July 01, 2013
What do you do when you really want high-end, high-efficiency equipment—it best fits your needs—but you can’t afford it? Or, at least, you don’t think you can.
The topic of initial capital cost vs. performance, efficiency and overall life-cycle cost became an important topic at our Multiunit Foodservice Equipment Symposium (MUFES) in Austin, Texas, last month. This one brought together large operators from all of the major noncommercial segments and 11 fast-growing, emerging chain concepts, 39 operators in all. (To see a final list of attendees, go to fermag.com/event-calendar/mufes.html.) As is typical of our MUFES programs, a presentation by our friend David Zabrowski of Pacific Gas & Electric’s Food Service Technology Center (FSTC) covered how to specify and research energy- and water-efficient equipment. The operators ate it up, along with the glorious food Barton Creek Resort always prepares for MUFES meetings.
But there was also some very honest discussion of the issues facing chain and noncommercial multiunit operators when they purchase new equipment. The operators at MUFES explained why initial cost is still such an issue. For the fast-growing chains, lower equipment costs make it much easier to meet the 20% plus return-on-investment and asset numbers equity folks and bankers demand. It’s the number restaurant chains need to hit if they want financing for growth or to eventually go public. Lower-cost packages also make it easier for franchisees to buy into a concept and open units.
The noncommercial operators said they have equal demands on the capital spend, but for different reasons. Funding for capital projects often is sporadic and difficult to come by. Such funding has been highly stressed by the Great Recession, of course.
Many also have to publicly bid their needs and are required to take the lowest bid. They try to hold tight specs, but when the choice becomes 20 lower-cost pieces of a certain equipment type vs. 12 of the more efficient item, it’s a tough decision. Privately funded noncommercial operators have many of the same constraints as our chain friends.
This quandary has been around forever, of course. There are no easy solutions. As Zabrowski pointed out, utility and water district rebates are helping lower the initial cost of more efficient models. A cost-of-ownership argument, with demonstrable hard data on payback, sometimes helps with the finance folks. And many manufacturers are building more efficiency into lower-priced models.
Operators—and their consultants and dealers—should know about these ways to lower cost or justify cost-of-ownership for better equipment. If you want more efficient equipment with better performance—the two almost always go together—a simple start is to go to the FSTC’s fishnick.com website and check out the equipment models for which California offers rebates. Life-cycle cost calculators also are available.
We suspect operators, dealers and manufacturers will contend with the initial cost problem for a long time. But it’s always been a “pay now or pay later” dilemma.
By the way, helping you research, justify and buy better equipment is one of the key missions of FER and MUFES. Our next meeting is Jan. 25-27, 2014, back at Barton Creek in Austin. Put it on your calendars and come on down.