After spending an afternoon visiting used restaurant equipment dealers in the Richmond area, I came away with interesting information and an eyeful of well maintained used restaurant equipment. One dealer had 15 used Hobart 80 quart mixers in one area of his warehouse. Every dealer I visited was easily sitting on a hundred thousand dollars worth of equipment.
The second restaurant equipment dealer spent a good fifteen minutes talking about the industry. Their family is moving away from used restaurant equipment, deciding to concentrate mainly on new restaurant equipment. After spending forty years in the used restaurant equipment business they are ready for a change. Their goal is to stock the showroom with a few high end freezers, refrigerators, ranges, and mixers but drop-ship most items ordered directly from the manufacturer.
Besides the obvious saving on inventory and warehouse space, this family dealership considers used restaurant equipment to be more of a headache with each passing year. Restaurant equipment repair is becoming increasingly expensive based on two factors: the cost of hiring experienced repairmen and ordering spare parts.
While this restaurant equipment dealership is moving mainly to new restaurant equipment, I was told "the majority of customers walking through their door are still looking for used restaurant equipment first." How this company balances their customer's demands with a move towards selling new restaurant equipment will be interesting.
2007年5月31日木曜日
Legwork
This tip is from a highly successful restaurant equipment dealer in the Raleigh-Durham area.
"Do the legwork. If you want to open a restaurant, don't just go and open up a restaurant. Go work in the industry for six months to a year. See if you like it and gain an understanding of the work involved. Too many people take their retirement accounts and decide to open a restaurant or catering business without considering pitfalls and the work required."
This restaurant equipment dealer started as a manager in a highly successful food service franchise. By learning about the food service industry and the restaurant equipment needed, he effectively counsels restaurant startups while selling them complete restaurant equipment packages.
This advice is well documented but often not heeded. By spending a year working in a restaurant similar to your potential food service establishment you can learn best practices. These include choosing food suppliers and products, dealing with labor issues, and choosing restaurant equipment suppliers as well as the equipment needed to start your business.
"Do the legwork. If you want to open a restaurant, don't just go and open up a restaurant. Go work in the industry for six months to a year. See if you like it and gain an understanding of the work involved. Too many people take their retirement accounts and decide to open a restaurant or catering business without considering pitfalls and the work required."
This restaurant equipment dealer started as a manager in a highly successful food service franchise. By learning about the food service industry and the restaurant equipment needed, he effectively counsels restaurant startups while selling them complete restaurant equipment packages.
This advice is well documented but often not heeded. By spending a year working in a restaurant similar to your potential food service establishment you can learn best practices. These include choosing food suppliers and products, dealing with labor issues, and choosing restaurant equipment suppliers as well as the equipment needed to start your business.
2007年5月24日木曜日
Where does it go?
I spent a couple of hours touring a restaurant equipment dealership this afternoon. After perusing through rows of used ice cream cabinets, refrigeration units, and sandwich prep tables, I quizzed the owner on his business and the restaurant equipment industry.
It turns out that a larger and larger percentage of used restaurant equipment is being stripped down for parts and metal scrap. China's insatiable demand for metal is turning old fryers, grills, and refrigeration units into exportable scrap metal. This used restaurant equipment dealer has been approached by at least one interested party. This demand for metal also explains the rising price of stainless steel products.
Many startup restaurants shy away from used restaurant equipment because of the potential hassle from health department inspectors. According to this dealer, certain county officials are merciless when it comes to inspecting used restaurant equipment. The repair requirements and assosiated costs can be overwhelming. It clearly pays to gain an understanding of the health department policies in the county you wish to operate.
One last point. Restaurant startups rarely stay on budget. This restaurant equipment dealer's clients inevitably experience construction overruns (time and money), financing snags, or health department hitches. Consequently, they are overbudget by the time they are ready to purchase equipment. Make sure you build this in to your cash flow analysis.
It turns out that a larger and larger percentage of used restaurant equipment is being stripped down for parts and metal scrap. China's insatiable demand for metal is turning old fryers, grills, and refrigeration units into exportable scrap metal. This used restaurant equipment dealer has been approached by at least one interested party. This demand for metal also explains the rising price of stainless steel products.
Many startup restaurants shy away from used restaurant equipment because of the potential hassle from health department inspectors. According to this dealer, certain county officials are merciless when it comes to inspecting used restaurant equipment. The repair requirements and assosiated costs can be overwhelming. It clearly pays to gain an understanding of the health department policies in the county you wish to operate.
One last point. Restaurant startups rarely stay on budget. This restaurant equipment dealer's clients inevitably experience construction overruns (time and money), financing snags, or health department hitches. Consequently, they are overbudget by the time they are ready to purchase equipment. Make sure you build this in to your cash flow analysis.
