- If you've dreamed about opening your own restaurant but didn't have the funds needed for new restaurant equipment, leasing may be an option.
- Understanding the different types of restaurant equipment, the daily use of each piece and the overall value will help make the decision on whether its best to buy or lease easier.
- There are pros and cons to almost everything, including leasing restaurant equipment, so be aware of the good as well as the bad when considering leasing.
Not all kitchen equipment is created equal
Whether you're opening a restaurant for the first time or you're an experienced restaurateur, you need to find ways to save money wherever you can. To reduce upfront costs, you can lease some restaurant equipment rather than purchasing it outright. Each piece of equipment a professional kitchen needs comes with different warranties and life expectancies. It may be better to purchase some pieces and lease others.
Food storage equipment like freezers and refrigerators are big-ticket items that usually come with long shelf lives. Walk-in freezers may set you back as much as $10,000, but these large appliances usually come with long warranties, from 15-year to lifetime warranties. Although leasing a walk-in freezer would cost significantly less, it can add up. For example, if a 12-month lease of an 8x20-foot walk-in freezer in Florida comes with an estimated quote of $1,332 per month, you'd end up paying more in the end, but typically your monthly payment would cover repair costs.
Lease: If you have no other option
Buy: If you have the capital or can secure a loan
Of all the equipment in a professional kitchen, it's the ice machine that's usually down. They are known for being the least-reliable appliances, but they are also a necessity in any restaurant. If you buy an ice machine, which is relatively inexpensive compared to major appliances, it's only going to set you back about $2,000 to $4,000. Warranties are shorter on these pieces – usually no more than five years.
Leasing an ice machine is a better choice because it will likely cost you a couple of hundred dollars per month, and the price includes repairs. If you do the math, you end up paying more to lease an ice machine for 24 months than you would if you purchased one, but it may be worth it compared with the hassle of breakdowns and finding a way to get ice for the day. (Many leasing agents work fast to get a working machine in your kitchen as quickly as possible.)
Lease: To save on hassle and upfront costs
Buy: If you have a backup plan when the machine breaks down
Coffee makers and espresso machines
You're likely to get a lot of use out of your coffee or espresso machine, so it may be surprising to hear you should lease these appliances. They have relatively short life spans and warranties. Plus, you can find many leasing agents that will supply the machines if you sign a contract to buy coffee and filters from them. It's a win-win situation for you, because you pay a monthly fee for the coffee you need and get the machine, along with repairs.
Lease: Especially if you can get a contract that includes a backup plan in case of breakdowns
Buy: If you're specializing in coffee or espresso
Gas ranges and stoves
A gas range or stove is a purchase-over-lease decision. You can even buy used gas appliances with confidence. These appliances are built to last, and repairs are far less costly than electric equipment. If you buy new, you're looking at anywhere from $1,500 to $10,000, but considering the long life expectancy of these appliances, it's a good investment. Warranties vary, but, generally, these appliances only carry a one-year warranty on parts and labor.
Lease: If you don't have the cash
Buy: These appliances are long-lasting – even buying used is smart
Pros and cons of leasing restaurant equipment
Whether you are a new restaurant owner or have been in the business for years, there will be a time when you need equipment. It’s common for restaurant owners to lease their equipment instead of buying, especially if it's a new business and you aren't quite sure if it's going to be a success – the last thing you want is to invest a lot of money into buying new equipment. However, if you have bought the equipment, you can resell it and recover some, if not all of your investment. So, there are both pros and cons to leasing restaurant equipment.
Pros of leasing restaurant equipment
- Leasing the equipment is an easy way to outfit the entire kitchen, so you can get up and running without having to wait for the funding to buy necessary equipment.
- Leasing restaurant equipment generally doesn't require much capital, so this a great way to cut expenses and still open the restaurant for business. You don't need financing, which can often take weeks; instead, you simply sign a contract and schedule a delivery date.
- In some situations, leased equipment can be used as a tax deduction. So, instead of paying a large amount of sales tax to buy a piece of equipment, you can use it as a write-off.
- If you operate a popup restaurant or will be operating only temporarily, leasing provides you the opportunity to get the equipment you need, without worrying about the stress of selling the items after the event is over.
- Leasing means you are not responsible for major repairs. Restaurant equipment gets a lot of use and abuse, which means you may have to replace or repair commonly used equipment regularly. If you lease, the owner of the equipment is responsible for repairs or replacement.
- In most situations, leasing companies have an offer-to-buy option in the contract.
Cons of leasing restaurant equipment
- Leasing equipment will not provide you with equity at the end of the lease.
- Not all types of restaurant equipment are available for leasing.
- You are responsible for someone else's equipment.
- You do risk incurring termination fees if you cancel the lease or change providers.
How to lease restaurant equipment
First, it's important to note that leasing restaurant equipment is different for a startup than for an established business. As a startup, you will not have credit established for the business, so you will have to depend on your personal credit to meet qualifications for the lease. When you are searching for restaurant equipment to lease there are a few factors to consider, including the lease terms and length of the contract.
You need to have a general idea of how long you're going to need the equipment, do you intend to buy out the contract for the equipment you are leasing, or do you plan to return the equipment later and buy new? Make sure your personal credit is in good shape; if it isn't, have a cosigner ready to back you up on the contract. It is essential that you carefully read the contract before signing on all rental equipment leases.
If you rent a piece of equipment and later add another piece of equipment to the same contract, confirm that all monies you have paid thus far apply to the purchase price, if you are planning to buy in the future. Only lease restaurant equipment from established leasing companies that specialize in restaurant equipment.