Buying & Financing Restaurant Equipment: What You Should Know 

November 18, 2019
Posted in: Uncategorized

Table of Contents

 

 

So you think you can Beat Bobby Flay or be declared a MasterChef? Or maybe you’re one of the Worst Cooks in America and just relish the idea of owning your own restaurant. Whatever the case, if you’re ready to offer gastronomic delights in your own establishment and have landed the perfect spot, it’s time to plan for buying restaurant equipment. 

Restaurant equipment includes everything from commercial ovens to dining tables to dishes. As a new restaurant owner, you can easily get overwhelmed deciding what type of equipment your new restaurant needs and how you’re going to pay for it all. Before you start buying equipment, you’ll need to determine the items you need. When deciding what types of equipment you’ll need, consider the size and layout of your commercial kitchen. You may have your heart set on expansive appliances but may have to scale your dreams down if space doesn’t allow. 

Since your chef will be the person working with the equipment (if the Worst Cooks in America scenario fits you) and has the expertise for knowing how to outfit a restaurant kitchen, it’s recommended that he/she be involved in the process. If necessary, run through mock scenarios with your head chef to determine if any tools need to be added to the equipment list to run an efficient kitchen. 

 

ktichen

 

Options for Buying Restaurant Equipment

 

  • Buying New There are some items that are best purchased new.  
  • Buying Used – Your brand new restaurant doesn’t have to have brand new equipment. Quality used restaurant equipment can be purchased at a substantial savings. Everything from larger equipment (stoves, ovens) to furniture and supplies (tables, chairs, dishes, and utensils) can be bought used. 
  • Leasing Many companies offer leased restaurant equipment, which can save you a lot of money as you get ready to open a new restaurant. Equipment with short life spans, like coffee makers, is ideal for a monthly lease.

 

Advantages of Buying New Restaurant Equipment

 

Although it’s recommended that start-up restaurateurs consider the most budget-friendly options when buying restaurant equipment, there are advantages to buying new. 

 

Warranty

New equipment includes a warranty that will cover certain repairs for a specified period of time. This alleviates any concern over costly repair bills.

 

Full Equipment Lifecycle

Since the equipment was purchased new, it’s unlikely that you’ll be subjected to costly repairs for most of the equipment’s lifespan (even after the warranty expires).

 

Equipment History

With brand new equipment, you know what it has and hasn’t been through so you feel more confident that you have a quality piece of equipment. New equipment also eliminates the need for pre-purchase inspection to ensure that the item is up to health codes.

 

chef

 

Disadvantages of Buying New Restaurant Equipment

 

High Cost

Let’s face it; new restaurant equipment can be expensive. It’s why start-up restaurateurs often seek financing.  On average, new restaurateurs can expect to spend $115,655 on kitchen and bar equipment with furniture and tables alone costing $40,000.

That’s not even including initial expenses such as:

  • Security deposit
  • First month’s rent
  • Utilities deposit
  • Architecture/design/renovation fees
  • Insurance
  • Legal fees
  • Opening food inventory
  • Signage
  • Marketing
  • Website
  • Accounting services

 

Depreciates in Value

Similar to how a new car depreciates once it’s driven off the lot, as soon as new equipment is unpacked, its value begins to drop. If you were to re-sell it a month later, you’d do so at a substantial loss.  

 

ice

 

Restaurant Equipment to Buy New

 

What if you’re the type who doesn’t like buying anything used and have decided to start your brand new restaurant with all brand new equipment? If you want to keep your working capital out of jeopardy, however, you’ll need to prioritize what equipment you buy new. If you must buy new, consider the following items.

 

Refrigerators & Freezers

Repairs to refrigeration equipment are very expensive. You don’t want to take a chance on refrigeration malfunctions because the repair cost can easily exceed the equipment cost. An out-of-service refrigerator could result in the loss of your entire food inventory and loss of business until you’ve fixed the unit and replaced spoiled food.

With new refrigeration equipment, you get to enjoy it for its entire lifespan and there’s no concern about the unit being up to health code.

