Renting vs Buying Restaurant Equipment: The Pros and Cons
Starting a restaurant requires more than just a tried-and-tested repertoire of recipes and a distinct culinary profile. While the dream is big, it’s made up of many practical considerations. Chief among which is capital — how much you need to build the dream.
Every restaurateur knows that the kitchen is the heart of every restaurant, fully furnished with equipment you can trust to deliver signature flavours in every dish. But these items don’t exactly come cheap — they are a major capital investment. In fact, next to leasing a space, buying reliable kitchen equipment is one of the largest start-up expenses, and certainly one you don’t want to skimp on.
However, capital isn’t unlimited: you have to recoup it in profits, ideally in your first year to stay in business. So, how do you get the best value for major expenses? Learn about buying and renting, two ways most restaurants acquire kitchen equipment and see what’s best for business.
Buying vs. Renting: What’s the difference?
Buying kitchen equipment is straightforward: you pay for the item and install it in your kitchen. But since brand new equipment comes at a hefty price, new owners can get savvy with alternatives like used and refurbished commercial freezers and other kitchen essentials.
Meanwhile, leasing allows you to finance or rent kitchen equipment, rather than shoulder the full cost upfront. A lender will purchase the equipment on your behalf and you will pay them back in installments. Depending on the leasing terms, you may be able to take advantage of rent-to-own options at the end of the term.
Rent Restaurant Equipment: Pros
Get Equipment on Little Capital
Undeniably the biggest benefit of renting is that you can furnish your kitchen with essential equipment like commercial freezers, even on a tight budget. Get your kitchen fully functional and your restaurant open in no time, compared to months, or even years, of saving up to pay for new equipment in full.
Rebates and Tax Deductions
Leasing commercial freezers and other equipment isn’t just cost-effective — it’s also rewarding in the long run. Lease payments are tax-deductible business operating expenses, so you pay a lot less tax than you would for a purchase.
Ancaster Food Equipment is partnering with SilverChef for equipment financing. SilverChef typically charges a $200 establishment fee to cover setup costs — but Ancaster is giving you back this amount! That’s right: you can claim the $200 fee as a rebate upon delivery of your equipment. Because every dollar counts, you can use these additional savings to help get your restaurant up and running sooner.
Pop-up restaurants, food trucks and other temporary kitchen setups are becoming increasingly popular. They’re a great way to test the market at different locations and events with reduced operating expenses — a feat that’s especially important for budding restaurants.
Renting commercial freezers and other costly heavy equipment allows you access to kitchen essentials but without the financial commitment. Now, you can use the equipment you need for as long as you are operating a temporary kitchen and get a jumpstart when you’re ready to make a bigger investment.
Rent-to-Own and Upgrade
Leasing terms are flexible. Often you have the option to rent-to-own or can buy the equipment at the end of the term at a discount. You can also upgrade your equipment as better models become available, so you can keep up with cooking trends as your customer base grows.
Don’t Pay for Major Repairs
Because you don’t own the equipment, you’re not responsible for its major repairs. If repairs are required, they can sometimes be cost-prohibitive - especially to new restaurants. In contrast, when you lease, the company will handle repairs or provide a replacement, making it cost-effective to maintain and use top-of-the-line kitchen equipment.
Cons of Renting
Renting means you don’t own the equipment. And while it’s affordable, it also means you have no equity or assets to convert into cash. Meanwhile, ownership allows you to sell commercial freezers and other appliances as used equipment and recoup your capital investment.
Pay for Damages
While equipment providers may cover major repairs, you are still responsible for the regular upkeep of your commercial freezers and other appliances. You may be held liable for major damages, particularly those resulting from mishandling and neglect.
Lease agreements are defined by fixed terms. You pay a set amount each month to use the equipment until the lease is over. If you decide mid-way through the term that the equipment does not serve your needs or your new restaurant goes under before the term is over, the provider may charge an early termination fee in order to cover their losses from the cancellation of the lease agreement.
Buying Restaurant Equipment: The Pros
Purchasing commercial freezers and other appliances is fast and easy. Once you have allocated a sufficient amount in your start-up budget and have done your research, you can get the equipment you need, with the best deals in the market. Unlike signing a lease agreement, you’re not bound to contractual terms specifying the allowable uses, rental term, damages and termination fees.
Get Exactly What You Need
As a restaurant owner, you know exactly what you need to run your kitchen — and buying allows you to get it at the best prices and quality. Some leasing companies offer only a limited set of appliance models, forcing you to settle. Meanwhile, buying allows you to customize and upgrade your equipment to serve your exact needs.
While most leasing providers cover major repairs, you might still be held liable for some damages. Buying eliminates that risk since brand new and even manufacturer-certified used or refurbished commercial freezers and other appliances come with a fresh warranty to cover malfunctions for two to five years.
Buying commercial freezers and other major appliances means not only getting the exact specifications you need but the guarantee that these work. Purchasing your own equipment gives you the freedom to shop around and compare different models, deals and providers, rather than being limited to what is available at the leasing company.
Cons of Buying
High Interest Rates
It’s no secret that purchasing equipment is a capital investment — it comprises a large chunk of the start-up costs. Many business owners take out a loan or line of credit to afford heavy equipment. You may be subject to high-interest payments which put a lot of pressure on revenue generation the moment your restaurant opens.
Deteriorating Equipment, Depreciating Value
Equipment deteriorates over time, especially with high-volume use. It’s not uncommon to require repairs and after a while, replacements. Depending on use, a lot of freezers, ovens and stoves don’t even maximize their usable life. While you may be able to sell a used commercial freezer and other equipment in fair condition, the profits won’t be enough to recoup your entire investment.
Every piece of equipment will become obsolete at some point. But it doesn’t help that manufacturers are constantly speeding up this process with new models released every year, causing your equipment to age and decline in value faster. As a result, you may need more frequent replacements than you can afford, especially as older parts are gradually phased out to force equipment upgrades and accommodate changing cooking trends and standards.
Should I buy or lease restaurant equipment?
There are countless pros and cons to weigh when deciding between purchasing and leasing equipment. Both leasing and buying are designed to help make equipment affordable to restaurant owners but it comes down to your financial situation and the projected outlook of your business.
Besides, there are additional options you can consider, such as buying used or certified refurbished commercial freezers and other appliances to maintain both affordability and quality. Take a look at your finances and business plan, and shop around for both leasing and purchasing deals to compare their cost and sustainability.
Contact Ancaster Food Equipment
For more information about the best leasing and buying options for refurbished commercial freezers, call Ancaster Food Equipment at 866-711-5486 or contact us here and ask us about the Ancaster Advantage.