Calculating the Cost of Restaurant Equipment Failures
Equipment failures can cause a restaurant to lose money quickly, but the question is how quickly and how much. With so many different pieces of equipment and systems in place, a restauranteur needs to understand and anticipate the cost of restaurant equipment failures. With the addition of a CMMS, or computerized maintenance management system, you can easily track the cost and time commitment of each repair. This makes it easier to see the cost that repairs have on your time and budget. However, there is more to the expense of unexpected failures.
The refrigeration unit protects one of the most important assets to a restaurant business, the food. Without your refrigeration unit, you can lose thousands of dollars of your restaurant’s inventory from a single failure. The most common failures of a restaurant walk-in refrigeration unit are to the doors and the refrigeration system. Commonly, these repairs do not take very long to fix and depending upon how catastrophic the failure you can lose entire stores worth of inventory which will drastically decimate your restaurant’s profits.
When you have a failure of your refrigeration compressor, it can cost anywhere from $200 to over $700, not including the cost of labor which can be as much as $200 per hour. If you factor in the downtime of your restaurant due to the failure, you can find that cost to go much higher. If, for example, you typically make $10,000 a day in food sales at your restaurant, and you have to close for four hours to have the repair completed. Using an equipment downtime calculator, you can see how large a percentage of your day was taken up due to downtime. In the preceding example, of four hours of downtime, if your restaurant is open 12 hours a day, that can be a loss of a third of your equipment or restaurant hours. If you made $10,000 a day that’s an over $3,000 loss to your business, $4,000 if you include the cost of repairs and labor.
Your restaurant’s ventilation system equipment is part of the backbone of your restaurant. This equipment takes the grease and other smoke particles out of the restaurant and can be very beneficial to the health of not only the customers and employees but the system as a whole. Typically, your ventilation system will fail if your employees fail to complete preventative maintenance, like cleaning your grease filters, properly.
If you have a failure in your kitchen exhaust system (ventilation system) equipment, these repairs can quickly become expensive. The most expensive repairs are the repairs required after a preventable grease fire.
If you have a fire and the equipment is down for a week while repairs are being completed, you will have to spend not only as much as $25,000 having the entire ventilation system replaced but, also you will lose out on as much as $70,000 of customer purchases while the restaurant is closed for repairs. Smaller repairs can take as little as two or three hours and can cause you to lose out on approximately 25-percent of your profits for any given day. While smaller repairs may only lose you $2,500 in food sales, the loss is unnecessary because most failures can be prevented with proper care beforehand.
Typical oven failures come from broken pilot lights, temperature problems, and faulty wiring. These problems can cause disaster during service as temperature problems can lead to unevenly cooked food, undercooked food, and of course the inability to cook food. If you rely heavily on oven-cooked food in your restaurant, the problem will lead to an entire menu worth of food being struck from service and hours of downtime for your staff. Not to mention, the cost of bad reviews on social media for badly cooked food.
However, other than the cost of bad reviews, what is the actual cost of a kitchen oven failure to your business. Using an equipment downtime calculator, you can figure out what percentage of your time has been eaten up by unscheduled repairs and use that to see what that relates to in terms of lost income. Most oven repairs can be completed in less than five hours; however, that doesn’t mean that they can be completed outside of service hours.
In addition to the 40-percent loss of business hours due to the repair, there are also the over $100-an-hour labor charges and parts charges that can come from needing to repair a faulty thermocouple which has caused the pilot light to keep switching off or a malfunctioning thermostat which has caused the food to cook unevenly. The overall effect can be a loss of thousands of dollars to your restaurant.
However, this isn’t all bad news, if you managed to have a system in place to keep track of warranties, you may be able to recoup some of the cost of repairs from the manufacturer or have them provide temporary replacements in the meantime; while the repairs are being completed.
The important thing; however, is to ensure that you are keeping track of both the time and monetary expense of failures.
Author: Warren Wu
Warren Wu leads growth at UpKeep, a CMMS software company that was designed to empower empower maintenance teams to make better decisions from data-driven insights.