales team. They're no longer going out with what they have in their head to sell. They've got insights driven by customer activity online. They've got insights driven by what our customers have on their menus and how their menus are changing in real time. They've got information that was magic a few years ago to even consider that is highly accessible today.
They are going out there equipped with knowledge, ready to sell. They are selling confidently. They are not just selling on price. They are selling knowing that they have the best product and their customers want that product. We have also worked to transform operations. Using the information that we have online and the scale and agility that we have from having everybody in one spot, we are able to do things like power the next generation of our price optimization tool and help with our demand forecasting. Again, we are seeing a lot of information that is helping us make smarter decisions at scale. This is no longer a mom-and-pop business. We have a lot of customers, a lot of moving pieces. Without these tools, it would be pretty difficult to keep up with how quickly market conditions and customer demands are changing.
This helps us do it confidently and in a very data-driven way. It's also helping us with all the integrations that we've made through acquisitions. We have a lot of different sales channels now. Having one single sales channel that customers can go to to interact with The Chefs' Warehouse, with Allen Brothers, with Chef Middle East, with all of our third-party partners really takes, again, this big complex business that we all know very intimately and makes it simple for our customers to do business with. They're not interested in how our operation works. They have their own operation. The easier we can be for them, the lazier we can make our customers, the stickier we'll be to our customer base. It also lets us test out new business models and new ideas at scale and rapidly.
Sell fast is something everybody's saying these days, but it's true in the sense of we can test out an idea, see if it works. If it doesn't, give up on it, move on to something else. One thing that we released recently and we've had customers loving is the ability to shop through third parties on our site. We do have a dropship model. A lot of our suppliers, truffle caviar suppliers, that we don't necessarily stock in our warehouse. We can give access to our 20,000 online customers to shop those products. We don't have to touch a box, which is a new concept for us, kind of a nice concept. They can go on, shop from one cart, and get everything delivered to their doorstep. The one thing I talk about with Chris a lot is digital, everybody has a website.
Why are we different? What's the differentiator there? I agree. Everybody's going to have a website at some point. I haven't even mentioned AI yet because, again, it's another buzzword, and everybody has it, and it's become commoditized in a way. What makes us different and what makes this a differentiator for us? I think what it comes down to is when you put your customers online, you're really opening up this magnifying glass to your customer. If you have problems with your pricing and your inventory and your product data and your selection, your customers see all of that.
It is in real time, and you do not have a sales rep who is there to say, "Hold on, let me check and go run a million miles to make it work for your customer." We have that magnifying glass, and we have an incredible company underneath that magnifying glass that it is pretty easy to put on top of because everybody sees how our operation works, and it is pretty flawless in many ways. It also lets us magnify what is good about the company and showcase that to customers at scale. I am lucky to be building this magnifying glass on top of The Chefs' Warehouse. Like I said, it is really paying dividends.
Our customers are the next generation of customers that maybe have a new relationship with us, can get up to speed on who we are more quickly, and we can get up to speed on those customers and really scale our communications to them and have one platform that we can build that relationship on. At the end of the day, this is a relationship-based business, and we're not moving away from that by putting customers online. We're creating this new connection to them, this new relationship. The last piece I'll add on that is this is not a replacement for our sales team. This is in addition to our sales team. This is something that helps our sales team sell. This is something that gives customers access to our business through a different lens and different touchpoint, however they want to interact with us.
Pat's team and Bruce's team and Harris's team, we all work very closely together to make sure we're going out with a single message and our customers feel that unified experience when they're working with us. I forgot to press my buttons here while I was talking, but this is just a small snippet of the website. Again, it's powering at this point, Chefs' Warehouse, Hardee's, Capital C Board, Chef Middle East, and many more of the companies that we work with. Thank you, everybody, for your time. I'm going to call on Ken Klauser, VP of Pricing and Procurement.
Good morning, everyone. Thanks for coming. My history is actually in accounting and financial planning analysis. Everything to me usually starts with data, right? If we don't have good data, we can't forecast. We don't know what happened.
We don't know how to predict what's going to happen in the future. We spend a lot of resource and time over the last few years building out our data warehouse, making it as accurate and complete across the organization as possible. We started with sales as most things do, but we've expanded that to now cover operations, procurement, category, logistics. We now can provide access to the entire organization of the data that they need to make better decisions. We've done that through a new analytics suite, Power BI. We just started that a few months ago, but the acceleration of the transfer of information to the decision makers has been really monumental in the last, say, quarter-to-quarter and a half. The more access to data we have, the better decisions we can make.
We're doing a lot more forward cost analysis, again, using history as the baseline, but using forward cost analysis. Chris mentioned and Pat mentioned earlier about our expanding capacities. With that expanding capacities, we can take advantage of market volatility, inflation to adjust our inventory levels to make sure that where appropriate, right? We live in a most of our products have very short shelf life, so we have to be careful. We're using that excess capacity to take advantage of market volatility. Part of that comes with a new supply chain platform that we're in process. We need better insights into our data. We have a team of 120-130 buyers today who are making independent decisions.