 

Ice Machines

Ice machines are equipment items that you’ll want to purchase new. Cross-contamination in ice machines can not only damage your equipment but the health department could shut your restaurant down if contamination is detected during inspection. 

 

Advantages of Buying Used Restaurant Equipment

 

Restaurant equipment can be pricey. To keep costs under control, buying some of your equipment used instead of new is an option to consider. Buying used equipment has its benefits as well as its shortcomings. 

 

Low Cost

The most expensive restaurant equipment like stoves and ovens depreciate in value once they leave the supplier’s showroom.  According to Restaurant Business, a six-burner range can cost $1500 new but a shrewd restaurateur can find it for $750 to $900 online, through private sales, or at auctions.

Finding a bargain on these big-ticket items is easy and if you buy from an independent seller, you can negotiate the price and may get other kitchen items for free or at a substantially reduced price.

 

Easy to Find Gently Used Equipment

Unfortunately, many restaurants don’t make it past the first couple of years (you’re going to do your due diligence so that’s not going to be you). The gently used equipment of these failed restaurants can be had at a bargain. If you purchase from a reputable used dealer, they often provide certifications that confirm that they’ve inspected the equipment for safety and usability (certified used). If you’re considering an independent seller who doesn’t offer certifications, inspect the equipment for irreparable damage. Ask the seller where they purchased the equipment and ask for proof that it’s still under warranty. 

 

Equipment May Still Be Under Warranty

Gently-used restaurant equipment is often still under warranty. In this instance, the manufacturer is still responsible for the cost of repairs regardless of the current owner. 

 

chefs

 

Disadvantages of Buying Used Restaurant Equipment

 

Buying used restaurant equipment can be a great way to outfit a restaurant without breaking the bank. Before making a final purchase decision, you should always do your due diligence by researching the seller, their restaurant, and how long they were in business. 

 

Expired Warranty

If you buy used equipment with an expired warranty, you’re responsible for any repairs should it break down. Weigh the estimated cost of repairs against any savings you may realize.

 

Undetected Damage

Buying used equipment with an expired warranty could be disastrous if you later discover malfunctions that weren’t detected during pre-purchase inspection. The repair costs could end up being more than the equipment is worth.

 

Limited Brand Selection

You may find that you have to settle for a brand other than what you had in mind or forego some functionality. 

 

plates

 

Restaurant Equipment to Buy Used

 

When it comes to buying restaurant equipment, there are some items that probably shouldn’t be purchased used because they may give you trouble down the line. During the buying process, always ask questions and test the equipment before finalizing the purchase. This is especially important with costly pieces. You don’t want to make a large cash outlay twice.

Here are some restaurant equipment items that are ideal for buying used:

 

Gas Equipment

Electric equipment is harder to fix when it breaks down because replacement parts are hard to come by. On the other hand, gas equipment is easy to repair and parts are more readily available. Gas equipment also breaks down less often. 

 

Ovens & Ranges

Because they have long lifespans, ovens and ranges are ideal equipment items for purchasing used. Before purchasing, test the oven or range to ensure that the oven and stovetop heat evenly. The cooking surface should be level and the oven seals should be intact. Bring your head chef along to ensure these appliances are in good working condition.

 

Fryers

Gas fryers have long lifespans like ovens and ranges. This makes them ideal for purchasing used. When vetting a fryer, make sure the oil container is still watertight as any splits will result in oil leakage. The fry baskets are an inexpensive replacement so don’t be overly concerned about them.

 

Small Appliances

Quality used pots, pans, knives, blenders, food processors, and kitchen utensils should be relatively easy to find. Test any motorized equipment to ensure they’re working properly. Knives can be easily sharpened and you’ll be able to see if there is excessive wear or damage to pots and pans before deciding to purchase. Vendors often offer small used appliances in bundles and will guarantee the functionality of the appliances for a specific time period.

 

Tableware

Restaurant-grade dishes, glassware, and flatware are designed for frequent use, making them ideal for buying used. You can buy entire used table settings that include salt and pepper shakers, and condiment holders without running into issues other than finding styles that suit your taste.

