Valuation of restaurant equipment los angeles often raises the question of which equipment is personal property – and should be valued for valuation purposes – or property – as in the case of part of the property. While most people have never wondered whether, for example, a walk-in cooler is a piece of equipment or a property, this is a question that any valuation of restaurant equipment could discuss in more detail. In general, equipment considered personal property includes all free-standing appliances such as ranges, heaters, stainless steel workstations and most dining room furniture.
However, when restaurant equipment is installed, the valuer has to determine whether the installed equipment should be considered as personal property – which would be valued for valuation purposes – or property – which would be considered as part of the building and should therefore not be valued as equipment in the valuation. Installed equipment of this type typically includes ventilation and fire-fighting systems, refrigeration systems and other attached components, the removal of which may cause damage to property or violate health regulations.
Determining the value of the installed equipment depends, as do many questions about the evaluation of the equipment, on the rationale of the valuation. For example, a going concern valuation under the going concern scenario assumes that the assets will remain in use at their current location as part of going concern. In such a case, it may be appropriate for the valuer of the restaurant equipment to take into account the installed components and the associated installation costs. If, on the other hand, the valuation of the restaurant is made for a scenario that could be a stock exchange or liquidation scenario (e.g. the valuation of bank credit collateral), then the assumption would be fragmented and the installed elements would be less likely to be taken into account.
Regardless of the reason for the valuation of restaurant equipment – purchase/sale, family law, security loan – it is important to have a plan for the installed equipment. And if the valuation of restaurant equipment is carried out in conjunction with the valuation of the property, as is often the case, the relevant valuers should talk to each other to ensure that all assets to be included in the valuation are properly serviced.
Now let’s discuss these 3 areas of installed equipment. And because the image is worth a thousand words, I have put some pictures to illustrate the different types of equipment for which installation costs may or may not be included.
Typically, the area of the cook’s line in the restaurant will have a ventilation hood, an air refilling system, a fire extinguishing system and an alarm system designed specifically for this particular location.
These elements are designed to order based on the general square feet of the facility and its specific kitchen. The individual components are installed as a complete unit, on site, and can represent a significant part of the total restoration and original installation costs of the initial equipment. And, as you can imagine, the cost of these costly and specific installations is usually impossible to recover, especially in a decommissioning scenario.
There are two reasons why ventilation and fire-fighting equipment lose value: First, once the units are combined and connected to a building, they are difficult and costly to remove; this is due to the fact that, since the system is designed as a customised installation for a specific space, it is unlikely that these units will have any practical use in any other place.