Buy For Best Value, Not Cheapest Price

During my recent visit to this year’s NAFEM Show in New Orleans, there was a lot of buzz about equipment economics. Not long ago, many people thought that while improved equipment efficiencies offered many benefits, they were still too costly and justifying their purchase was a hard-sell to those controlling the purse strings.

Today’s operators have adjusted their thinking in a lot of ways, and foodservice professionals from around the country reported that they’re hearing more talk about the economic benefits of high-efficiency gas cooking appliances. With the price of natural gas rising, there are more reasons than ever before to investigate the merits that these improved technologies can provide.

Even with the high prices being predicted, natural gas will continue to provide the best energy value. That’s largely because natural gas delivers a much higher cumulative amount of BTUs from the wellhead to the point of use than electricity. To be specific, 91% for gas vs. 27% for electricity. It is for this reason that gas will continue to be a less expensive energy source on a per Btu basis.

It seems that a high-efficiency gas fryer, combi oven, condensing water heater or a gas-fired booster heater for warewash sanitizing in your restaurant might be among the best investments you could make today. Manufacturers who sell such appliances have long complained that operators don’t always look at the long-term picture. Want to buy an electric booster water heater for less than a thousand dollars or a gas booster for three thousand dollars or more? Sales pitches often begin – and end – at this point. It works the same in a retail appliance store where an energy efficient freezer is displayed next to a basic model of a similar size; the efficient unit is priced several hundred dollars more.

No matter how well-intentioned you were the last time you had to replace a piece of equipment, it takes a real financial commitment to ante up a few hundred bucks more for that fryer with the Energy Star rating, knowing that it will basically do the same job as a less expensive unit. Or would it?

Let’s put aside the potential benefits of today’s improved, high-efficiency, multitasking gas appliances for a moment. Forget about the positive environmental benefits, the reduced operating costs, the improved food hedonics, the reduced food and labor costs, etc. Now think for a moment about the points I just mentioned and you might just see for yourself that not to consider the purchase of today’s high-efficiency appliances is a fiscal irresponsibility to your business!

I encourage you to make your equipment purchase decision in the same manner you buy anything else for your business. To get what you want without paying more than you have to, keep these two terms in mind: payback and life-cycle cost.

Simple Payback

When you buy an energy-saving/efficient appliance, it is going to do something very few, if any, appliances will do for you. It’s going to be FREE! And it will ultimately be free, because over time, the money you save by using that appliance will offset the price you paid for it. This is called simple payback; it’s the period of time it takes for the purchase price to be recovered by savings. That savings can be in the form of reduced operating costs (due to lower energy, water or sewage use), reduced food costs (due to improved hedonics) or reduced labor costs (due to higher production and less product waste).

Maybe you’re considering the purchase of a high-efficiency gas fryer that costs $1000 more than a similar conventional model, but it saves $500 a year in oil cost due to less drag out. Just factoring the oil savings alone, gives you a payback of two years, and we haven’t even discussed the energy savings! And then, after that, the $500 each year is a positive contribution to your bottom line!

Life-Cycle Cost

Life-cycle cost lets you take into account all of the costs associated with the appliance you’re going to purchase and use for its lifetime. Let’s say that you’re now considering an electric booster water heater to replace your chemical rinse system for warewash sanitizing. The purchase price is only one cost, because over its lifetime of use, day in and day out, you’re going to have monthly energy costs and demand charges for operating the electric booster heater, repair and maintenance costs and other expenses.

Figure out what those costs will be and then investigate what the costs will be for an alternative, such as a gas-fired booster. This allows you to make a more accurate comparison of what the costs are of purchasing, owning and operating a booster heater. What looks like big savings up front might be wiped out by higher energy, water and sewage costs every month. That gas-fired booster water heater for $3000 might cost a lot less to own and operate for 10 years than a low-efficiency electric unit that costs only $800 to buy.

So be a wise and prudent operator when buying appliances for your foodservice facility, and think about the long-term usage as well as the up-front costs. And, buy for best value, not cheapest price!

Reprinted with permission from Cooking For Profit November 2003

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