Buying Restaurant Equipment at Auction
There are 3 main reasons restaurant equipment and supplies go up for auction.
- Restaurant Failure – When a restaurant closes its doors the equipment has to go somewhere. Most of these failed businesses sell their kitchen equipment, along with everything else to auction houses.
Equipment Replacement – Occasionally a restaurant will buy new equipment to replace older models. Generally these pieces are too old to be traded in and so they go to the auctions. Dead Inventory – Dealers sell products that aren't selling well in their geographical location or are hard to get repair parts for to auction houses.
Everything you might need for a restaurant will be sold at these auctions, but the most popular products are commercial refrigeration, gas cooking equipment and compartment sinks.
There are two main groups of people that attend these auctions – used equipment dealers and individual restaurant owners (or soon-to-be owners.) This creates an unbalanced audience. If you aren't very knowledgeable about equipment you are looking to buy, the dealers will be much more successful than you could hope to be because they will have much more experience.
Auctions are generally held either onsite (at the establishment that has gone out of business) or at an auction facility (check your local directories to find these.) They are also moving into the online world now, on sites such as eBay.
Auctions can vary. Some auction companies have 1 per week; others don't have more than 6 in a year. It's best to contact your local auction companies to find out.
The first place to check is the classifieds. Once you go to an auction there will be mailing lists you can join to be notified when auctions are occurring in your area. You can also try to call auction dealers. Occasionally you can ask for certain items and they will have them available.
- Look for auctions with equipment from restaurants that were in business for a shorter amount of time. These pieces of equipment will have fewer problems than ones from restaurants in business for longer.
- Remember these products are sold as is. There is no warranty so if you are in doubt, DON'T bid. Once you win an item you are responsible for paying for it regardless of the condition.
- These items are also sold where is. That means you need to be able to haul it away or arrange for delivery of some type. The auctioneers take no responsibility for an item once it has been sold.
- Check the safety/sanitary codes. Many of these items will be old and they may not be up to current standards. Also, you need to absolutely be sure of are the UL and NSF labels.
- Check the voltage requirements. Most restaurants and similar establishments need 220/230/240 volts. A lot of times auctions sell equipment that has voltage requirements as high as 440 volts which is unusable in many commercial settings.
- Generally, the longer an auction house has been established the more trustworthy they are. Since auction houses have a "not our responsibility" attitude this is the best way to determine which places are safer for purchasing from.
Remember auction houses have a vested interest in everything they are selling – they are a business after all! Because of this there are certain questionable activities some of the auctions will participate in. Here are a few (and the inside terms they are known by) to watch for.
- The "grind" is when auction houses engage in persuasive selling to talk you into spending more money than you'd like. This may involve stretching the truth just a bit with statements such as, "This is the best one (of a certain product) that we've seen in years!" or scaring you by making you feel as if you're going to blow an awesome deal.
- Remember you set a budget for a reason. Stick to your guns, your piece of restaurant equipment will come along soon enough.
- A "shell" is a person that works for the auction house but is disguised as a bidder. Auction houses use these people to drive prices up. Be wary of someone who bids often and then drops out after a certain price stage.
- If a piece of restaurant equipment looks extremely clean it was most likely steam cleaned to hide leaks. Remember these are used pieces so while they should be decently clean they will never be in pristine condition.
- If a refrigerator has a bad odor, even a faint one, you should be extremely cautious. Often commercial refrigerators go out overnight and everything inside spoils leaving behind a terrible smell that you absolutely cannot remove. The auction houses will turn these types of refrigerators on to suppress the smell quite a bit, but once the refrigerator is off the smell will return with full force. That smell will permeate everything you store in your commercial refrigerator, leaving you with taste contamination in everything you store in that refrigerator.
- Deep fat fryers in general have a high failure rate, mostly due to leaking. Make sure to inspect the equipment thoroughly for leaks before purchasing.
- Some commercial refrigerators are given a "quickcharge" which is a shot of gas that makes the refrigerator stay cold even though its chilling apparatuses are broken. This can last up to 5 days before becoming warm again. There is no real way to determine if this has been done to a commercial refrigerator and it is a minimum of $350 for a repair call.
- The "hammer price" or price the auctioneer says just before tapping the hammer to signal the bidding has closed will NOT be your final price. Auctions include what is called a "premium". This is an extra charge that ranges from 10% - 22% of the hammer price of the item and is tacked on after the final bid is accepted.
If you aren't experienced in auctions or the restaurant equipment industry we strongly recommend against buying your equipment at auctions. Although they initially seem like a good way to save money you'll end up spending more for an older, less efficient piece of equipment in the long run if you are an inexperienced buyer.
More from How to Start a Restaurant...
- Top 10 Tips for Buying an Existing Restaurant
- Opening a Franchise vs. Starting an Independent Restaurant
- Opening an Independent Restaurant
- Restaurants Organized as Sole Proprietorships
- Buying an Existing Restaurant vs. Starting from Scratch
- Legal Structures in the Restaurant: Sole Proprietorships, Corporations, Partnerships and LLCs
- How to Open Franchise Restaurant: A Quick Guide
- Restaurants Organized as Corporations
- Organizing Your Restaurant as an LLC: Pros and Cons
- Restaurants Organized as Partnerships: Pros and Cons
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