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Permalink Reply by Jeremy Perrine on July 3, 2010 at 5:29pm

Be careful of giving machines (evening renting). You'll be on the hook for repairs. No one cares about free equipment and they will trash it. Sell them the equipment just above cost and if need be, take a small percentage off of your coffee.
Tell them that as long as they're buying your coffee, you'll cover labor on all repairs and maintenance.

It's gonna cost you a lot in the long run to give/rent them equipment unless you have the capital to cover multiple machines in back stock.

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Permalink Reply by Brady on July 3, 2010 at 5:50pm

This was standard procedure a few years ago, but appears to be going away among quality roasters. Check around and see which of your competitors are providing free equipment.

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Permalink Reply by Claudia Cabezas on July 3, 2010 at 6:03pm

Would this work?? The company already buys coffee from someone in town, but wants to separate themselves from the mundane. If they come over with us, they will need machines because the other company will take them back; the machines belong to the other coffee company.

Jeremiah Perrine said:

Be careful of giving machines (evening renting). You'll be on the hook for repairs. No one cares about free equipment and they will trash it. Sell them the equipment just above cost and if need be, take a small percentage off of your coffee.
Tell them that as long as they're buying your coffee, you'll cover labor on all repairs and maintenance.

It's gonna cost you a lot in the long run to give/rent them equipment unless you have the capital to cover multiple machines in back stock.

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Permalink Reply by Jeremy Perrine on July 3, 2010 at 6:44pm

To be frank,
It will work if your coffee is good enough and they are serious about providing quality coffee.

Show it to them in two realms: 1) if they buy the equipment which you will provide 'at cost' (you can still make a little), they will save money in the long run because you will not be making up the cost by adding the difference onto the price of the coffee.
2) They will be able to have equipment at a great price and not be in the situation they are in now.

I should note that we're a new company. I'm only saying these things from the advice I've been given and the research I'm done.

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Permalink Reply by Marshall Fuss on July 3, 2010 at 8:12pm

Don't forget to tag the equipment and, if it is permitted in your state, file a UCC-1. You don't want it sold off in a creditors' sale!

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Permalink Reply by Claudia Cabezas on July 3, 2010 at 8:37pm

Gentlemen thank you so much for your assistance. I've truly appreciated your knowledge and graciousness in allowing me to be the recipient!!

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Permalink Reply by Ron Ingber on July 4, 2010 at 6:13am

Since you mention "machines", I assume you are talking about two (or more) espresso machines, plus grinders.
You will have a lot of money tied up in them, plus the ongoing maintenance and repairs.
Quick calculation:
2 3 group machines plus 4 grinders - quick estimate $27,000
3 year "lease" / payback = $9,000 per year (does not include any interest on your investment)
This = $750 per month to cover the cost of the "free" machines.
How much coffee are they buying each month and how much can you raise your coffee price to cover $750/mo?

If the machines only cost $18,000 (one third less) you are still talking about $500/month to recover in your increased coffee price.

Of course, if you are talking about only brewed coffee, the dollar figures are much lower.

We really need more detailed information to help provide advice.

Crazy idea - see if you can buy the equipment from the other vendor that is already in place. No additional costs for installation and training.

Ron, the Country Guy

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Permalink Reply by Claudia Cabezas on July 5, 2010 at 7:04am

Country Guy, Wow!!
In a nutshell, we're looking at outfitting a hotel, they want for six stations and in each one a dual grinder, brewers, espresso machines. They are buying approx 180 pounds per month of coffee.
It is alot of money in the machines, and honestly, I'm blown away just by preparing for the presentation. I've thought of several options for them and that's what I'm working on.
Thanks again, like I said, ANY information/thoughts are appreciated.


Ron Ingber said:

Since you mention "machines", I assume you are talking about two (or more) espresso machines, plus grinders.
You will have a lot of money tied up in them, plus the ongoing maintenance and repairs.
Quick calculation:
2 3 group machines plus 4 grinders - quick estimate $27,000
3 year "lease" / payback = $9,000 per year (does not include any interest on your investment)
This = $750 per month to cover the cost of the "free" machines.
How much coffee are they buying each month and how much can you raise your coffee price to cover $750/mo?

