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Dealer's Notebook The Check's in the Mail Why Mission's CEO Jack Lewis is Glad He Took a Chance on the Leasing Business By Stacy Ward, Managing Editor fedastacy@ver izon.net S alespeople at Mission Restaurant Supply are happy to sell equip- ment—and they do, plenty—but when given the opportunity, they would rather contribute to their com- pany's expansive portfolio of leases and pocket a larger commission in the process. For every piece of equipment leased, Mission's DSR's receive a check for the first and last month's lease pay- ment, upfront, so a $200 lease means an extra $400 once the lease is approved. "All our salespeople lease, " says owner and CEO Jack Lewis. "We have salespeo- ple who are leasing equipment every day and picking up leases that have matured. The monthly billing keeps our company name in front of the customer and provides an opportunity for addi- tional sales. " One of his many talents includes get- ting his team to buy into—whole hog— the fact that all sales are not created equal. Mission currently has 3,500 pieces of leased equipment seeded into the Central and South Texas market. And once a month, the yield is metaphorically every entrepreneur's dream: the coveted recurring revenue stream. "We put out our first piece of equip- ment in 1988 and it's just grown ever since, he was the owner of Mission Party Ice. "As you can imagine, the packaged ice business gets pretty slow in the winter, " " says Lewis. Back then, however, " he says, "so we were just looking for a way to generate year-round income when there was no other income. Diversifying into the ice machine leas- ing business was the obvious answer, says Lewis. "We knew whose ice machines were broken because they would call on us to deliver ice, so we started offering our packaged ice cus- tomers an option to lease. " Hard-to-clean fryers and ranges not 60 FEDA News & Views included, the San Antonio-based distrib- utor now typically offers its customers three-year leasing contracts on practi- cally everything you can unplug. Refrigerators, freezers and ice machines make up the lion's share and ice machines represent about 80 percent of all leases. "Commercial refrigeration is a great add on to a customer's ice machine lease, " says Lewis. "It's usually easier to maintain and does not require the amount of attention that an ice machine demands. " Other impressive stats in the celestial realm: 98 percent of Mission's leases are full-service and 95 percent of its cus- tomers renew at the end of their con- tract. According to Lewis, people are willing to pay a premium when nature dictates the conditions, namely the hard water that flows in his part of the U.S. "I know people in areas where the water is super clean and it's difficult to run a successful leasing operation where machines seldom break, " he says. "You see the same with dishwashers, with either chemicals or tough water. Historically, both pieces of equipment have been high mainte- nance items, and at times problematic, so in our area a lot of people like to lease because they don't want to deal with the hassle of keeping the machine clean. it's the epitome of capital-intensive." The Cost to Lease Let's start with the cost to get the equipment through the customer's door—minus a $125 lease payment. There's the purchase of the machine, itself, a water filter, installation and the salesperson's commission. Most of which is expected to be paid within 30 days, per the dealer's purchase agree- ment with its supplier. "So by the time I have to pay for it, I've got a $3,000 short- age, " says Lewis. "It took us 10 years to get established, before we really didn't have to worry about dealing with the banks and paying for all the equipment. There was a time when we had millions of dollars of bank loans to service all of the equipment we were putting out. That can keep you up at night, but once you get over the hump and you have more and more machines paid for, it gets progressively easier. " Most of the pressure comes from building/funding the massive preventative mainte- nance infrastructure necessary to sustain and grow the leasing busi- ness, not necessarily from working with the bank, according to Mission's CEO. Even in these tough times, banks are willing to invest in this " Which is why distributors tend to shy away from leasing, he adds. "It's a good business but it's also a very tricky business, and it takes a long time to get to the point where everything is paid for and you can buy new equip- ment. In other words, you can't just dip your toe into it. It's a long-term deal and type of business because "it's really a secure asset," he says. "Let's assume you give them a package of 50 leases. They're going to have 50 customers paying them and the chance of half of them going under is slim to none. They get a lien on the pieces of equipment and a contract that says they're entitled to $125 a month for three years. After 18 months, the equipment is paid for; that's