 

wine glass

 

Advantages of Leasing Restaurant Equipment

 

As you prepare to open your new restaurant, you may have considered leasing some of the equipment instead of buying outright. Because commercial kitchen equipment gets a lot more wear than equipment in a typical home kitchen, you’ll need to factor in the cost of repairs and the time expended searching for reputable repair companies if you buy outright. For this and other reasons, leasing for a commercial kitchen often makes the most sense.  Here are some of the benefits of leasing restaurant equipment.

 

Saves Money

Leasing large commercial kitchen equipment, like a commercial grade stove, makes sense for budding restaurateurs. The money you‘ll save by leasing equipment instead of buying outright can be used in other areas. Instead of shelling out thousands of dollars for a stove, you could use that money toward your initial marketing budget or to stock your kitchen with the ingredients for your first week’s recipes.  

 

Some Equipment is Free

Some “leased” equipment may actually have no monthly lease fee. There are vendors who will offer leased equipment for free as long as you’re purchasing products from them on a regular basis. For example, a coffee vendor may provide you with coffee makers without charging a leasing fee if you regularly purchase their coffee. 

 

Don’t Pay for Repairs

When you lease restaurant equipment, you typically don’t have to pay for repairs if the equipment breaks. If you buy it outright, it’s all yours and you’re fully responsible for keeping it in good working condition (outside of the warranty period). 

 

Better Equipment

Since you don’t have to pay the entire cost of the equipment upfront, you may be able to afford a higher quality piece of equipment. 

 

Easy to Upgrade

If you prefer to lease cars instead of buying, do you do so because you like the idea of always being in the latest model? If you lease your commercial kitchen equipment instead of buying, you can easily get a newer model. 

 

breakfast

 

Disadvantages of Leasing Restaurant Equipment

 

There are advantages to leasing restaurant equipment but there are downsides as well.

 

No Equity

When you purchase equipment, you build equity. Should you find yourself in a financial bind, you can sell the equipment and recoup some of your investment. When leasing equipment, the money applied to monthly payments is gone forever.

 

Fine Print

Interest rates and early termination fees are part of a lease arrangement. Also, if an item doesn’t perform the way you expected it to, you may take on additional cost if you want to replace it.

 

Types of Restaurant Equipment Leases

 

If you’ve decided to go the lease route, here are the common types of equipment leases:

  • Lease-to-own If you feel confident that you want to purchase the equipment at lease-end but don’t want to make a large payment upfront, this lease option may work for you. You’ll have higher monthly payments but a lower buyout amount at lease-end.
  • Fair market value lease Allows you to obtain the latest equipment at a lower monthly cost. A portion of the equipment’s purchase cost is often deferred to the end of the lease. At that time, you can purchase the equipment at fair market value, return it, or continue the lease on a month-to-month basis.
  • Quarterly equipment lease You can make quarterly lease payments, instead of monthly. Interest rates are often higher.
  • Seasonal lease, semi-annual lease If your restaurant has distinct busy and slow seasons, instead of making monthly lease payments you make them during your busy season when sales are highest.

 

Before You Lease Restaurant Equipment

 

As with any financial arrangement, you’ll have to sign a contract or agreement when leasing restaurant equipment. Review the document carefully (or have your small business attorney review it) to make sure you understand and agree to the terms. Take note of certain stipulations like having to make payments for the remainder of the lease term should you decide to end the arrangement before the lease has expired.

And, as with any lease, you don’t own the equipment so you’ll have to make regular payments (weekly or monthly) for the use of it. This information will be detailed in the contract or agreement.

 

restaurant

 

Restaurant Equipment Financing

 

To outfit a professional restaurant kitchen, you’ll need much more than a refrigerator and stove.  Commercial-grade ovens, dishwashing equipment, and other kitchen essentials are necessary for your restaurant to run smoothly and meet health codes. However, the cost of restaurant equipment can be exorbitant which is where restaurant equipment financing comes in. 

