If you’ve had a frozen beverage program running for a few years, you’ve likely had to have your equipment serviced or repaired at some point.
In many cases, these service calls can cost just a few hundred dollars. However, as equipment ages and normal wear-and-tear occurs, you may find yourself placing several service calls per year and encountering high repair bills.
Eventually, you may begin to wonder if it’s more economical to just replace your equipment outright.
Here are the factors that will help you determine whether it’s worth it to continue repairing your equipment, or whether it’s time to finally replace your frozen beverage equipment:
Minor Repairs vs Critical Component Failures
Most service calls are for minor repairs where the machine is still capable of producing frozen beverages in at least 1 barrel. Because the machine is still functional and capable of generating revenue, minor repair costs are usually negligible.
Unfortunately, this isn’t always the case. Late into the equipment’s lifecycle, a critical component could fail that renders the entire machine inoperable. Because of the component’s complexity or location within a unit, it is often extremely difficult and time-consuming to service.
In these cases, labor costs alone are likely going to be so high that it is more economical to simply replace the equipment outright.
However, even if you don’t encounter a critical component failure, if repair bills are starting to add up, the calculation of whether to repair or replace your equipment might not be so clear.
In that case, you will want to start by knowing the book value of your equipment.
Know the Book Value of Your Equipment
Before you can make a calculation on whether to repair or replace your frozen beverage equipment, you will need to contact the manufacturer to determine the book value of each of your units. The book value will take into account the equipment’s current condition and how long it has been in operation in order to determine its current value.
If, for example, the book value of your machine is $4,000, and the repair will cost 50% or less of that value, most owners will choose to repair the machine to restore it back to its full, book value.
At that point, you can choose to either continue using the machine, sell it, or trade it in for its full book value toward a new unit.
However, once a repair bill surpasses 60% of the machine’s book value, it is likely not worth the cost, and it is simply more economical to replace it with a new machine.
While this is a good, general “rule of thumb” for one-time repairs, some equipment owners find themselves in a situation where each repair bill is relatively small, but they are increasing in frequency as the equipment ages.
In that case, it’s best to do your calculation based on the equipment's age as a general guideline.
Consider the Equipment’s Age
The expected lifespan of a piece of equipment varies by manufacturer. At FBD, for example, our machines come with an expected lifespan of 7+ years, though many of our machines that are over 10 years old are still in operation.
In general, once your machine has reached its expected lifespan, repairs make less financial sense and it’s best to replace it with a new piece of equipment that will come with the latest technological advancements and run at optimal performance for many years to come.
Here are some general guidelines to use to determine whether you should repair or replace your equipment:
- 0-5 Years: Manufacturers will typically provide a warranty that will cover most, if not all costly repairs you may encounter during this period. Any repairs not covered by warranty will typically be minor and will not justify replacement of the entire machine.
- 5-10 Years: During this period, repairs will gradually increase in frequency due to normal wear-and-tear. You have to look at each repair on a case-by-case basis. If only 1 or 2 of the machine’s 4 barrels are down, and the machine is still capable of generating revenue, it may be worth it to fix the machine, especially if the repair cost is below 50% of the machine’s book value. However, if all 4 barrels are down, and the repair will cost 60% or more of the machine’s book value, replacing it with a new machine that can start generating revenue as fast as possible is probably the best decision.
- 10+ Years: After 10 years of operation, multiple parts may begin to fail, and the frequency and cost of repairs quickly become prohibitive. In general, if a machine is 10+ years old and you run into a one-time $1,000 repair or $1,000 worth of repairs in a 12 month period, replacing the machine with a new unit is the best option.
Still not sure if you should replace or repair your aging equipment?
Let us help you with the calculations to make sure you get the most out of your investment. Schedule a FREE call with an FBD Account Manager to discuss your needs.
We’ll run the numbers, taking into consideration your unique circumstances, and then give you a personalized recommendation based on our decades of experience.
Get started by scheduling a FREE call with an expert FBD Account Manager or give us a call at 1-866-323-2777.