Kitchen Rental vs Buying – Which Business Model Wins?

Commercial kitchen

Congratulations! Your foodservice business has taken off, and you’re ready to embark on your journey into the world of commercial kitchen space. When it comes to deciding which business model to choose for your foodservice venture: buying or renting a commercial-grade kitchen, there are a few things to consider. On the one hand, buying a kitchen can be a more stable investment and provide a higher return on investment. However, renting kitchen space may be more affordable and allow you to grow your business quickly. 

It’s important to choose the model that best suits your needs and goals, and, as with any business, there are pros and cons to each side. 

Kitchen rental vs buying; let’s see which business model takes the crown…

Advantages of kitchen rental

  • Renting is straightforward – you’ll simply need a deposit, a guarantor and the ability to cover monthly payments.
  • Flexibility – if you outgrow your current kitchen space, it’s easy to move out at the end of your lease into somewhere more suitable. There’s also more choice with a wide range of options to suit all food businesses of all sizes. You have the opportunity to compare different kitchens and choose one with sufficient storage.
  • Temporary contracts – temporarily renting a space is a great way to ensure you have enough storage space for your commercial catering equipment without having to invest large sums of money, so this works well for small businesses.
  • Testing the market – you need to test the location’s response to your product before investing all your resources in it. If demand shifts geographically, you can move your kitchen space. As a growing food entrepreneur, you have an opportunity to test the market at low costs before investing more capital in your business.
  • Dedicated space for food preparation – a commercial kitchen to rent comes cleaned to professional standards and, depending on the lease, can even come stocked with all the necessary kitchen equipment.
  • Peace of mind – renting a commercial kitchen gives you peace of mind and allows you to focus on other aspects of your business. You can concentrate on meeting your customers’ needs and hiring the right kitchen staff.
  • Additional storage space – this is great for online food delivery companies that don’t necessarily have huge storage space for food. Renting is often the only solution for caterers and street food pop ups who have to deal with limited storage in their operations. Having the option to rent storage space offers additional flexibility to increase or reduce capacity as needed. Storage can be rented in the form of shelves, cold storage units, or freezer space.
  • Avoid responsibilities of ownership – being responsible for a building and maintenance can eat up a lot of time and money. Renting kitchen space means relinquishing the responsibility of overhead and maintenance to the owners, giving you the freedom to focus your time and energy on your business.

Disadvantages of kitchen rental

  • Restriction on space – there may be restrictions on what you can do with the kitchen space, and if you require a larger kitchen, changes will require landlord consent.
  • Rent can increase – unless you sign a long-term contract, rents can increase, and you may have to find new premises if faced with an unexpectedly high rental increase.
  • You’ll be committed for the duration of your contract – you’ll need to keep paying rent even in slower months.
  • You are at the mercy of your landlord – problems such as leaks, mould, or malfunctioning appliances will have to be fixed by your landlord.

Advantages of buying kitchen space

  • Longer-term cost benefits – buying property gives you a sizeable investment, and you could benefit from capital growth over the long term. The mortgage you pay may also be cheaper than monthly rent. Owning a kitchen space can also be a more stable investment and provide a higher return on investment.
  • Extra income – if you no longer require the kitchen space, you can rent it to other food businesses. 
  • Kitchen design – having your own bespoke kitchen layout lets you maximise productivity and efficiency.
  • Full-term access – you’ll have 24/7 access to your kitchen.
  • Brand development – owning your own kitchen allows you to create a signature brand and flavour which is unique to your food business.

Disadvantages of buying kitchen space

  • High-cost – buying business premises requires capital. You may need to take out a commercial mortgage to buy premises if your business doesn’t have the cash upfront. A large deposit – often up to 40% of the purchase price – may be needed. As well as mortgage repayments, there are other costs involved in buying, including stamp duty, legal fees and valuation fees, as well as ongoing costs such as business rates and buildings insurance.
  • Increased interest rates – over time, interest rates may go up, which means you may end up paying more on your mortgage.
  • Planning permission – if you want to make significant changes to the building to suit your business needs, you’ll need planning permission. Check before buying to ensure your plans don’t run into problems with planning regulations.
  • Maintenance – you’ll be responsible for repairs and will need to allocate budget for ongoing maintenance costs.
  • Selling – when it comes to selling your kitchen space, it can be slow and complicated, which may hinder your business should you need to quickly move to larger or smaller premises or a different location.

Which food business models suit kitchen rental?

Entrepreneurs and foodie founders

Cutting costs is key when taking the first steps on your food business journey. Commercial kitchen hire is an affordable option and is a fantastic stepping stone for startups hoping to enhance their brand without high costs. 

Renting a commercial kitchen space will help entrepreneurs scale up prep and production of their menus or provide a dedicated space to focus on product development. It allows entrepreneurs to focus on the behind-the-scenes of running a successful food business.

Restaurants, cafés and mobile food businesses

Renting a central production unit helps foodservice businesses reduce their costs, improve the consistency of food quality and tighten efficiency; or they can be used as a prep restaurant kitchen hire solution. 

Whether you want to consolidate a chain of restaurants to one catering unit, or you are a mobile food business needing a flexible kitchen space, hiring a commercial kitchen is the way to go.

Delivery-only

If you are looking for a deliver-only kitchen to connect your food businesses to customers with ease, reduce overheads and focus on food quality, renting a food delivery kitchen will serve up a storm for your food business. 

Scale-ups

Commercial kitchen rental is an adaptable and economical space, perfect for launching your food and beverage business or scaling up food production.

If renting is the right choice for your F&B business, look no further! Dephna rents brilliantly bespoke, flexible spaces to growing food businesses of all sizes. With over 250 commercial kitchens on our sites across London and more than 500 cold rooms, we’re confident that we have a convenient workspace for you. Enquire now to book a visit.

by Dephna

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