When opening your first café business, there will be substantial expenditure and everything you will want to buy is important to the success and profitability. However, if the sign above the door is a Café, you will need the right hot beverage equipment in place from day 1. This will need to include an espresso machine, grinder, knock box and filter as the very minimum.
How do I afford all of this?
You will need to ensure that you have budgeted for all your expenses; however, when it comes to gaining the hot beverage equipment you may wish to use two different purchasing options – other than cash – and these are renting or leasing. There are some common mistakes around leasing and renting and here are the advantages and the disadvantages on both options.
When you lease a coffee machine package you will agree to purchase it over a set-period; normally 36 months. During this period, you pay your instalments but you can also use the coffee machine as it would be yours. However, the ownership remains to the leasing company that supplied you the product. When the predefined period that you have agreed expires then you have the option to buy the full ownership of the coffee machine for a nominal sum. This will be based on your payment history during the leasing period and the value of the equipment when originally purchased.
Advantages of Leasing a Coffee Machine
- It is a great way to check in practice if a specific coffee machine suits to your specific needs. In this way, you avoid risking your money in an investment of the total cost of the machine.
- If you are satisfied with the coffee machine, you can buy the full ownership with a reduced price after some period. This must be agreed before signing up for leasing.
- You can choose a higher specification of equipment than the one that you would choose if you had to pay the whole cost from the beginning.
- You can save money for other business-related investments.
- It can be also tax effective, while you can include the cost of the monthly instalments to your company's costs.
Disadvantages of Leasing a Coffee Machine
- You must pay penalties and fees if you want to terminate your contract earlier that the arranged date. Even though, you can negotiate a more affordable solution on this scenario at the beginning of your agreement.
- The lease price will be higher than a cash purchase price.
Renting a coffee machine is a totally different process. If you rent a coffee machine, you do it for a predefined period – usually a minimum of 12 months - but you have the option to extend your rental agreement if you remain satisfied with what you get. In most cases when you rent a coffee machine you also enjoy constant technical support; though, this will exclude scale issues and miss-use. In some cases, it will include a training program from a barista to guarantee the proper operation of the machine. However, when you have a rental agreement you do not have the option to buy the coffee machine, and thus, it may be not so profitable a deal in the long term for your business.
You choose with your agreement if you will have technical support and on which level. In most of the agreements, the maintenance and the breakdowns are covered by the renting company.
Advantages of Renting a Coffee Machine
- You can calculate the fixed price that it will cost you every month. Given that the technical support is provided, you only must be worry about the monthly instalments that you agree to pay.
- Even if your contract expires, you have the option to extend your agreement.
- You can rent a better model of coffee machine that you would choose if you had to pay for full ownership
- You can agree on super-short-term rental deals, which is a great option for one day events, conferences or festivals.
- You save cash for other business-related investments.
Disadvantages of Renting a Coffee Machine
- It is a solution that is profitable when it is not a long-term choice. If you continue renting a coffee machine for many years, it will prove to be a far more expensive option.
Disadvantages of Renting a Coffee Machine (Continued)
- You do not have the option to buy the coffee machine.
- Being tied with a contract is not always the best scenario. Ensure you agree with the supplier what the length of rental is and what the period of termination is too.
What will I pay for leasing or renting?
This will depend on the value of the equipment you are leasing or renting and the many other variables; therefore, it is important to know what you require before you approach suppliers to get quotes. It is unlikely, that you would get a full package of equipment - espresso machine, grinder, knock box and filter – for less than £75.00 + VAT per month; which means that you are open for 30 days a month your daily cost – based on the above figure – is £2.50 + VAT per day.
Do remember that whether you rent or lease, you will know exactly what your monthly outgoings are and there should be no hidden surprises and this will give you peace of mind as you build your business.
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