Restaurant Social Media
Equipment Cost Control
How do you control the cost of equipment and supplies and make intelligent purchasing decisions?
We all know that controlling the cost of doing business is not optional and it is a huge area for discussion. Spending is everywhere. It seams to be involuntary. It gets up with us in the morning, and doesn’t let up until we go to sleep. But even then, the furnace keeps running and payments accrue.
Harnessing the cost of doing business and growing sales are equally important. In fact they go hand to hand, and require equal attention. Cost control is necessary in every aspect of our business, food, wages, utilities…and the list goes on and on.
I’m here to discuss only one small cost area; and that is your capital investment in equipment, fixtures, and supplies.
Let me begin with the following questions.
1. Do you know exactly what you want to buy before you ask for quotes?
This question may be easy if you go to the NRA or NAFEM show, and come home with the exact specification. You may have searched the internet, or have a friend that told you about this equipment. You may have seen it in a competitor’s establishment.
2. Do you know what your cost is going to be before you get prices?
This one is easy too. You may have obtained the list price at the show or from the manufacturer’s web site and think you should get 30-50% off the list price. Combine that with two or three internet mail order prices, and you find out exactly what you are willing to pay.
3. Did you make a good buying decision?
This is easy as well. Company X price was $3,000, Y was $3,200, and Z was $2,900. Of course you bought from Z and took advantage of the best deal. You made a good buying decision.
Let’s talk about the various aspect of purchasing equipment. Ask me questions and give me answers. I’ll continue to build this discussion. My statements above may seam very basic, but it’s best to start from the ground floor and construct a purchasing model that will give you the tools to make wiser purchasing decisions.
What is missing in the above equipment buying scenario?
How can you overpay in the bidding process?
What is the difference between purchasing a new start up package vs. equipment replacement?
How does the useful life of the equipment you are purchasing affect the value, and influence what you are willing to pay?
How do vendor relationships affect the buying decision?
What purchasing strategy differentiates the chain operator from the independent operator?
What are you buying, value or price?
How does value translate to the bottom line?
Are all equipment vendors created equal?
How can I control energy consumption?
What is Energy Star?
We all know that controlling the cost of doing business is not optional and it is a huge area for discussion. Spending is everywhere. It seams to be involuntary. It gets up with us in the morning, and doesn’t let up until we go to sleep. But even then, the furnace keeps running and payments accrue.
Harnessing the cost of doing business and growing sales are equally important. In fact they go hand to hand, and require equal attention. Cost control is necessary in every aspect of our business, food, wages, utilities…and the list goes on and on.
I’m here to discuss only one small cost area; and that is your capital investment in equipment, fixtures, and supplies.
Let me begin with the following questions.
1. Do you know exactly what you want to buy before you ask for quotes?
This question may be easy if you go to the NRA or NAFEM show, and come home with the exact specification. You may have searched the internet, or have a friend that told you about this equipment. You may have seen it in a competitor’s establishment.
2. Do you know what your cost is going to be before you get prices?
This one is easy too. You may have obtained the list price at the show or from the manufacturer’s web site and think you should get 30-50% off the list price. Combine that with two or three internet mail order prices, and you find out exactly what you are willing to pay.
3. Did you make a good buying decision?
This is easy as well. Company X price was $3,000, Y was $3,200, and Z was $2,900. Of course you bought from Z and took advantage of the best deal. You made a good buying decision.
Let’s talk about the various aspect of purchasing equipment. Ask me questions and give me answers. I’ll continue to build this discussion. My statements above may seam very basic, but it’s best to start from the ground floor and construct a purchasing model that will give you the tools to make wiser purchasing decisions.
What is missing in the above equipment buying scenario?
How can you overpay in the bidding process?
What is the difference between purchasing a new start up package vs. equipment replacement?
How does the useful life of the equipment you are purchasing affect the value, and influence what you are willing to pay?
How do vendor relationships affect the buying decision?
What purchasing strategy differentiates the chain operator from the independent operator?
What are you buying, value or price?
How does value translate to the bottom line?
Are all equipment vendors created equal?
How can I control energy consumption?
What is Energy Star?
Replies to This Discussion
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Permalink Reply by Rob Ames on -
HI I just joined so I will just start short and add as the discussion grows. One thing to consider is the leasing option. Although the long term cost may be higher, typically leasing comes with free replacement if equipment fails. Of course there is also the extended warranty on eqwuipment if you buy outright. There are now tax credits available for energy star rated equipment also. Leasing allows you to budget for more in the present as the initial expense is lower (partial payment) My business has done it both ways. Typically we lease high usage items- dishwashers for example, and buy low usage items like freezers. It is not an exact science, ineveitably someone will buy a dud. As long as you have the warrenty to cover you in the beginning you are sfae, but after that expires then you dig deep again.
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Permalink Reply by Joe Quicquaro on -
Hello Rob,
The type of lease you are referring to I find to be more of a rental program; although some food and chemical product suppliers may offer you a lease to own option, the strategy is to lock you in. Stop buying the product and you loose the machine.
Most of these vendors expect a certain amount of purchasing volume, so they can pay for the cost of the machine and maintenance over time. The price you pay for product may be overly inflated; however it may not be inflated much if you are a super high volume customer who buys food and other products that make up the difference.
Regardless, when it comes to the vendor side of things, the price you pay for product better pay the cost of the equipment or they are not making money. The most popular types of equipment I see with these programs are dishwashers and coffee makers. I've seen rental programs for ice maker as well for $50-60 s month. When it breaks they fix it, and when it breaks too many times (for them), they replace it; most likely not with a new machine.
Dishwashers are very expensive and require heavy maintenance. I've seen chemical prices all over the place. Coffee makers can be cheap and easier to hand out; but believe me they are monitoring how much coffee you buy. I am a firm believer in owning your equipment, and lease to own purchasing is fine if it is not tied to the food or chemical product. It makes sense to spread out the cost and pay for your equipment over time because you don't make it all back the minute you buy it. In the stream you are making money before you spend it.
If you have noticed, all these equipment items use water. Water does nothing to extend the useful life of your equipment unless you use some soap and water with it and keep that equipment clean. I always suggest that you need to be careful about how much you spend, but never think you're getting it free. Free may be the most expensive way to go.
My suggestion....buy the machine, clean it every day, filter the water, and shop to death those chemical and beverage prices, you'll be way ahead of those who are trying to take your money when your not looking or think you are saving.
Thanks for participating and I hope you don't think I sound like some kind of know it all....I'm not. I just see all of this from the sales side, and I want to really understand the thought process and logic of the buyer. I haven’t figured it out yet and that's why I'm here.
Joe Q "The Equipment Guru" -
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