Restaurant equipment financing is a type of small business loan that restaurant owners obtain to purchase equipment. The purchased equipment serves as collateral for the loan. If you need a new stove, refrigeration unit, or other equipment, there are restaurant equipment financing companies that will provide secured financing without you having to offer other collateral. This financing option is ideal for fledgling restaurants and owners with personal credit challenges.

Even if you have available cash, financing equipment will keep you from disturbing your working capital. Because this type of financing is secured by the equipment and is less risky for the lender, new restaurants and credit-challenged owners can still access low interest rates and long repayment terms.  Credit rating and time in business aren’t the only factors that equipment financing lenders consider during the approval process. Many lenders will place just as much emphasis on the quality of the restaurant equipment you want to purchase and use as collateral. 

Before signing on the dotted line, make sure you understand any limitations in the equipment financing terms. Some lenders won’t finance used equipment. Others will limit you to specific brands. Scour your agreement for any additional fees, early payoff penalties, late charges, and unexpected taxes. 

 

Financing vs. Leasing Restaurant Equipment

 

If you decide to finance your equipment, your restaurant will be the legal owner of the equipment and can add it to the restaurant’s total assets. If your restaurant is based in the U.S., you can also take advantage of special tax deductions under IRS 179. 

If you finance, your restaurant equipment might be outdated by the time you pay off the loan. If you lease your restaurant equipment, you can opt not to purchase the equipment for fair market value once your leasing agreement expires. This frees you to easily upgrade to a newer model. If you expect your restaurant to quickly outgrow its initial equipment needs, then you should consider leasing your restaurant equipment rather than financing it. 

 

glasses

 

Tools & Equipment Most Restaurants Need

 

commercial kitchen needs industrial-grade equipment that can withstand heavy use. Depending on the size of your kitchen and your restaurant type, you may not need everything listed below or you may need other items that are specific to your type of restaurant. 

  • Range
  • Oven
  • Grill
  • Deep fryer
  • Grease traps
  • Steam table
  • Dishwasher
  • 3-compartment sink
  • Walk-in cooler
  • Reach-in cooler
  • Freezer (upright or walk-in)
  • Ice machines
  • Coffee brewer
  • Microwave
  • Toaster
  • Beverage dispensers
  • Food processors
  • Prep tables
  • Blenders
  • Kitchen spoons
  • Turners
  • Chef’s knives
  • Cutting boards
  • Slicers
  • Mixers
  • Tongs
  • Spatulas
  • Ladles
  • Whisks
  • Strainers/colanders
  • Squeeze bottles
  • Stock/soup pots
  • Saucepans
  • Saute pans
  • Baking pans
  • Oven mitts
  • Pizza pans
  • Pizza paddle
  • Mixing bowls
  • Entrée plates
  • Pasta bowls
  • Appetizer plates
  • Salad plates
  • Dessert plates
  • Flatware
  • Glassware
  • Storage containers
  • Commercial shelving
  • Bussing & utility carts
  • Sheet pan racks
  • Drying racks
  • Dunnage racks (for storing large, bulky items safely off of the floor while taking up little space)
  • Restaurant POS system with printer (for sending food orders to the kitchen)
  • Cleaning rags
  • Scrubbers & sponges
  • Mops & cleaning buckets
  • Brooms & dustpans
  • Rubber floor mats
  • Trash cans/recycling bins
  • Hand soap/sanitizer dispenser
  • Fire extinguisher
  • First aid kit
  • Goggles
  • Wet floor signs
  • Domed safety mirrors (so staff can see who’s rounding a corner)
  • Restroom supplies (toilet tissue, paper towels, hand soap, baby changing tables)

 

Your menu can also help you determine the equipment you’ll need in your restaurant. For example, your equipment list can include your recipes and the tools needed to create each one. For each item on the menu, list every piece of equipment you need to create the dish. List pots, pans, knives, graters, measuring cups, fryers, stoves, food processors, freezer, fridge, etc.  List every single item.

 

A spreadsheet will aid in capturing this information and will look something like this:

 

Fettuccine Alfredo             Strainer

Fettuccine Alfredo             Stock pot

Fettuccine Alfredo             Whisk

 

Repeat the process for every menu item/recipe. Once all recipes have been listed, sort the list alphabetically and remove duplicate equipment items. 