2007年5月12日土曜日
Stockpiling Restaurant Equipment & Pre-Planning
I just spent the day visiting used restaurant equipment dealerships around Greensboro, North Carolina. The first restaurant equipment dealership was housed in a 10,000 square foot red brick building. One large room housed new restaurant equipment and the sales counter. The two larger back rooms contained rows of fryers, grills, ice cream cabinets, coffee brewers and other small wares in various conditions ranging from almost new to needing repair. As I browsed through different sandwich press models, I noted the sheer volume and age of the restaurant equipment.
I asked the sales representative who was assisting me, "How can the owner afford to sit on all these assets? It doesn't seem like there is significant turnover?"
The sales representative explained it this way, "Our owner may only be interested in a restaurateur's deli slicer and freezer, but the restaurateur says 'he needs everything out by Friday' and essentially gives the other restaurant equipment away."
After more browsing and an informative conversation with the owner, I left with a couple of thoughts:
While most restaurant owners and food service entrepreneurs don't want to face the possibility of failure, it is a necessary part of planning. Assessing the liquidity of your restaurant equipment should be considered before opening. Less liquidity means more risk and should be factored in to your business plan.
If a food service establishment is not meeting sales projections or cash flow is unsustainable then closing may be required. Instead of selling your equipment once "the doors" close, posting an ad in the newspaper or on a website while you are still operating could increase your negotiating power. By reaching out to potential buyers before you close, you might avoid "giving" away your equipment.
My second thought concerns how entrepreneurs shop for restaurant equipment. Clearly there is a lot of used restaurant equipment available. If food service entrepreneurs are willing to shop and negotiate, they can find good deals on used restaurant equipment either from dealers or other food service entrepreneurs who are closing their business. Buying used means paying less if you do your homework.
I asked the sales representative who was assisting me, "How can the owner afford to sit on all these assets? It doesn't seem like there is significant turnover?"
The sales representative explained it this way, "Our owner may only be interested in a restaurateur's deli slicer and freezer, but the restaurateur says 'he needs everything out by Friday' and essentially gives the other restaurant equipment away."
After more browsing and an informative conversation with the owner, I left with a couple of thoughts:
While most restaurant owners and food service entrepreneurs don't want to face the possibility of failure, it is a necessary part of planning. Assessing the liquidity of your restaurant equipment should be considered before opening. Less liquidity means more risk and should be factored in to your business plan.
If a food service establishment is not meeting sales projections or cash flow is unsustainable then closing may be required. Instead of selling your equipment once "the doors" close, posting an ad in the newspaper or on a website while you are still operating could increase your negotiating power. By reaching out to potential buyers before you close, you might avoid "giving" away your equipment.
My second thought concerns how entrepreneurs shop for restaurant equipment. Clearly there is a lot of used restaurant equipment available. If food service entrepreneurs are willing to shop and negotiate, they can find good deals on used restaurant equipment either from dealers or other food service entrepreneurs who are closing their business. Buying used means paying less if you do your homework.
2007年5月10日木曜日
Used Restaurant Equipment Dealers in Raleigh
I just spent the afternoon driving around Raleigh looking for used restaurant equipment dealers. I was informed by a number of restaurant equipment dealers that no one sells used equipment in Raleigh. Greensboro, I was told, is where the nearest used restaurant equipment dealership is located. That is an hour and a half away. Yikes!
Where does all the used restaurant equipment go? I wasn't able to receive an answer from any of the new restaurant equipment dealers. Does everyone buy new equipment? I am going to investigate this question in upcoming posts.
Where does all the used restaurant equipment go? I wasn't able to receive an answer from any of the new restaurant equipment dealers. Does everyone buy new equipment? I am going to investigate this question in upcoming posts.
2007年5月2日水曜日
Selling Restaurant Equipment Via Consignment
I just received an email from a snake bitten restaurateur. I have corresponded with this gentleman in the past and felt like relaying his experience on to our readers. We will call our reader Tim for the sake of anonymity.
Tim was the proud owner of a Bunn 2 head granita machine. He recently made the decision to sell the unit because granita drinks were not selling at his convenience store. He had purchased this machine second hand and consequently was not in a position to return it to a Bunn distributor. He evidently did not pursue the possibility that a Bunn distributor might buy the machine at a significant discount.
The Bunn 2 head granita machine was selling retail for approximately $3,000. This includes the powder auto refill dispenser. In short this was an expensive and sophisticated piece of restaurant equipment. Tim didn't see a use for the granita machine and decided to post it on craigslist and mixingbowl.biz for two months. Although Tim did receive some interest in the machine, he ultimately didn't find a buyer.
This led Tim to approach a restaurant equipment dealer that specializes in auctions and consignment. The restaurant equipment dealer agreed to sell the Bunn granita machine with 65/35% split. This translates into Tim receiving 65% of the sale price while the dealer, who is storing and selling the machine, receiving 35% of the sale price. On the face of it, this seems like a pretty good deal. But is it?
Before we address the major points, let me give you the rest of the story. Tim was told that the expected sale price should be right around $1,500. The restaurant equipment dealer explained that they always fixed equipment before attempting to sell it. This meant that the cost of repairs (if any were needed) would be deducted prior to dividing the cash between Tim and the dealer. The dealer also believed that it would take a few months to make a sale. Frozen drink machines are rarely sold in December.
