Equipment Appraisal Blog | Understanding Machinery Appraisals

Someone once advised me that when you're in the restaurant business, change is inevitable. This was originally intended to mean the frequent need to shift suppliers, update your menu, and constantly train staff, among other things. Today it means a whole lot more than that, with the goal of survival and long-term profitability at the forefront for many restaurant owners due to the COVID pandemic. Kitchen, dining, and bar equipment, commonly referred to as FF&E (furniture, fixtures, and equipment) can assist restaurant owners with obtaining new capital, restructuring loans, and help expand a growing business.

A restaurant FF&E appraisal will support the value needed for these situations

Restaurant appraisals are commonly requested by banks and other lending institutions for owners, potential buyers and sellers when assessing loan amounts or restructuring existing debt. The value of your overall restaurant business probably has a small amount of that value on the books associated with the FF&E. As long as your equipment has been well maintained and is in good condition, an updated appraisal will most likely support an increase to the tangible asset component of your operation, and will, in turn, increase the overall value of your restaurant.

Leveraging these assets in conjunction with the value of your intangible goodwill can maximize the amount of capital you may be able to borrow in any of these financial situations.

When you are ready to get an FF&E appraisal for your restaurant, always seek out an experienced, accredited equipment appraiser, as their credibility, and that of the valuation firm they represent, goes a long way to supporting the concluded values estimated in the report. Most banks and lending institutions will require a fully documented and researched analysis as part of the valuation effort.

You can ask the appraiser to quote the work either as a visual on-site inspection or as a “desktop” appraisal depending on the level of data you have available for review and your cost budget. You should request the valuation be under a Fair Market Value premise, assuming the restaurant remains in operation, and potentially a more conservative orderly liquidation value if the bank is looking for a “best case, worst case” scenario.

By having a restaurant equipment appraisal performed on your associated FF&E, you can also better determine the overall value of your business if you decide to sell.

When you are ready to move forward on an appraisal of your restaurant FF&E, contact us at Equipment Appraisal Services. Our fully accredited and experienced appraisers are well prepared to provide you with everything you need.

When your world is your restaurant, your equipment is a vital part of keeping that world turning. Appraising restaurant equipment is a vital part of staying on top of your business' assets. But how does the appraisal process work with this type of machinery? By having a solid understanding of how the process works, you'll be able to better manage your restaurant's assets. Here's a quick overview of the process to help get you started.

What's involved when appraising restaurant equipment?

One of the first questions you'll often hear when trying to find an appraiser for your restaurant equipment is what is the reason for the appraisal? Many businesses don't understand why this is important, but depending on the situation, many appraisers are legally required to use particular types of appraisal methodologies. Typically this happens in a divorce, estate settlement or dissolution of a partnership where the court is involved in ensuring that both parties get a fair share of the profits.

Are you trying to find out the value because you've suffered an insurance loss? If you have equipment that required specific conditions to operate properly, such as water lines at a specific pressure, being bolted to the floor or similar factors that may need to be changed with the replacement or require significant work to remove, knowing the value of the equipment including the removal costs is important to ensure that your business is reimbursed for all the expenses related to the loss rather than just the cost to replace the machinery involved in the loss.

Another area of interest is whether the machinery is in good operating condition or if it has issues, such as a non-working burner, occasional leaks and similar problems. Because these issues can often limit the performance of the equipment in your restaurant, they can impact the overall value of the machinery, whether you're selling it or preparing your business for sale. When you work with an appraiser who has experience in the restaurant or food service business, they have a much better grasp of the equipment involved and how those factors can limit your production.

What about the equipment's expected useful lifespan? Because experienced restaurant equipment appraisers have extensive experience looking at a number of equipment options, they know the signs of failure for common models. If a piece of equipment is making a specific noise, the gears or belts have issues, it has signs of failing systems or similar issues, it's much easier for an appraiser to pin down the exact issue and determine how that will impact the equipment's useful lifespan. 

If you're considering using your restaurant equipment as collateral for a business loan for your restaurant, have you taken the time to have an appraisal performed to determine the machinery's equipment prior to signing the contract? Many financial institutions don't go to the depth and length of equipment values, because they work with a wide range of loans. Instead, the documentation is often written up with incorrect values that shortchange your company's true asset values.

Appraising restaurant equipment is a complex process and should be undertaken with the help of an experienced, certified appraiser. It's an important part of your business process because understanding how the process works can help you figure out how your assets change in value over their usable life. Make sure to work with an equipment appraiser who has experience in the restaurant industry.