The success of any restaurant depends largely on the quality of the equipment in the kitchen. While buying new equipment is an option, it can also present a significant financial burden.

As an alternative, leasing restaurant equipment has emerged as a viable solution for many foodservice businesses. This method of equipment financing allows new restaurants and even established ones to acquire the necessary equipment without committing a large chunk of their capital upfront.

However, just like any financial decision, it comes with its advantages and disadvantages which we will thoroughly examine in this article.

What are the Advantages of Leasing Restaurant Equipment?

When it comes to the restaurant industry, maintaining a positive cash flow can be a challenge. Leasing restaurant equipment presents a solution by providing a range of benefits.

Affordable Monthly Payments

Unlike buying equipment outright, where a large upfront payment is required, leasing equipment involves manageable monthly payments. This allows you to distribute the cost over time, freeing up working capital that can be used for other critical business areas like marketing or hiring additional staff.

Access to High-quality Equipment

Leasing equipment can offer your restaurant access to the latest commercial kitchen equipment from top brands. You can upgrade your equipment as often as you want, keeping your restaurant at the forefront of the industry's technological advances.

Easier Approval Process

Compared to traditional bank loans, equipment lease agreements are often easier to qualify for, especially for new businesses with little to no payment history. Leasing companies typically base their approval on the equipment's value and the business's potential profitability, making it a viable option even for businesses with bad credit.

Tax Benefits

Under certain lease agreements, lease payments can be considered operating expenses, which could potentially provide tax deductions, depending on your location's tax laws. This could help reduce your business's overall tax liability.

What are the Disadvantages of Leasing Restaurant Equipment?

Despite the many benefits of leasing restaurant equipment, it's not always the best option. It's essential to consider the potential downsides before signing a lease contract.

Cumulative Cost

The convenience of small, monthly payments can be deceiving. In most cases, the total cost paid over the term of the lease is higher than if the equipment had been purchased outright. This is primarily due to interest rates and fees associated with leasing.

Lack of Ownership

Leasing restaurant equipment means you never actually own the equipment. This lack of ownership can become a problem when considering the equipment's value as a business asset and potential collateral.

Early Termination Fees

Leasing contracts often include early termination clauses with associated penalties. This means if you decide to cancel the lease before the end of the term, you might incur hefty fees.

Limitation on Usage

Lease agreements often come with terms and conditions on how the equipment can be used and maintained, potentially limiting your flexibility.

How to Lease Restaurant Equipment?

The process of leasing restaurant equipment may vary from one leasing company to another, but the basic principles remain the same. It starts with understanding your needs and then choosing the best financing option that suits them.

Let's take Kitchenall, a restaurant equipment supplier and distributor, as an example.

We offer short and long-term financing options.

Short-Term Financing

Kitchenall provides a convenient short-term financing option. Once you fill in your credit application, approval can come in as quick as 30 seconds. The lease amount can range from $1,500 to $50,000, spanning over 12 months.

The best part?

You get 0% interest for the first 30 days. After that, the interest rates are as low as 1%. The process is straightforward. You simply choose the equipment you need on Kitchenall's website, add them to your cart, and then checkout using the short-term financing option.

Long-Term Financing

If you're looking at a larger amount or a longer lease term, Kitchenall also offers long-term financing options.

With this option, you can finance up to $200,000 worth of restaurant equipment. The interest rates for this option are variable and based on your credit rating. Approval requires underwriting and generally takes 2-3 days.

You will need to work with a Kitchenall sales representative throughout the process to ensure a smooth experience.

What type of restaurants benefit most from leasing restaurant equipment?

Not all types of restaurants may benefit equally from leasing their kitchen equipment.

• Start-ups and new restaurants often find leasing particularly attractive. The reason? It allows them to equip their kitchen with high-quality appliances while keeping their initial investment low.
• Fast-food restaurants and cafes that heavily rely on specialized equipment may also benefit from leasing. Since they often require top-of-the-line equipment to ensure quick and consistent service, leasing gives them access to the latest models and technology without the hefty price tag.
• Establishments with seasonal operations such as food trucks, catering services, or pop-up restaurants might also prefer leasing. They can lease the equipment only for the duration of their operational season, saving costs when the business is off-season.

What are the alternatives to leasing equipment?

While leasing is a popular choice for many, it's not the only option out there. Other alternatives can provide different advantages depending on your business' circumstances and needs.

Purchasing New Equipment

Buying brand new equipment might require a significant upfront investment, but it also means you have complete ownership of the equipment. This can be a great long-term investment, as you can sell the equipment if you decide to upgrade or if the business changes direction.

Buying Used Equipment

Used restaurant equipment can be an affordable alternative to leasing. Some businesses sell their gently used equipment when they upgrade or close, offering an opportunity to get quality equipment at a much lower cost.

Overstock or Discounted Equipment

Overstock or discounted equipment from suppliers can also be a cost-effective option. These items are usually brand new but are sold at a reduced price due to overstock or model discontinuation. This option can save your business money while still allowing you to own the equipment outright.

Conclusion

Whether to lease or buy restaurant equipment is a decision that requires careful consideration. Leasing offers many benefits such as flexible payment options, access to high-quality equipment, and potential tax advantages. However, it also comes with its downsides, including the cumulative cost, lack of ownership, and potential limitations on usage.

On the other hand, buying the equipment, whether new, used, or discounted, can be a great long-term investment but also requires substantial upfront costs.

The choice between leasing and buying ultimately depends on your restaurant's specific circumstances, including your budget, cash flow, credit rating, and long-term plans. It's always recommended to review all your options and possibly seek financial advice before making the final decision. With careful planning and thorough research, you'll be better equipped to make the right decision for your restaurant business.