How do we supercharge that using new software so the first 80% of their job is fed to them and they can spend most of their time to make sure we have the right inventory, right time, right place, right cost, and make sure we do not have excess? With that, we are kind of looking at our entire supply chain. We use a hub-and-spoke model. A lot of that has been East Coast-centric because of capacity limitations around the country. With the additional capacity regionally, we are transitioning to a more localized or regional hub-and-spoke model. Again, reducing total delivery cost is the primary goal. Mentioned earlier, we have 88,000 SKUs, 4,000 suppliers. It is a very large product portfolio, and it is ever-changing. We are constantly getting requests from our sales force, from our sales leaders, from our customers of new products that they want.
We have to collect that information, analyze to make sure it's a good fit for the company, make sure we identify suppliers, supply lanes, minimum work requirements, everything that's needed to bring that product into our facilities and make sure we sell it before it expires. We've developed an item lifecycle, which is basically a business process workflow, but it brings all of these departments and teams together, centralizes that flow to make sure we're making the right decision for the company, we're not losing information, very important information along the way. Tied to that is vendor outreach. Once we make that decision, we have to talk to our vendors, collect the data for the website and the photos in the romance language we're using online. This tool helps us complete that entire lifecycle.
As products get stale and we may not want to carry it anymore, we need to make sure we wind down those supply chains to make sure we do not have excess inventory. This item lifecycle process goes from idea all the way to completion. Mentioned source and strategy already. We are transitioning as much as possible in leveraging our internal logistics teams. We want to own more of the value chain. We know logistics is typically a profit center. If someone touches it, someone's making money. We want to be the ones touching it. That lowers our cost. In addition to that, we can be more reactive and have more control over that supply to make sure if something happens, we can recover quickly. Lower cost and better service. All of that comes back to our suppliers. We have suppliers 30-plus years that we've been doing business with.
We are making sure that we have a competitive cost advantage with those suppliers. These guys help grow them. We need to leverage that. With that, when there are supply disruptions, we are getting the benefit of that relationship in our service levels. We all know what happened with eggs, right? There is an egg shortage. We do not have a shortage, and it is benefiting us because of those relationships. On the pricing side, we have a centralized pricing team. It is a hybrid, half region, half central. We have dedicated pricing managers that support all the different regions, one for the West, Midwest, East. That team is expanding. We have a central team who works on the systems, the tools, the software, and the technologies that we are implementing. A huge benefit we have seen recently is Salesforce education.
Pat mentioned the investment in our Salesforce. We are doing the same with our Salesforce on the pricing side. Our dynamic pricing model can't be a black box that no one understands because then they won't trust it. The goal is to make sure that the sales reps don't want all the details. They want enough to be confident that the price we're starting with that we're suggesting to them is within market. They're not going to get embarrassed if they go present that to a customer. That connection with the Salesforce is extremely important because we're building models, we're adjusting algorithms. We need their feedback just as much as they need our feedback. What looks good on paper might not work down the street. The collaboration between the Salesforce and the pricing team is really paying dividends. There's trust on both sides.
There's more interaction, and both teams are benefiting from those discussions. I think pretty powerful from a sales rep perspective. We have some who've been here 30 years and millions and millions of dollars, some brand new off the street. The peer comparison for opportunity assessment is significant. If you know someone who's fantastic, you want to emulate them. How do we show sales reps or reps who may have customers who are on the lower end of margin? How do we move them to the higher end of margin? The best way to do that is evidence. Show them other customers, same city, same zip code, same market, right? Bakery, Italian restaurant, whatever. Show them successes that other reps are having, other customers are having, give them the confidence to approve price. All of this is working toward continued advancement. We're starting to dip into AI as well.
I feel like it has been a buzzword for a long time. I think we've looked at a couple of times at solutions in the past couple of years, and AI was really a buzzword. There wasn't much meat behind it. I think that is changing rapidly. AI, machine learning, I think it's really going to supercharge our teams. It's going to provide the leverage that, again, 80% of that work is done for you. You're spending your time doing the 20% value-add work versus chasing numbers, chasing data, chasing information. In summary, we are a data-driven organization. There's not a meeting goes by, Chris doesn't say, "That's great. Show me the data." Prove what we're saying and why we think it.
Technology, we will continue investments, some slow, some fast, but I am very confident we're going to be able to leverage our teams and our information to drive better results for the company. It is my honor to introduce John Pappas, COO, Vice Chairman, and Co-founder of The Chefs' Warehouse.
I have the most boring part of the job. I build buildings and try and figure out capacities. We have a philosophy: either buy it, fix it, build it, grow it, or start it, grow it, fix it, build it, grow it. Why are the buildings important to us in capacities? In New England, you see a group of three of our companies up there. They're all within two miles or two and a half miles of each other or about nine minutes. There's no real minimum order.