If the machines only cost $18,000 (one third less) you are still talking about $500/month to recover in your increased coffee price.

Of course, if you are talking about only brewed coffee, the dollar figures are much lower.

We really need more detailed information to help provide advice.

Crazy idea - see if you can buy the equipment from the other vendor that is already in place. No additional costs for installation and training.

Ron, the Country Guy

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Permalink Reply by Mike McGinness on July 5, 2010 at 10:37am

If I understand correctly 180lb of coffee per month for the equivalent of SIX locations? One good location does more than that! That's only 30lb per month per location. And you'll have to suppy each of the 6 locations with espresso and drip grinders, espresso and drip brewers?

Might be a deal you'll have to walk away from. Maybe I'm missing something but good luck making the numbers work so you won't loose your shirt.

Claudia Cabezas said:

Country Guy, Wow!!
In a nutshell, we're looking at outfitting a hotel, they want for six stations and in each one a dual grinder, brewers, espresso machines. They are buying approx 180 pounds per month of coffee.
It is alot of money in the machines, and honestly, I'm blown away just by preparing for the presentation. I've thought of several options for them and that's what I'm working on.
Thanks again, like I said, ANY information/thoughts are appreciated.


Ron Ingber said:

Since you mention "machines", I assume you are talking about two (or more) espresso machines, plus grinders.
You will have a lot of money tied up in them, plus the ongoing maintenance and repairs.
Quick calculation:
2 3 group machines plus 4 grinders - quick estimate $27,000
3 year "lease" / payback = $9,000 per year (does not include any interest on your investment)
This = $750 per month to cover the cost of the "free" machines.
How much coffee are they buying each month and how much can you raise your coffee price to cover $750/mo?

If the machines only cost $18,000 (one third less) you are still talking about $500/month to recover in your increased coffee price.

Of course, if you are talking about only brewed coffee, the dollar figures are much lower.

We really need more detailed information to help provide advice.

Crazy idea - see if you can buy the equipment from the other vendor that is already in place. No additional costs for installation and training.

Ron, the Country Guy

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Permalink Reply by Ron Ingber on July 5, 2010 at 11:04am

"they want for six stations and in each one a dual grinder, brewers, espresso machines"

Based on using decent, name brand equipment, but not "top-of-the-line", I'm estimating $10,000 per station for a total layout of $60,000. This does not include having spare machines (to exchange when something can not be fixed on site) plus an inventory of spare parts.

Using the calculator available at http://www.easysurf.cc/vfpt2.htm#pmi

Monthly payment - interest compounded monthly - (rounded to cents)

loan amount = dollars you want to borrow
Enter loan amount : $60,000
Enter term, in years: 5
Enter annual interest in percent % 6 (this is a low interest rate)
Monthly Payment is - $1,159.97

You would have to add $6.44 per pound - for 180 lbs/month (to cover the monthly cost of $1,160)

I would be surprised if they were willing to pay that much extra for your coffee. Remember, this does not include any money for maintenance or repairs of the equipment over the 5 years. I would walk (or maybe run) away from this, no matter how tempting the monthly sale of 180 pounds of coffee looks.

If I am missing something, I hope someone will correct me.

Ron, the Country Guy

Feel free to call me if you would like to discuss this in more detail (cell) 315 269 9265

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Permalink Reply by Brady on July 5, 2010 at 12:44pm

As Mike pointed out, a single lower-volume cafe does more than 180lb a month... with the equivalent of 1 station's worth of gear. If I understand correctly, they want 6 drip brewers, 6 drip grinders, 6 espresso machines, and 6 espresso grinders? That doesn't pass a sanity check. I've traveled a bit, and stayed in some pretty posh joints, but I'm not sure I've ever been in a hotel that was set up to utilize 6 full-on coffee and espresso bars. This customer sounds more than a little confused.

Let me join the others in suggesting that this customer is not for you, for a couple of reasons. Go looking for a nice, straightforward coffee shop that already owns their equipment instead.

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