The price on the invoice is only the first cost of a piece of equipment. Over its life you also pay for installation, energy, water, maintenance, repairs and downtime. Total cost of ownership, or TCO, adds these up so you can compare two options fairly. Here is how to build a simple TCO worksheet without a finance degree.
Shop the equipment in this article: L&J LJFW48 48″ strip heat lamp, 800W, Migali C-F40-NG 40 lb gas fryer and Migali C-F40E-NG 40 lb Energy Star gas fryer. Freight is included on every order.
The Parts of Total Cost
- Purchase price: the equipment itself.
- Delivery and installation: freight, rigging, gas and electrical hookups, and any plumbing.
- Utilities: electricity, gas and water for as long as you own it.
- Consumables: filters, oil, cleaning chemicals and replacement parts that wear out.
- Maintenance and repair: scheduled service plus the repairs you expect.
- Downtime: lost sales and wasted product when it fails.
- End of life: removal and disposal.
Step 1: Pick a Time Frame
Choose a period that makes sense for the equipment, such as the number of years you expect to keep it or the remaining years on your lease. Use the same period for every option you compare.
Step 2: Estimate Energy
- For electric equipment: watts x hours per day / 1000 = kWh per day. Multiply by operating days per year and by your utility rate per kWh.
- For gas equipment: BTU per hour x hours at full fire / 100,000 = therms. Multiply by days per year and your rate per therm. Remember that thermostatic equipment cycles, so actual use is lower than the full rating; be consistent across options.
- Get the ratings from each spec sheet. For example, strip heaters list watts right in the name, like the L&J LJFW48 48″ strip heat lamp, 800W. At 800 watts for 10 hours, that is 8 kWh per day before you apply your rate.
Step 3: Estimate Water
For ice machines and other water-using equipment, spec sheets list gallons per 100 lb of product or per cycle. Multiply by your daily volume and your combined water and sewer rate.
Step 4: Estimate Maintenance and Repairs
Use your own equipment log if you have one. Otherwise, ask your service company what they typically see for that type of equipment. Include filters, gaskets and routine service calls.
Step 5: Add It Up and Compare
Add all costs across your time frame for each option. The option with the lower total wins, even if its purchase price is higher.
An Example Comparison Without Numbers
Say you are choosing between a standard 40 lb gas fryer and an Energy Star 40 lb gas fryer. The Migali C-F40-NG 40 lb gas fryer lists a higher BTU input, and the Migali C-F40E-NG 40 lb Energy Star gas fryer lists a lower one. Plug each into the gas formula for your hours and rate. Subtract to find the yearly difference, then multiply by your time frame. Compare that with the difference in purchase price. The answer depends on your hours and your gas rate, which is why the formula matters more than any general claim.
The same approach works for refrigeration. Compare the rated energy data for, say, a Coldline G2-B 49″ two glass door merchandiser refrigerator against the older unit you are replacing, using measured kWh for the old one.
Factors That Are Hard to Price
Ease of cleaning affects labor every day. Parts availability affects downtime. Footprint affects what else fits on the line. Staff training time matters for more complex equipment. Note these next to your numbers even if you cannot put a figure on them.
Mistakes to Avoid
Comparing purchase price only. Ignoring installation needs such as a new gas line or circuit. Using different time frames for different options. Forgetting that an undersized unit wears out faster from overwork.
Next Steps
Build a one-page TCO sheet for your next purchase and keep it in your equipment file. Then compare options in commercial deep fryers or glass door refrigerators. Questions? Contact Express KitchQuip and we will help you pick the right size and configuration.