A customer can order something from any one of these, and we can instantly put them together and have them delivered on one truck. We do not tell the customer, "Your order is too small." We are not, in our words, getting them upset. We can pretty much ship anything. It is not seamless, but it is almost seamless. The customer has no idea in some instances that they ordered from three different companies. It shows up on the same truck. I would say we are kind of like the Amazon of food. It is the next day, same day, sometimes within six or seven hours after placing the orders. You have heard about capacities and why do we need all this CapEx? Why are we building these buildings?
In Philly right now, we're putting our actually in Gibbstown, New Jersey, we started reconstruction of a building, bought a business down there, very small. Again, buy it, grow it, fix it, build it. We're building a building right now. We're putting up inside a new refrigerator, a new freezer that will give us huge capacity for the Northeast Corridor. A lot of the product that we sell is frozen. Frozen capacity is almost at zero in the United States. Paying for outside storage is a fortune. We're building it. We store it. We can buy better, and then we can hub and spoke it. We do have capacity on the West Coast. As you heard, we have built new buildings on the West Coast. Florida is our new baby, state of the art.
We have fish, meat processing, and the same CW, obviously, our specialty business in the same building. Customers can order from any three of the companies that are in the building, and we have produce in it also. They can order from one, we get everything shipped on the same truck, and they can order from any one of the three. We internally transfer it to each other, and they get it the next day on the same truck. It is paying dividends because they do not have to go elsewhere. We are just under 100% in shipping once they place the order. We are in the high 99% percentile, which makes our customers feel warm and fuzzy that they can place an order, go home, and know that they are going to get the product. Northern California, we just finished consolidating. It says four.
There were five businesses, state of the art, fish, meat cutting plant, about a 160-mile geography, I have to imagine. It's all on one truck now. It leaves the same place. It leaves the same place and gets to the destination rather than starting at four or five different facilities and having to figure out how to do it. From a transportation mode, if you can imagine having four or five facilities of three within three miles apart, sending trucks to the same locations on the same day, A, it makes us not green, so this makes us greener. B, we save a ton on transportation, windshield time, drivers, and trucks, and we just keep getting more efficient. Chris has spoken about Chef Middle East. Now, why do we need so much space? The average facility is between 4,000 and 7,500 SKUs.
Why do we need so much space? You have to pick them, pack them, put them away, receive them. Everybody knows what a tractor trailer looks like. Just in olive oil, for argument's sake, we buy about 500 tractor trailers a year. Imagine how much space you would need if you had to bring them in. Thinking about tariffs, we have enough space now on the expensive items to bring them in advance if we think they're going to be tariffed. We can store them either East Coast, West Coast, or down south. We get ahead of it. Our vendors love us. They're actually helping finance it. They're storing it there. They'll store it here, and they trust us, so they will ship in advance. Going back to the Middle East, you've seen the growth. One of the reasons is we had the inventory.
We had the inventory because we doubled the square footage in that facility from 100,000 sq ft to 200,000 sq ft and two new buildings coming online this year. We're changing the methodology of how we pick. A lot of the businesses we bought, again, the buy and fix, had no structure to them. It was mom-and-pop businesses, everybody showing up for work, working real hard. I called it the daily Chinese fire drill. We went to voice pick. Now we went to scan and pick, system guidance. People don't have to think. They don't have to think of where they're going to get it from. They don't have to think of what the box looks like. The machine tells them where to go. Pick it, scan it. If it's right, they get a green light. If it's wrong, they get a red light.
It's increased our accuracy by about five-fold. As Ken alluded to, Power BI is our new tool. Everybody in every business that we have will be on Power BI, same KPIs. When we get in the room, everybody speaks the same language. They look at their cost per case. They look at how many miles driven, how many boxes in a truck, the weight capacity, how many miles that truck is going to drive, how many it would have driven if we ran it on two trucks, how many orders it can fit. It's becoming instant gratification for our routing department, for our sales department. They can look up and see where the orders are.
This has been transformational for our business that was run by people knowing or thinking they knew what they were doing to now looking at a machine that can run hundreds of thousands, millions, and even billions of algorithms in minutes rather than somebody saying, "I think this goes here, and I think this goes there, and this is the best way to do it." This is not new to us, but it's new to a lot of the businesses we bought. Now that they're accepting the fact that there's a better way to do it, we've seen huge gains in productivity throughout the entire business environment. With that, back to Lex. Thank you, everybody.
Thank you, John. Obviously, I am not Jim Leddy. My name is Lex Carter again. I'm the Director of Treasury for Chefs' Warehouse. Over the next few slides, I'm going to share how we plan to allocate capital and how our recent investments have paved the way to achieve our 2028 financial targets. Coming out of COVID, the economic environment provided us the opportunity to begin meaningfully investing back into the business. You've heard a lot today about how we've expanded capacity in a lot of our core markets like Florida and made acquisitions that expanded our footprint both domestically and internationally. We have seeded the ground with these investments that we now expect to start bearing fruit over the next several years. These are going to be foundational to both the top-line growth that we look to as well as the margin expansion.
