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Finding & Vetting Local VendorsApril 29, 2015
These slides are part of a free webcast from rd+d magazine. There is a link to the webcast on Slide 6.
Today’s Objectives
• Discuss growth-chain strategies for finding/vetting reliable vendors/GCs for build-out projects
• Discuss franchisee/vendor issues – dictate or guide?
• Identify red flags and stumbling blocks• Share recommended best practices• Answer your questions!
Meet Our Panelists
John DruseVice President of
Design & Construction
Del Taco
Steve HendersonDirector of
ConstructionNoodles & Co.
Bob WitkenDirector of
Construction & Development
RAVE Restaurant
Group
TO VIEW THE COMPLETE FREE WEBCAST CLICK HERE:
www.rddmag.com/localvendors
Del Taco – Ramping Up for Fast Expansion
• Past development average — 18-20 stores per year
• Roughly half company-owned/half franchised• Acquisition by Levy Acquisition Corp. underway• Future development impact — potentially double
or triple store count within 24 months• Having vendors in place to support rapid growth,
particularly in new markets — but also in existing markets — is critical
Finding GCs/Vendors• Pull in every available
resource• Tap industry connections
for leads – i.e., RestaurantPoint
• Tap multi-brand franchisees – have they used vendors for other brands/other markets that I don’t know about?
Del Taco Vetting Strategies
• Make sure they’re of a size that makes sense for us – not too big, but not a “mom & pop”
• Conduct financial due diligence – AIA A 305 Form/Contractor’s Qualification Statement
• Tour their facilities– What are their capabilities?– Do they have enough machines/manpower?– How innovative are they?– Do they work in the most effective way?
• Focus on long-term relationship potential vs. lowest price
Del Taco Vetting Strategies
• Use them on a trial basis in a corporate store• Test/determine their problem-solving abilities
“Restaurants are hard. There are tons of variables. The kind of vendors we want are the ones that are problem-solvers.”
Franchisees – Dictate or Guide?
• Provide authorized vendor list for computer equipment, kitchen packages, etc.
• Encourage use of authorized vendors for signage but will approve others they may have used before
• Give a lot of leeway on architects, civil engineers, contractors – we don’t dictate– Leaning toward regional authorized consulting
groups
“I like to give them some freedom in the things that could give them the most problems, like their GC,
architect, civil engineer.”
Noodles & Company – Aggressive Growth Ahead
“Of the 450 or so stores developed in our 20-year history, probably 200 of those restaurants have opened in the past 5 years.”
Noodles & Company – Aggressive Growth Ahead
• 12-14% growth expected for the near future• 50-60 new openings in 2015• 80% or more will be corporate stores• New markets:– Upstate, NY– Yonkers/White Plains NY,– Oklahoma (Tulsa, OKC and Stillwater),– Phoenix AZ, – Toronto Ontario Canada – first international
expansion.
Finding GCs/Vendors Finding them is relatively easy…• They solicit us• Personal connections• Peers’ referrals• Trades’ referrals• Noodles’ project
managers’ insights
Vetting Strategies …Vetting them is tougher• Always do reference checks –
subs, other restaurant brands• Require CPA-audited or
reviewed financials. “Compiled” is not enough.
• Start looking/vetting w/in 6 months of knowing we’re going into a new market
• We use third-party partner for assistance
Franchisees – Dictate or Guide?
• Most are multi-brand operators with own contractors/vendors in place
• We provide referrals and resources• They typically bid projects out competitively to
existing vendors and referrals but are free to use their own network of contractors -- as long as they’re building to approved plan specs and quality levels
Pie Five – Fast-Growth Fast Casual
• Launched in 2011• Texas-based• More than 40 locations in 9 states• More than 450 announced franchised and
company-owned units under contract in 16 states and the District of Columbia
• Key growth markets: Dallas/Fort Worth, Houston, Chicago, Atlanta
Finding GCs/Vendors • Leverage existing relationships• Tap franchisees• Talk to your facilities managers• Call peers or ex-employees who
may have moved to other brands
• Join associations and network, i.e.,– RestaurantPoint– Restaurant Facility
Management Association
“We’re all looking for the same results: on time, on budget, no issues.”
Vetting Strategies• Start with AIA A503 form/GC
Qualification Statement• Run credit reports, check
references• Visit other projects they’ve
done• Talk to their subs• Require site visits and visits
to our offices• Review plans together• Set expectations, timelines,
deliveries• Trust your gut
Franchisees – Dictate or Guide?
• Franchisees have a choice of which KEC that they want to use
• All suppliers/vendors are approved by corporate
Benefits of Local Contractors – Del Taco
• Local relationships with subs• Local-market knowledge• Relationships with city/knowledge of local
inspection, permitting issues• Local nuances that only local/regional GCs would
know – saves time, money
Benefits of Local – Noodles & Company
• Recently expanded contractor base from a few traveling with us nationally to 10-12 regional firms
• Better customer service, follow up, representation• Better local market knowledge• Ongoing relationships with local trades – more
work gets them better pricing, better long-term support
• Easier qualification/vetting process – they have a presence in the market and more at stake locally
• No travel expenses
Benefits of Local Contractors – Pie Five Pizza
• We use a mix of local and traveling general contractors
• National architect to ensure consistency • Prefer local contractors– Suits our plan to build out each local market– Fast response time when we want to move to
the next project in the market– Relationships with local inspectors– Good connections to local subs and unions– Helps build the local economy
Druse’s Big Red Flags
• Unpaid subs/lien rights• Always looking for more money• Poor response to issues/problems – emerge
after a store or two• Unwillingness to “play nice” with other vendor
partners – us vs. them attitude
Henderson’s Big Red Flag
• Any contractor who says they always build on time, on budget, with no change orders or punch list– No set of plans is perfect and no project is ever
perfectly aligned with the plans!
Witken’s Big Red Flag
• Ask for cost to bond the project. If they have a high bonding cost or are not bondable, that’s a red flag.
Best Practices – Closing Thoughts
• Do your research/due diligence before committing to a contractor
• Get and check references – both trade and operator
• Develop a clear understanding of the suppliers’ capabilities, strengths and weaknesses
• Trust your gut. Walk away if it doesn’t feel right – mistakes are very costly
Future rd+d Webcasts
August 26, 2015
Green Building Strategies
Comments/suggestions: Contact Dana Tanyeri, [email protected]
Webcast Archives availablerddmag.com
A link to the CEU quiz will be sent when the webcast archive goes live.
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