How to Acquire Bar Equipment: Lease or Buy?
Coming up with the cash to buy an entire kitchen and bar full of brand-new equipment isn’t easy. Many owners opt to look into other options like leasing or buying used equipment instead of going with brand-new stuff.
Now let’s work through the process of getting the equipment you need, also alert you to the pros and cons of leasing and buying, and then help you decide whether to go with new or used equipment.
Don’t forget to discuss your options for buying and leasing equipment with your banker and accountant. They have the information about your particular financial situation that can help you make the best decision for your bar.
How to look at leases for bar equipment
Leasing isn’t just for cars these days. Often companies lease equipment for a set period of time and fully maintain the machine during your lease term. After the term of the lease is over, you can choose to renew the lease, but typically you get a brand-new machine to use during the lease period. It can be an ideal situation for many owners.
Here are a few of the brighter points of leasing equipment:
Your cash isn’t tied up in equipment. By leasing, you have money for working capital and cash flow.
Zero repair costs (assuming maintenance and repair costs are included in the contract).
No out-of-date equipment. You lease new equipment. When your lease expires, you get to sign a new lease for new equipment. Leasing lets you upgrade your equipment to newer appliances with the latest bells and whistles, so you don’t own the same, behind-the-times oven for ten years.
Tax breaks! Leasing also may be fully tax deductible as an operating expense. (Check with your accountant.)
More variety of types of equipment. You can lease almost any type of equipment that you need, and you can have more equipment because you’re not tying up your cash.
The biggest downside to leasing is that you don’t own the equipment. You make payments but don’t own anything at the end of the contract; in some cases, though, you can buy the equipment at the end of the contract.
You can buy some of these appliances used at a very good price. Over time, you can save a lot more money by buying used equipment, even when you factor in maintenance costs.
In our opinion, leasing is a good option for ice machines, coolers, dishwashers, and coffeemakers in particular. In the case of coffeemakers and dishwashers, many times the company will give you the machine if you buy the accompanying product (coffee and detergent) from them.
How to negotiate for new bar equipment
The greatest thing about new equipment is that it’s, well, new. No one has dropped it, dented it, or otherwise abused it yet. The best thing to arm yourself with when looking at new equipment is information. Do your comparison shopping. Know your prices and be ready to negotiate. List price is for wimps!
Know the answers to these questions before you buy your first piece of equipment:
What equipment do I need for my bar? Think about the front of the house and the back of the house.
Who can I buy this from in my area? Create a list of restaurant supply houses, salespeople, other people in the business, and anyone who can get you in touch with potential suppliers.
What do these items cost new and used? Create a spreadsheet to keep track of prices of comparable items.
Answering these questions before you buy can help you know whether you’re getting a good deal or being taken for a ride.
When buying new equipment, check all warranties. If you can, buy a service agreement. Make sure the agreement specifies how long it will take for a repairperson to get to your place. This timeline can vary greatly. Does the company guarantee repairs within four hours, a day, or a week? If they can’t repair the appliance in three hours or less, you could be losing serious money.
How to evaluate used bar equipment
You can save between 40 and 60 percent of your equipment budget by buying used equipment. But it’s only a savings if you don’t spend a ton in maintenance and repairs. Voilà! The balancing act begins. It is recommended taking an electrician and mechanic with you when buying used equipment.
Consult your local phone book and ask around for reliable contractors. Talk to the town engineer, fire marshal, and local builders. Check with your employees and the Chamber of Commerce.
Here’s what to do when looking at used equipment:
Visually inspect the equipment. Missing knobs are usually okay. Warped grill bottoms are not.
Be wary of used electrical items. These items are more likely to have problems than their gas counterparts, especially if they’re not maintained well. Always have an electrician with you to check out anything electrical that he may have to repair. He should advise you about appliances that are beyond repair or always need repair.
Check temperatures of any coolers or ovens. Any legitimate seller will let you plug in equipment and wait for it to come up to the proper temperature. Bring your own professional, calibrated thermometers to confirm the temperature readings.
Get all model and serial numbers for any equipment. Check online for any recalls or common user complaints with the items you’re considering.
Get written guarantees. You shouldn’t expect to get a long time period guaranteed, but you need some assurance that if the appliance stops running next week, you can return it.
Factor moving and installation costs into the total price. After you figure in these costs, you may be better off buying new with free installation. It’s now a matter of money. Is it cheaper to buy new and have it installed, or buy used and pay to have it installed? Get out your pencil and paper and add it up. Now make the decision.
Consider looking for used equipment online through sites like Craigslist.org. Coauthor Heather recently scored $45,000 worth of equipment and smallwares from a local restaurant that went out of business after only 18 months. Her final costs, including moving the equipment for an out-of-state client and storing it offsite for two months during a remodel: $15,000.