With that in mind, that's allowed us to now pivot going forward into the next phase where we can continue to invest in organic growth, be even more targeted in that investment while also tightening up the capital outlay. At the end of 2023, we announced a new capital allocation plan that has three key priorities. The first is to start deleveraging, paying down some of that debt that we had issued to finance our recent investments and bring net debt leverage down to 2.5x adjusted EBITDA. The second was to start focusing more on generating free cash flow and in doing so to modestly reduce our capital expenditures to about 1% of revenue. Finally, begin to start returning some of that excess capital back to shareholders through a share repurchase program. In 2024, we started to execute on this plan.
The walk on this slide shows you some of the key areas that we did deploy capital over the last year. CapEx came in just shy of $15 million, about 1.2% of revenue. About 90% of that was spent on just three items, all of which we've talked about today: building out our center-of-the-plate facility in Northern California to consolidate four local facilities into the one, creating new capacity in our Middle Eastern business, which was greatly needed in that market to open up even more growth potential, and making additional investments in IT infrastructure and digital technologies. We began to modestly start paying down some of the debt. About $23 million of the cash principal that we paid last year, of that $23 million, about $14 million was unscheduled.
There was an ABL draw, and it was mostly a timing event at the end of last year. We had a $40 million convertible note that matured in December. That was ultimately mostly converted to equity. This cash was drawn as a contingency to that and to also ensure that we had the appropriate working capital to get us through our busy holiday season. That was always meant to be a temporary draw. We also repurchased $17 million of our own stock. All of this while adding about $65 million to our cash balance by the end of the year. As we look ahead to the next four years, we'll continue to be disciplined.
Targeting that CapEx spend in that 1% of revenue range, we achieved our leverage target early of the 2.5x adjusted EBITDA at the end of 2024. That does give us some additional flexibility over the next couple of years around the timing of debt repayment, especially as we continue to scale in EBITDA. That will continue to remain a priority. We'll also continue to be opportunistic around M&A transactions as well as additional share repurchases. With all this investment, by 2028, we are targeting a return on invested capital in the mid-teen percentages. To achieve that improved return, we've made significant investments in these high-growth markets that you've heard a lot about today. At the top of this slide, there are two of our most populous markets. Together, they represent about $1 billion of top line.
These are some of our more mature markets. We expect to see revenue growth in the 5%-10% range in these areas with high EBITDA margin flow-through as we continue to grow. The markets below that represent about the same amount of revenue as the top two. These provide even more opportunity for growth as new capacity comes online that we can continue to grow into and as we expand our presence in that region. We expect for these investments and these markets to have top-line growth in the low to mid-teens. As we scale, we'll continue to generate additional operating leverage, which will improve margins as well. This is important to know. This is not an exhaustive list, and we've seen a lot of that in earlier slides.
We do expect that our key markets will contribute about 75% of our incremental adjusted EBITDA growth contributing to our target by 2028. I won't spend too much time on this slide, but this is just to reiterate the guidance that we announced earlier this year. There have been no changes over the last couple of months. Sales growth, we expect to be in the 4%-7% range year-over-year. One thing that is important to highlight here is that the midpoint of our adjusted EBITDA guidance of $240 million implies about a 10% flow-through on the estimated revenue growth, which you can compare to recent years was about 7%, 8%. Making improvements in that delta as well. Looking ahead to 2028, our goal is to achieve 6.5%-7% adjusted EBITDA margin on about $4.5 billion-$5 billion in revenue.
The key to that growth will really be about executing on a lot of the initiatives that our team has discussed today, driving sales in those high-growth markets that we've invested in, and generating that additional operating leverage to grow the bottom line, further integrating our recent acquisitions and providing more cross-selling opportunities and operational efficiencies, and optimizing pricing and overall customer experience through IT and digital development. Of course, continuing to provide the excellent service and expertise that our customers have come to expect that has differentiated us from our competitors. We believe the foundation is there, and we're very excited about the opportunities that we have in front of us. With that, I will turn it back to Chris Pappas for some closing remarks.
We'll tell Jim he was missed, but I think he did a pretty good job. I just want to thank everybody for coming today. We're really happy. I couldn't be prouder of our team. For many of our shareholders that have been with us from the beginning, you know how hard this was. We thank you for your patience. I still remember my first presentation when we turned the family business into a public company, which was a little harder than I thought. I think we're finally getting used to it. As you could see today, I wanted to put some of our talent on display. I just think we have such a talented team, and we continue to seek out experience, youth, and people that can with the know-how because what we do is hard.
Servicing the top chefs in the world is not easy. They are very demanding. That is why we needed the technology. We need people that can take the technology, understand our business, and turn it into the efficiencies that you are starting to see. I think it is obvious that we are starting to put the whole puzzle together that I have talked about for so many years with scale. With an investment of over $1 billion over the 10-plus years, you are starting to see where the money has gone and the best is yet to come. We are getting that leverage. Chefs' is not just bigger, it is better. It continues to get better because of the team that we have put together and what they are able to accomplish. We are getting penetration.