 

cocktail

 

Outfitting a Restaurant Bar

 

If you want to offer “non-soft” beverages to your restaurant guests, you’ll need to set up a bar. The actual set-up will depend on the restaurant’s size and theme. Will you have a service-only bar where customers aren’t served directly and servers place drink orders and pick them up for the customers? Or, will you have a full-service bar where customers can place drink orders directly and order food? 

In some restaurants, the bar doubles as a wait station where servers can dispense their own fountain drinks. In others, the bar is strictly off-limits to anyone other than the bartender who can be somewhat territorial as he/she considers the bar to be their domain. If this is the case, you may need to restrict servers from entering the area during certain hours or altogether.

If your set-up will allow for food orders to be placed at the bar, you’ll need to have an integrated POS system. The system will allow the bartender to settle customer bills right at the bar and send food orders to the kitchen. 

 

Your Liquor License

Depending on your location and the type of liquor license you have, you may be allowed to sell all alcohol, or only wine and beer. The type of license you have will determine the type of supplies and equipment you’ll need. It’ll also determine if your staff needs to have specific training related to handling liquor. Some locations require Training for Intervention Procedures (TIPS) certification or an alcohol awareness class. Even if the license-issuing authority doesn’t require it, it’s important that staff members who handle liquor be well-trained in order to protect themselves, the customer, and the restaurant.

 

bar

 

How Much Space Will You Need?

If your liquor license only permits you to serve beer and wine, a small service-only bar should be adequate. If your license allows for serving all alcohol and you want to increase restaurant revenue by maximizing bar sales, you’ll want a full-service bar. The amount of space you have available may also dictate the type of bar service you offer. 

The amount of counter space you’ll need will depend on how many guests you want to seat at the bar. A good rule of thumb is to have a minimum of 24” between each bar stool as measured from the center of one bar stool to the center of the next. However, depending on the width of the stool and the size of the person using the stool, 24” may still be a tight squeeze. Therefore, it’s probably best to have at least 26” of space.  

Depending on the overall size of your restaurant and/or amount of space designated for the bar, you may want to include a standing-room area where guests can wait for an available table. This type of bar is best placed in the front of the restaurant. For server convenience, place the bar in the center of the restaurant so they can easily access it from any point in the dining room.

 

Stocking Your Bar

Choosing the right equipment for your restaurant bar will ensure that it runs smoothly and that customers have a positive experience. Positive customer experiences will influence tips and return visits. Here are the typical supplies and equipment needed in most restaurant bars. Depending on the type of bar service you plan to offer, you may not need everything listed or you may need other items that are specific to your type of restaurant. 

 

Refrigeration:

  • Kegerators or beer towers (used to dispense draft beer, wine, cold brew coffee, and kombucha)
  • Horizontal bottle cooler
  • Swing door back bar cooler
  • Swing door merchandiser

 

cocktail

 

Additional Equipment:

  • Speed rails
  • Liquor dispensers
  • Rubber floor mats
  • Ice maker
  • Ice wells
  • Ice crusher
  • Blenders
  • Waitress stalls
  • Glass racks/holders
  • Paper towel dispenser
  • Bar POS system    

 

Glasses:

  • Rocks glasses
  • Pint glasses
  • Shot glasses
  • Collins (and other specialty) glasses
  • Pint glasses
  • Wine glasses
  • Champagne glasses
  • Martini glasses
  • Brandy snifters
  • Highball glasses
  • Mixing glasses

 

Tools & Accessories:

  • Jiggers
  • Muddlers
  • Cocktail shakers
  • Cocktail spoons
  • Citrus juicers
  • Cap catchers
  • Bottle and can openers
  • Cocktail strainers
  • Garnishing tools
  • Muddling supplies
  • Straws and stirrers
  • Cutting boards
  • Napkins & coasters
  • Bar mats
  • Bar towels
  • Liquor bottle pourers
  • Containers for garnishes and bitters
  • Ice cube trays, ice molds, and ice buckets
  • Wine openers

 

Bottle coolers should be big enough to hold bottled beer, wine bottles, juice, milk and other beverages needed to mix drinks. You may have to run beer lines from the walk-in cooler if your bar doesn’t have enough space for kegs or kegerators. 