Tim believing that the sale may take a few months took a passive approach. He chose not to contact the dealer. Instead, Tim received a check from the restaurant dealer via mail in the amount of $367.81. The check arrived approximately two months after dropping off the granita machine for consignment.
Now, let's explore the points and takeaways. First, the idea of consignment is inherently fraught with danger for the consignee. Used restaurant equipment dealers will always negotiate on price. This creates a situation where a consignee can not be sure of the price an item is actually sold for. Second, regardless of the percentage split that Tim and the dealer agree on, a dealer can adjust that split without Tim's knowledge. Third, Tim was only selling one item. There is a principal/agent problem that arises in this relationship. The dealer has more incentive to sell the granita machine quickly at almost any price, while Tim would prefer the best possible price. The dealer wants to clear floor space, Tim is only concerned with his granita machine.
So what could Tim have done differently? Obviously, Tim was entirely too passive in this arrangement. Setting out clear ground rules about minimum selling price as well as a time line would have helped. Tim should have stopped by and checked-in with the restaurant equipment dealer. By showing an active interest, the restaurant equipment dealer would have been less likely to sell quickly at a reduced price. In short, Tim could never have known how much the restaurant equipment dealer sold the Bunn granita machine for, but he could have created a situation that increased the likelihood of a fair payment.
The other issue Tim should have considered is who should sell the granita machine. If Tim had used mixingbowl.biz or craigslist for a longer period of time, he may have found a potential buyer that was willing to pay more than $367.81. The fact is the restaurant equipment dealer probably sold the machine to another restaurant equipment dealer who marked up the granita machine to $1,500. Sometimes it pays to be patient and use our own skills as well as cheaper resources to sell or buy restaurant equipment.
Tim was the proud owner of a Bunn 2 head granita machine. He recently made the decision to sell the unit because granita drinks were not selling at his convenience store. He had purchased this machine second hand and consequently was not in a position to return it to a Bunn distributor. He evidently did not pursue the possibility that a Bunn distributor might buy the machine at a significant discount.
The Bunn 2 head granita machine was selling retail for approximately $3,000. This includes the powder auto refill dispenser. In short this was an expensive and sophisticated piece of restaurant equipment. Tim didn't see a use for the granita machine and decided to post it on craigslist and mixingbowl.biz for two months. Although Tim did receive some interest in the machine, he ultimately didn't find a buyer.
This led Tim to approach a restaurant equipment dealer that specializes in auctions and consignment. The restaurant equipment dealer agreed to sell the Bunn granita machine with 65/35% split. This translates into Tim receiving 65% of the sale price while the dealer, who is storing and selling the machine, receiving 35% of the sale price. On the face of it, this seems like a pretty good deal. But is it?
Before we address the major points, let me give you the rest of the story. Tim was told that the expected sale price should be right around $1,500. The restaurant equipment dealer explained that they always fixed equipment before attempting to sell it. This meant that the cost of repairs (if any were needed) would be deducted prior to dividing the cash between Tim and the dealer. The dealer also believed that it would take a few months to make a sale. Frozen drink machines are rarely sold in December.
Tim believing that the sale may take a few months took a passive approach. He chose not to contact the dealer. Instead, Tim received a check from the restaurant dealer via mail in the amount of $367.81. The check arrived approximately two months after dropping off the granita machine for consignment.
Now, let's explore the points and takeaways. First, the idea of consignment is inherently fraught with danger for the consignee. Used restaurant equipment dealers will always negotiate on price. This creates a situation where a consignee can not be sure of the price an item is actually sold for. Second, regardless of the percentage split that Tim and the dealer agree on, a dealer can adjust that split without Tim's knowledge. Third, Tim was only selling one item. There is a principal/agent problem that arises in this relationship. The dealer has more incentive to sell the granita machine quickly at almost any price, while Tim would prefer the best possible price. The dealer wants to clear floor space, Tim is only concerned with his granita machine.
So what could Tim have done differently? Obviously, Tim was entirely too passive in this arrangement. Setting out clear ground rules about minimum selling price as well as a time line would have helped. Tim should have stopped by and checked-in with the restaurant equipment dealer. By showing an active interest, the restaurant equipment dealer would have been less likely to sell quickly at a reduced price. In short, Tim could never have known how much the restaurant equipment dealer sold the Bunn granita machine for, but he could have created a situation that increased the likelihood of a fair payment.
The other issue Tim should have considered is who should sell the granita machine. If Tim had used mixingbowl.biz or craigslist for a longer period of time, he may have found a potential buyer that was willing to pay more than $367.81. The fact is the restaurant equipment dealer probably sold the machine to another restaurant equipment dealer who marked up the granita machine to $1,500. Sometimes it pays to be patient and use our own skills as well as cheaper resources to sell or buy restaurant equipment.
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