I hear other companies come up and say, "Winning, winning." We have the leading organic growth in the industry. And it is not coming by accident. It is coming because of the experience in the team. We kind of know mostly what we are doing, always uncharted territory. Turning these new companies that join us, Chef-sizing them, putting in the technology, getting the expertise behind the product, that is all driving the organic growth. We still remain very optimistic, but really, organic growth is the main focus right now, driving that volume through all our new facilities, the digital adoption, the pricing. What you are seeing now is Chef finally getting leverage to all that money that we have invested, and the best is yet to come. With that, I think we will get ourselves up for Q&A for the next 30 minutes, and we will answer some questions. Can we please sit down, Andy, first?
Can you? Doesn't hear me. We're just going to run the microphone to those who have a question. If you could just say your name and your company before you ask your question, that would be great.
Right. Andrew Wolf from C.L. King. Just wanted to ask kind of the same question about the dynamic pricing modeling and the Power BI, APIs that are coming out of that. I mean, it's obviously the early innings, but it sounds like you're already having decent success stories. It's really just where are you at? How much of the kind of broad, but how much of the margin build and your guidance is from that versus what you've been traditionally doing, which is just selling more stuff and getting inherent leverage? That's sort of the bottom-line question. What kind of success stories are you having? What kind of not success, like where you're having an extra train, twist arms, whatever, just how that process is going and where you're at in the innings? Financially, what does that mean for investing?
Yeah. I mean, you have our forecast, Andy. Everything is pretty much, obviously, we'd love to exceed it. Everything's been built into what we see in the business. Again, we are getting leverage. My hope is to continue to get leverage. All these tools are just helping every department get better, get faster. It's so nice to finally have some capacity. Since we started, since we went public, we've been fighting to, we need cash flow, finance the buildings, finance all these acquisitions, finance the technology, finance to get the talent.
People always ask me, "What's the most difficult part?" I said, "It's kind of everything." When you start so small and you have to do everything in front of the public markets, people think you're going backwards, where you try to explain that you got to make these investments to build a much bigger company. I think that we did. We took some hits to do it, but we stayed focused. I think that everything that you heard today, of course, my expectation is just going to make us more efficient, more efficient. Obviously, that is the goal, right, to continue to be more profitable, but still make sure that our customers feel that they're getting value today, no matter what, if it's a pound of truffles or it's a cut wagyu steak. Our customers, they have to feel that they are getting value.
To do that, all our investments are allowing us to control our costs, right? Part of what we're looking at today is with the inflation that we've had over the past so many years, you've heard me speak many times on, yes, margin is really important, but it's really controlling our overhead, okay? We keep GP dollars to the bank. As things get more expensive, you don't need to make that kind of margin when something goes from $200 a box to $500 a box. It's really the GP dollars we're trying to protect. I think that's where this incredible technology is really allowing us to control our costs and keep our prices very fair and helping us win the business.
I think the salespeople going to market, it speeds up their ability to not question the price or the deal size. Because you can sell something for $1 all the way to $3. They do not know where to sell it. They are iffy on it. Trusting the system kind of shrinks the deal size, gives them a faster head start.
Just on the KPIs, in order to me at least, on the operational KPIs from Power BI, what's the management structure of that? Is it local? Is it comparative? Does DC is at this and this one's at that? Some more mature distributors use that kind of game to use comparative.
Yeah. Are you asking how we compare each division?
Like how are you managing?
They all have their KPIs, right? They all have their numbers to hit. We have corporate control. We're looking at it every day. Every business is different, though, right? They're at a different maturization of their growth. We have businesses that do $500 million plus a year. We still have some of these small businesses we're integrating that are doing $30 million, $40 million, $50 million. We're running them on the local level for success and for growth. Obviously, we have command and control that we're looking at by the minute, watching orders come in, watching their overhead. I think that's, I mean, it's completely, for me, it's magical to be able to actually see the businesses now in a real-time basis and be able to have input and coach and manage the business. Peter?
Peter Saleh BTIG, Thanks for hosting. This has been great. Just a question maybe on the Salesforce. Thousand sales professionals, you're growing double digits in many of these top areas here. Can you talk a little bit about the commission model that you have? Does it differ by region at all? Is it the same? What's fixed versus variable? How do you compare? How does that compare to what you're doing in the Middle East? Do you have the same model in the Middle East? Is it different? Just trying to understand how those two differ.
Yeah. I really don't want to tell you about it. It's something that we think we do maybe better than a lot of our competitors. It's not a one-size-fits-all at this point. There's still a lot of customization. Obviously, we're using best practices, and we're sharing. What I've learned over 40 years is that every territory is unique. Every category is unique. People are unique. You don't want to have mass disruption, okay, in the business while you're figuring it out. I think we've leaked in our ability to make decisions and continue to modify the commission structure. One of the reasons we're getting such great talent is we really don't cap salespeople. You look at our industry, and the average pay of a salesperson is X.
