How much does it cost to rent restaurant equipment? The answer to this question depends on a lot of factors, many of which actually contribute to the overall cost of your equipment lease.
Restaurants that enter into an equipment lease blindly without even considering the risks involved, have a higher chance of paying more than they should. Equipment leasing companies take every chance that they have to increase their potential revenue especially when you seem oblivious to the fact that your equipment lease has been structured to increase the risks. In order to protect yourself and have a true picture of how much it would actually cost you to rent restaurant equipment, you have to understand some of the risky lease agreement terms.
Risky Restaurant Equipment Lease Agreement Terms
Fair Market Value
Most kitchen equipment lease agreements will allow you to purchase equipment at the end of the lease term at fair market value. However, if your lease agreement gives the lessor permission to determine fair market value, then it may be a potential obstacle that could prevent you from purchasing the equipment.
Leasing companies know that it would be much more profitable for them if you extend your lease. They know that purchasing the equipment would not be practical for you because you might be reluctant to pay the inflated fair market value on the equipment.
The good news is that you can both mutually agree on fair market value. All you have to do is ensure that the process takes a limited amount of time; if not, you might probably end up paying for lease extensions. Remember that you will still have to continue paying for rent even as the negotiations are ongoing, your lessor will not be in a hurry to reach an agreement.
Because there’s a potential opportunity to make money, lessors often prefer lessees to extend their lease on restaurant equipment rather than return or purchase it. One way that they ensure you extend your lease is by including in the lease agreement “an-all-but-not-less-than-all” clause for equipment return.
This means that your lessor can charge you full rent for an entire leasing schedule until you return every single piece of equipment. This can be impractical for many restaurant owners especially when leasing technology equipment such as computers. Some lessors threaten with default to encourage lessees to extend their leases.
It’s very easy to give your lessor leverage for future negotiations by defaulting under an equipment lease agreement. You therefore have to be savvy enough and ensure that your lease agreement is structured in such a way that this risk is minimized.
Check to see if there is any use of language that may “accidentally” cause you to default. Make sure you eliminate clauses that can trigger default such as failure to meet certain requirements within the lease agreement.
Penalties For Non-Compliance
Some equipment leasing companies are known for including provisions that are impossible for lessees to meet thus leading to additional expenses. For instance, packing requirements and equipment conditions can often be so strict that the chances of non-compliance are increased. Such extremely burdensome requirements that can lead to penalties should be eliminated from your lease agreement before signing.
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Most restaurant equipment lease agreements permit leasing companies to charge rent for kitchen equipment that has been accepted and delivered before the leasing period officially begins. The rent is usually at full rate and if you fail to cap this amount, your lessor will collect substantial additional rent without adjusting the amount of regular lease term rent owed.
How Much Does It Cost To Rent Restaurant Equipment?
Given the above information, after all the risks have been identified and minimized, renting restaurant equipment can be very cheap. Lease rates aren’t even that important if you do not factor in the risks that come with the leasing.
In fact, lease rates should be the last thing on your mind given that you can actually choose your own rates. That’s right. Your credit score will give you an upper hand when negotiating rates. The higher it is, the higher your chances are of getting better lease rates. To adequately review your lease agreement, ensure that you hire an equipment lease professional before signing anything.
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