Appraising Resturant Equipment

Over the Memorial Day weekend, I had the privilege of inspecting a series of restaurants for a machinery and equipment appraisal. Because the owners declined to provide a listing of Subject Assets, I took my lovely and clever wife along as “clipboard” assistant. She wrote while I measured, called out manufacturer names and model numbers, took pictures with my faithful Casio Exilim.

One reason I like restaurant appraisals is that I spent several years in my 20s cooking in Aspen, Tucson and Phoenix. It’s fun to be back in a professional kitchen, chatting with the chef about Hobarts and Groen stock pots, even if I am using a tape measure instead of a spatula! Cook and Food and Beverage Controller turned Restaurant Appraiser.

As an auctioneer in the early 2000’s, dawat resturant tooting I helped a number of restaurant owners liquidate their assets; I’m happier doing restaurant appraisals like these, where I’m determining values for collateralized lending purposes.

Beyond nostalgia, restaurant appraisal has other interesting aspects. A stainless steel prep station, for instance, has the same value whether it’s in a quick service drive-through, a full service linen-napkin restaurant, or a vinyl-boothed BBQ joint. And that value, these days, whether you’re looking at Orderly Liquidation or Fair Market Value in Continued Use, is remarkably low.

During the restaurant appraisal research, I discovered that recent importing of brand new, low-cost stainless steel kitchen equipment has lowered the boom, as it were, on re-sale value of many used stainless steel products. The cost of used steel tables or shelves, added to the labor cost of moving them to a new location, could easily out-price the cost of new, delivered to your specified restaurant location. A situation such as this is when we refer to the theory of substitution, which states that a prudent investor would not pay more for an asset than the cost to replace it new. In restaurant appraisals, where most of the machinery and equipment is standard and readily available, this is especially viable.

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