You look at what our top performers could make, and people say, "Wow." That ability is given because we sell a lot of expensive products. They could sell a customer $500 boxes of X and build a much bigger order than if you are just selling $20 boxes. I think it is a balance. We are also balancing it out because we are putting in all the expertise now with our team sell. I think it is continuing to evolve as we grow and adapt and realize that we also have to account we have to get this talent in the door that supports everybody to make these great sales. It is a constant work in progress, but I think the results are showing success.
Thank you.
Hey, it's Alex Soleil from Jefferies back here. A follow-up on digital and data, which it seems like an overarching theme, an important one, and maybe a driver of your market share gains recently, maybe an unlock of your differentiation in the market and the broad SKU base, which, I mean, it's interesting to see the number of suppliers increase 33% or something over the last couple of years. So managing all that. But I guess just how to think about the opportunity for more upside here as this continues to roll out. I know on the customer-facing side, you're still expanding it. The digital interface to the center-of-the-plate proteins, and maybe you could add a little progress there.
Our butter's better. That's what I told there is to it, Alex. It's all about the butter. Yeah. I don't know if you want to add anything. Obviously, it's not like we're betting on digital. We know digital is part of the business. Our debates are everyone's going to have some sort of digital presence. You have to exist today. I think that what we're building is kind of special. It had to be because we think we are special, right? Our customers are special. It has to relate to the customer that we're talking to. I think what Ari said in his presentation, that being able to see what the customer is looking at, I'm always amazed when he gives me the numbers of how many millions of visits our sites get.
People are chefs, are very curious, and they're very creative. That's why I still love this business after so many years because the chefs, the passion they have for creativity kind of builds Chefs' Warehouse. Nobody knows 88,000 products anymore in the company. That digital capability is just, you're seeing the results. I hope and dream it's going to continue. To multiply, I don't know why it wouldn't because it's the best sales tool. It's the best salesperson in the country at this point. Obviously, we need all the expertise, and we have the most talented team in the business, I think. For them to really come on, we did an ingredient book years ago. It was kind of like that Restoration Hardware book. You see one of those huge things everybody thought were kind of crazy.
I realized that chefs are creative, and it's their off time they're going to look. At that time, it was to go through a book and think about how to create new menus. Today, it's our digital capabilities. It's the website really that they're coming to, and they're looking for ideas. They're not just looking for price on something, which they are, or they're looking for ideas. They're looking for what we have, what's coming in, what's new. I mean, look at New York. There's five good restaurants on every street. It's very competitive. There's a reason we carry 175 different olive oils. That long tail is our job is to allow them to differentiate them from their neighbor and have a story to drive their success of the business, right? We don't sell chains that it's a cookie cutter.
You bring it in, and that would be way too easy. They want 100 different types of sauce, 50 types of different peppers. The creativity never stops because they're constantly traveling. They're researching. I think that's really the big bang we're getting out of our capabilities now is that they're able to see what we have, and they're ordering it.
Thank you.
Hi, Kelly Ann Bania from BMO Capital Markets. Thanks for doing this today. I have a different question about technology and digital. It sounds like with all the investments across the warehouse, the online ordering platform, the pricing. I guess my question is, how many of your small competitors have something like this? As you look at those M&A targets, you have a lot of insight into where their technology is because it seems like maybe the message is there's a step function that all of this is kind of enabling you. How does that separate you from those competitors? How does that show up? Does that show up in market share gains and pricing and margin? Just curious your thoughts on that.
Yeah. We look at a lot of companies. We were a little quiet the last year plus. What we found is nobody has our capabilities, right? Especially as Ken says, it's accelerating, right, at this point. The things that we're implementing and learning how to do things so much better and faster. The businesses that we have bought, they have good capabilities. It's just amazing. If I ever write a book, you build them a new warehouse. You give them new technology. You fund everything they ever dreamed of, and they hate it because you've changed it, right? The only person that ever loves change is, they say, the baby in a wet diaper.
We're starting to see, especially as the youth comes in and we are getting our arms around them, and they're seeing how much more money they can make the sales team, they're getting excited, right? As Adi is building out that team and IT is building their team and Ken's building his team and John was saying earlier, it's in the warehouse too. We took a pause for many reasons. We had so much to integrate. Going forward, when we do acquisitions and when we find things that aren't interesting enough, implementing these tools is going to make them much better companies. That's exciting. Right now, again, our internal growth has been great. We're just adding so much for our teams to sell that I think we're getting intoxicated with the organic growth. Obviously, we haven't filled out the world map yet. We still have a lot to do.
Can I add to that?
Sure.
I think the other biggest benefit and advantage is we're basically 100% live. They go on, they see it, and it's real. They can touch it knowing that if I order it, I'm almost always going to get where on a lot of the smaller businesses or other people's websites or whatever, there are cache or a snapshot of yesterday or last night. This was something that was asked of Adi and our IT team early on. Don't show them what they can't get because all they're going to do is complain that I saw it and now I can't touch it. Being live adds some complexity, but it also adds confidence in what they buy from us, they're going to get, and they can have it on their menu.
