Restaurant owners lease restaurant equipment in order to have newer equipment and to manage cash flow. In general, it's almost always possible to purchase used restaurant equipment for less than the cost of a lease. But, by leasing equipment, restaurant owners can get newer, often better equipment for less out of pocket cash than they would have to pay to buy the same type of equipment outright.
Nearly all types of equipment are available for lease. This includes things like stoves, fire suppression systems refrigerators and more exotic equipment like dough making machines and even high-end food processors. In general, furthermore, leases include service agreements. With leased equipment, another company stands behind keeping the equipment in working condition. It's even possible to lease other things. Restaurant furnitureÃ¢Â€Â”tables, chairs, hostess stands, non-built in barsÃ¢Â€Â”are always lesable. It's possible, furthermore, to rent plates, glasses and silver-wear. (This is almost never done in established restaurants but, instead, is largely for the catering business and, perhaps, for temporary restaurants established at conventions and festivals.) Even in cases like this, it's sometimes cheaper to buy the products outright.
The main advantages are the time it takes to buy things outright plus the fact that you can often get higher quality products (china rather than cheap plates from Wal-Mart.) Also, of course, there's at least some prospect that the plates you purchase will be recycled rather than simply being thrown out. The business itself relies on getting an adequate return on capital. Many of the "leases" are really just payment plans: a stove that has been used in a restaurant for 5 years on a lease probably has little residual value. Also, the leased item ownersÃ¢Â€Â”under most leasesÃ¢Â€Â”are responsible for maintaining any sophisticated piece of equipment they lease. This can cost a significant amount of money and cut significantly into the margins of anybody in the restaurant equipment leasing business.
The return on investment for a restaurant equipment leasing business, however, can be quite good in some cases. A well-managed business that also figures out ways to keep other costs down and its customers happy can get a return on capital in excess of 10 percent. Some types of engagementsÃ¢Â€Â”leasing plates and glassesÃ¢Â€Â”can return a lot more than this. OthersÃ¢Â€Â”leasing stoves for the long termÃ¢Â€Â”are much closer to break even.
One of the major challenges is building a portfolio of products for lease that works from a profit perspective and also meets consumer needs at the same time. This isn't easy and, in fact, represents one of the greatest ongoing challenges of running any restaurant equipment leasing business. That said, a well-run business is quite a service to the restaurant industry as a whole.