The Total Cost of Ownership: How Investing up Front Pays Off In The Long Run
Purchasing new kitchen equipment for a commercial foodservice operation should be a thoughtful process. There are many things to consider and finding equipment to fit the business’s needs plus dealing with the costs involved can make the decision process overwhelming. One of the biggest decision drivers? The price tag. But before you decide to cut costs and settle for the economy model, consider the total cost of ownership (TCO).
What’s Total Cost Of Ownership
TCO is a financial estimate that considers the purchase price plus any additional costs involved over the lifespan of the equipment. This includes installation, training, parts, maintenance, and service for the duration the equipment is in use. There are many factors to consider, but a key takeaway is generally the longer a piece of equipment lasts, the lower overall total cost of ownership.
Determining the total cost of ownership for restaurant equipment involves various factors. In the case of commercial foodservice equipment, these factors are:
- Initial Cost (I) – purchase price after taxes, fees, installation, and shipping
- Operation Cost (O) – utility bills including water, gas, and electric. This is where energy-efficient electric equipment can make a BIG impact.
- Maintenance Cost (M) – cost of parts and service fees to fix broken equipment. Only buying OEM parts can also increase the operational life of equipment.
- Downtime Cost (D) – the amount of revenue lost due to inoperable equipment
- Lost Product (L) – burnt or overcooked food as a result of unreliable equipment
- Remaining Value (R) – the price left on the equipment in the long term based on devaluation
The formula to determine the total cost of equipment is:
I + O + M + D + L – R = TCO
While the hard costs are crucial to the decision, there are a few other areas to consider.
Brand reputation and quality
Like all things in life, there are always cost-effective options. Economy or private label products might be cheaper upfront, but this level of foodservice equipment will likely not hold up as long compared to a trusted, established brand. Look for a brand that has a reputation for excellence and durability, such as Star Equipment. Star recently celebrated its 100th anniversary and held a contest for the oldest piece of equipment still in operation. Nothing eases purchase anxiety like a solid brand reputation, which only comes with many years of manufacturing quality equipment that’s stood the test of time. For example, Blodgett ovens have been around since 1848, and are the trusted manufacturer for restaurants, fast-food chains, hotels, hospitals, institutions, small businesses, and large corporations alike.
The standard warranty for most foodservice cooking equipment is one year. After the first year is up, costs for repairs fall on the restaurant or operator. Considering equipment that has a longer warranty can help save money over time. By introducing a 4-year warranty, Varimixer mixers help bring down the total cost of ownership by covering parts and labor in case anything goes wrong.
The average lifespan of appliances relies largely on the type of materials and how they are constructed. Look for 100% stainless steel construction as an indicator of a piece of cooking equipment that’s built to last. You’ll find this standard of quality in all Southbend ranges and Imperial ranges.
Investing In Quality Equipment Can Save Money
As the foodservice landscape is changing, more and more private label equipment is steadily entering the market. While the cost of buying private label may be appealing, not all private labels in foodservice equipment are created equal. You may be sacrificing quality for cost, which can end up being a short-term solution when repairs or replacements are required.
The same factors go into purchasing used equipment. When buying equipment that is previously used, there’s no way to know its internal condition, if there was regular maintenance done, or if it’s been damaged by incorrect use. There are also no warranties associated with buying used. By purchasing new equipment for your commercial kitchen, you’ll know that everything works as it should and there is a warranty included.
Investing in a quality piece of foodservice equipment upfront can result in a lower total cost of ownership. The result? Successful operation and happy customers for many years to come.
See it for yourself! Schedule a test drive to demo equipment from the top brands in the industry.
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