A lot of the restaurants that order from us are waiting for the delivery to prep for lunch and/or dinner. If they order it and they do not get it, they are disappointed. That adds to our benefit.
Very helpful. Just wanted to ask another one about the SKU selection. It's a lot of SKUs at this point, a lot of companies over the years. I guess number one, how do you think about that? Is that the right number? Do you want to make sure that that doesn't get too complex to manage? Is there an 80/20 rule where the majority of your sales are coming from those top SKUs and protein and the 20 are additives and maybe more margin enhancing? I don't know if you would be willing to give color on that, but I'm curious how that works.
It's always something like that. Yeah. I don't think there's a day that SKU rationalization is not a topic. We're constantly trying to, like Ken was saying earlier, cycle out how to stay or its moment in time. We always went out and said, "We are the company that says yes." Now we're the company that goes behind in the office and says maybe because we have so much product, right? We had to build out all the categories. That's constantly going to go. It is a big part of the focus to get more and more efficient, control the SKUs. We bought a lot of companies. We have a lot of duplications. We've learned you got to take it slowly. You start to change it too fast, they'll revolt. They'll say they're going to drop you.
I think it's a part of our long-term plan to continue to have SKU rationalization as quick as possible. Especially now space is so expensive to build that those days are gone where you can get a warehouse and it was X amount of dollars. It's 3x the price.
Hi, Elle Niebuhr with Lake Street Capital Markets. With the collapse of the wine and spirits business, how have restaurants been impacted by this? What lessons are you guys taking from this to see how the consumer reacts and behaves and operates and how you guys would handle something like that?
Yeah. I'm glad I'm not in the wine and spirits business. Though every time I go out, I see everybody drinking. I don't know. Maybe our clientele is still doing a lot better because it is an important revenue piece of our customers. We're selling more and more beverages, non-alcoholic beverages. People are making mocktails. We just did a show in Baltimore. We had over 1,000 customers come. I was just amazed to see how many new beverages are being catered towards food service. Restaurateurs are very creative. They have to find a way to supplement a loss in some of the beverage income. That's when I think the food becomes even more important. I mean, what we have found is there's all this noise constantly about the consumer. I mean, we had a really great fourth quarter, right?
We saw strength coming into January and February. I've always said we sell probably the top 10%. Our customers sell the top 10% of the world's wealth. There's always aspirational customers coming in and out. There is a core base, I think, of most of our clientele that is more resilient than the rest of the trade. I'm just not hearing that their customers are not drinking. I'm hearing that there is adaptation. I go out every night, look at the tables. I see tons of drinks and tons of wine. I know the numbers show that it's down. I think that especially on the better restaurants, when people are going out, if you don't drink, you don't drink. I think maybe you don't drink at home as much. You go out, you have a glass of wine, or you're having a cocktail.
I'm just not hearing that beat as they're complaining more about labor and what could happen with tips and everything else. The food becomes even more important as far as I'm concerned that the meal better be good if you're not going out just to take some stress off the day.
Hi, Lulu Banju, BNK. Thanks for hosting. My question is about M&A. How do you think about the size and cadence of M&A, especially in the context of your long-term targets? If there is an ideal company or business for you to buy today, what would it be? Thank you.
Yeah. I think we still have some white space left. We're not in the south, right? We skip from Virginia. We go straight to mostly southern Florida. We think there's going to be great opportunities. We're still not really in the Rockies. I mean, we ship into all these markets, or we have some sub-distributors for a lot of our unique products. I think that's still a big opportunity for us. Internationally, we get calls every day. I think we're very patient right now. It has to be a compelling story like Chef Middle East really to get me excited. I think we remain opportunistic. I mean, the great thing, we built out so many markets at this place, and there's so much growth in some of these facilities that we've put up. We're expanding. We're in Nashville in a small way now.
We're in Detroit. We're starting to touch the markets that eventually will be much bigger markets for Chefs' Warehouse. I think what we've learned over the last, I mean, it's our 40th anniversary. Really, being a public company and looking at our capital allocation and our growth and trying to balance it all, we've created the machine that we really don't have to buy, which is a much better position than when we were so small that we needed to buy just to get into these territories. I think it's just really opportunistic. The price has to be right. The multiples, obviously, have come down in the public markets. We need realistic sellers to get us really excited. I think we're in a really good position to take advantage of a great opportunity, but there's really nothing that's really forcing us to buy anything.
Maybe just to quickly follow up on the multiple, when do you think how much has the multiples come down, and when do you think there will be a good opportunity for a buyer sale if any.
