Leasing vs Buying Equipment

By Hina Jasim
Greg Heller, owner of the ‘Chef Upstairs buys his own restaurant equipment.

“It’s better to buy your restaurant equipment, even more so if you’re an independent restaurant,” Heller said.

Restaurant owners across Toronto have two options with their equipment: either buying or leasing it. There are several restaurant equipment vendors who rent and sell separately, or have the option of both. There are many different points in choosing either option for restaurateurs, but it depends on the size and type of restaurant. Companies like Nella Cutlery and Russell Food Ltd. are examples that lease their restaurant equipment, Dinetz is one who sells. There are pros and cons for both choices, but it relies on the type of restaurant equipment you’re looking for.

Rick McDonald, a contract sales representative at Russell Food Equipment Ltd. Is responsible for designing the equipment, fabrication and creating custom-steel designs.

“We don`t lease restaurant equipment, we have three leasing companies in place who do. We don`t lease or finance the equipment ourselves, it`s another company“ McDonald said.

With 14 branches across the globe, Russell Food is a family owned company and mainly responsible for manufacturing restaurant equipment.

“The equipment depends on what the owner wants, if they want to buy or lease their equipment“ McDonald said.

The company is primarily known for leasing restaurant equipment, but does have the option of selling some items. For example, a dishwasher, ice cooler and bar items.

“We have every cooking equipment available for a restaurant, anything and everything“ McDonald said.

Restaurant owners need to look at many factors before buying or renting restaurant equipment. The safety features, quality and how efficient the item is. The cost of the item depends on how long it will last.

“Prices vary from a small size at $400 to a large at $1500“ McDonald said.

A dishwasher from Dinetz is priced at $400, fridge is $3,600 and oven is $30,000. Burner is $1,700…

Foodservice and Financial Restaurants like Canyon Creek, Marcels and Richtree are just a few examples of their clients.

Doug Fischer, a restaurant consultant with FHGI has an extensive background in foodservice and restaurant management himself. After completing his Masters in Restaurant Management, from George Brown College Fischer decided to put his experience in the restaurant industry to good use.

“The basis of my job is to advise restaurant operators on how to run a successful business. Restaurant equipment impacts the business by the effect of reducing labor and costs“ Fischer explained.

Through the use of reviews, market research and strategy planning, Fischer helps restaurant owners better their business.

“Restaurants are now using equipment that`s more power-saving, reducing labor as best they can“ Fischer said.

He went on to use the example of a potato peeler that`s been around for years, but now with the latest technology that same item cuts down on prep time.

“Reducing your prep time is very important when running a successful restaurant. There`s a lot of technology…“ Fischer said.

According to an E-lease study nearly $1 billion worth of restaurant equipment is leased annually in the USA. The Restaurant Central site showed that restaurant sales are made up of 60 per cent sales, 40 per cent labor, which accounts for restaurant equipment. There are more than 500 companies in both USA and Canada that lease and sell restaurant equipment.

“I believe purchasing restaurant equipment is the better option, since leasing has very high interest rates“ Fischer said.

Pros for buying restaurant equipment are first needing to have a strong credit history and up-front cash. This works for restaurant owners who know how to maintain their restaurant and equipment very well. A con is the up-front cost is higher; it takes away from your profit and budget. There`s also dealing with repair of the equipment and maintenance. When you`re renting restaurant equipment, a pro is you`re not stuck with the item, you can return it anytime, especially if it breaks or stops working altogether. Some vendors might even waive the monthly fee, if it`s a new restaurant. One of the cons is dealing with credit checks and the high interest rates.

“Leasing equipment comes with higher interest rates, high depreciation. It`s better to deal with a bank`s interest rates, than rates with leasing equipment“ McDonald said.

Independent restaurants in Toronto make up most of the market and want to buy the right equipment for their business, especially because they`re making a mark in the industry.

“We buy our restaurant equipment since it highly expensive to lease. Our restaurant equipment is fairly simple; we have a gas stove, dual oven and a large fridge. There`s a small cappuccino machine, dishwasher and a wine cooler“ Heller said.

The restaurant has been in business since 2008, after taking over from founders Jim and Janice Colbert. Heller is an entrepreneur, wine collector and successful chef.

“Buying is definitely a better option in my opinion, if you have the cash I say buy your equipment“ Heller said happily.

McDonald from Russell Foods agrees with the buying option.

“It`s a lot more expensive to lease, than to just buy it. You can lease as well, but smaller items. Joe Fresh for example, prefers to lease their dishwasher rather than buying it“ McDonald said.

Fischer explained how he tells his clients to have an equal budget, with half of the 50 per cent going into the restaurant`s equipment.

“If you can`t afford the restaurant equipment, don`t be in the business“ Fischer said.

Companies like Russell Food and Dinetz tell the restaurant owners to lese small items like grills and freezers, buy large items like ovens and fridge.

“In my perspective, buying restaurant equipment is better for the business. If you decide to buy, you have at least five to 10 years with a good equipment“ McDonald said.

Dinetz is a company, which mainly leases restaurant equipment across Toronto and deals with both chain and some independent restaurants.

Larry MacLean is clerk who has been working at Dinetz for the past 10 years and deals with the equipment, customers and designing.

“Leasing your restaurant equipment is a better option from my opinion, you can write-off your rented equipment but you can only do that with specific items when buying“ MacLean said.

MacLean went on to describe the process of leasing versus buying. He explained it`s the same, until the financial factor.

“Buying is just paying for the item up-front and taking it in, but leasing requires going through credit checks and another company“ MacLean said.

Heller stays adamant on buying the equipment.

“Leasing has very high interest rates and harder when you own a new restaurant“ Heller said.

Whether you`re buying or leasing your restaurant equipment, there are many equipment vendors in place to take care of your needs. If you have the cash and a running restaurant, then buy but if you`re a new restaurant then lease.

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