Your bar equipment list should also include a selection of well liquors (typically lower-cost liquor that’s the equivalent of house wine) and top-shelf liquors, as well as liqueurs and mixers for cocktails.

 

liquor

 

Liquor

  • Vodka
  • Gin
  • Tequila
  • Whiskey
  • Scotch
  • Bourbon
  • Rum
  • Triple Sec

 

Liqueurs

  • Amaretto
  • Coffee liqueur
  • Dry and Sweet Vermouth
  • Irish Cream liqueur
  • Orange liqueur

 

Cocktail Mixers

  • Lemon and Lime juice
  • Orange juice
  • Cranberry juice
  • Grapefruit juice
  • Pineapple juice
  • Tomato juice
  • Bitters
  • Simple syrup
  • Sour mix
  • Grenadine
  • Milk, Half & Half, or Cream
  • Tabasco Sauce and Worcestershire sauce

All bars need a soda fountain for dispensing the most common mixers for drinks, including soda and water.

 

Common Sodas

  • Club soda
  • Tonic water
  • Ginger ale
  • Cola and diet cola
  • Lemon-Lime soda

To take your drinks up a notch, you’ll want to stock fruit garnishes and other ingredients that give your restaurant bar panache. 

 

cocktail

 

Fruit Garnishes

  • Lemons
  • Limes
  • Oranges
  • Maraschino cherries

 

Nice Extras

  • Olives
  • Cocktail onions
  • Mint
  • Salt and sugar
  • Cinnamon
  • Grated nutmeg
  • Celery or pickles
  • Whipped cream

 

Properly Light Your Bar 

Whether you intend to add glamour to your restaurant’s bar or make it comfy and casual, choosing the right lighting to achieve your desired look is key. Since bars have become the focal point in many restaurants, the lighting in your bar should serve both a practical and aesthetic purpose.  First of all, bar lighting should be subtle but not so dark that guests can’t read menus.  

Lighting designers often suggest that light designs with clear glass and globes be hung above the seating area to emit the optimal amount of light for reading menus and watching sports on the big screen. Pendants and track lighting are most often installed above the seating area. Adding dimmer switches will allow you to adjust the light for the time of day.

Uplighting along the back of the bar or strategic backlighting behind transparent liquor bottles showcases and encourages the sale of premium liquors. Uplighting is also used to highlight special wall finishes such as hand-applied plaster or untreated wood. The aim is to provide dimension and texture to the bar area. Your bar lighting should complement the colors and furniture used in the bar and, ideally, throughout the restaurant.  If you want to create a party atmosphere, use colored LEDs for a lively effect. 

Lastly, buy your restaurant bar lighting from a reputable manufacturer or retailer. Research the manufacturer to obtain information about the company and its history of providing lighting for bars and restaurants. Whenever possible, contact/visit some of their former clients to assess the quality of their work. Don’t cut corners. Reputable manufacturers may charge a little more upfront but you’ll save money in the long run because you’ll have purchased a quality product that lasts longer.      

 

Ask About Freebies 

Before buying any accessories or decorative items for your restaurant bar, find out if your beer, wine, or liquor salesperson/distributor will provide things like glasses, coasters, mirrors, or specialty lighting. Companies that sell alcoholic beverages will often give free merchandise to their customers.

 

food

 

Final Thoughts

 

Opening a new restaurant can be a rewarding experience but without proper planning, initial costs can add up quickly. To secure quality restaurant equipment and maintain adequate working capital, consider alternatives to purchasing new equipment. If only new will do, consider available financing options.

Whether you decide to purchase new, used, or lease, make sure you’re buying commercial-grade equipment. Residential-grade equipment wasn’t built to handle the capacity of a commercial kitchen. You don’t want your restaurant equipment to fail when you need it most.

 

 

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