Yeah. Most of these small competitors, they're fighters. We're not seeing, I think, the buyer sales may come from the PE-backed companies if they're underwater. I mean, we don't wish anybody bad, but we're hopeful that we do get those opportunities. I think we've been pretty disciplined in what we have bought. We're patient. I think that the world is changing. What we see is these smaller companies, they're very resilient. They find ways to figure it out even if they have to shrink. They need to make a living. Up to this type of market, I think they were unrealistic still with their multiples. I mean, you saw privates are selling higher than public companies. I think, again, my wish list would be a really good opportunity at a very fair price of something that really fits into Chefs' Warehouse, especially Fold-ins.
We have capacity now in South Jersey. We have capacity. We will have capacity in New England. We have capacity in California. I think that would be the most appetizing because we already have the infrastructure built. It is highly accretive if you could find a really good opportunity in Fold-ins.
Hi, Barbara Miller of Federated Kaufmann Funds Funds. Thanks. Good morning. You talked about Florida as sort of the pinnacle of what you're looking for in terms of capabilities in one facility. Can you give us a sense of how creating that has driven growth? Is it more accounts? Is it existing accounts buying more? Can you just maybe give us a little bit more on that?
Everything. Isn't everybody moving to Florida? It's all of the above. It's the ability now to have experts in different categories, okay, in one room, bonding, sharing knowledge, sharing accounts, right, bringing each other into each other's accounts, having more opportunities at the accounts that we're calling on that they could buy. You don't have to get all the business. You could sell them some produce. You could sell them some specialties, some broad line, some protein. I think Florida was a market that was changing. I've been studying Florida for a very long time. We had a small business there for years. I think COVID really has hypercharged changes the consumer as well, right? You had a lot of people move into Florida that are used to higher standards and quality. There's a lot of bar and grills and stuff.
You are seeing more and more Michelin-star restaurants and hotels up in their game. I think it is all playing into who Chefs' Warehouse was. The timing was really great for us to really build the facility, get it open, and then have all the expertise. We have probably one of the best protein leaders in the country, knowledge of the industry. We just keep adding to that talent for expanding specialty, obviously, is what we came from. I think adding the categories, you have so many more opportunities, I'd say, to get a hit with the accounts. I think we are winning. There have been so many openings. I think we are winning the beauty contest. They prefer doing business with someone like us when it stands their business better and quality levels. I think that is what is really driving our growth.
Thanks. Just more generally, as you think about your revenue goals, how much of it should we expect to come from existing accounts buying more categories versus new accounts?
Yeah. We look at it. I mean, it's really profitable selling one more item. My brother, every day, I think we were going to make him a plaque that says, "Sell one more item," because that drives so much profitability. At the same time, we realize that 7-10% attrition is normal. You have to do both. I think coming out of COVID, I said, "Restaurateurs are going to build restaurants. That's what they do." They continue to build restaurants. We continue to expand too, more cruise ship business, more hotel business, more bakery business. We're not just—we're not a one-trick pony. I think sometimes the industry just thinks that we're selling four or five-star restaurants, not enough of them. We have a huge customer base, all different levels.
I think it's the expertise that's allowing us to go in and win. You must grow your customer base because you're going to have that attrition. Place is closing. They're doing less business. In one way, even though you go to 57th Street and the restaurant that was there goes down, I mean, we feel bad for them. Actually, we're up on the corner because two more restaurants opened. Maybe we're selling less to our historical account, but now we're getting more business because we have more seats in the neighborhood. A lot of that is driving our growth as well. And territories.
The KPIs that we look at basically every day, it's like a ticker tape. Customers, how many? Can't go backwards. Item penetration, how many? Can't go backwards. It is a constant reminder on every single salesperson and manager's screen on where they are every time they take an order of changes.
Alex.
Alex from Jefferies. Any other big opportunities that are under the radar, like additional products?
Partnering now without actually having to bring the products in and to sell to customers. I think that's a big growing opportunity as we're partnering with either super highly perishable product that it's low volume, but needs to reach many customers. Tremendous opportunity still in fresh. I think we're just getting started. It's becoming more and more part of our passion and personalities as CW. I think it's every part. I mean, protein, every time I say, "Well, how about this category?" I mean, protein is over a billion dollars, and that'll double. We're just really getting going into much deeper parts of being able to supply even a bigger base of customers with even our broad line. I mean, that's why we built these facilities, and we're hiring all this talent.
We just see the opportunities of a different type of distributor nationally than what the choices were before. I think a lot of the independents are slowly going to get out of the business. I mean, I don't know if there's an easy business, but this is really hard. Most independents that are left, especially smaller specialty companies, don't want to invest in a new facility, don't have the capacity to invest in the same technology. We're counting that they're just going to continue to want to get out. Really, that's our pipeline as far as M&A continues. We're just going to continue to grow our category expertise and keep marching on what we're doing because it's working. I think we're hitting it from all sides. Are we out of time?
We're out of time.
Well.
Lunch.
Yeah. Before we break for lunch, our host was nice enough to do a video for us. We will show you. We will get out of the way. Danielle Ballou and what he has to say as a, I think, his 40-year customer.