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Table of Contents Introducing a more integrated approach to retail build-out 2 Breaking down the many phases and risks of today’s build-outs 2 The problems with multi-phased build-outs today 5 A peek at possible pitfalls in each build-out phase 6 Using an expert to integrate and streamline the build-out process 8 The many benefits of using an integrated approach 10 Integrated services’ expected return on investment 12 Conclusion: An integrated process new business owners can feel better about 13
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Introducing a more integrated approach to retail build-out. With new retail locations popping up everywhere these days, it seems like a good time to review whether the current build-‐out process is purposefully effective or habitually ineffective. Transforming newly leased properties from their “empty shell” to a “ready-‐for-‐business” state is often times the single most important—and expensive—event some people will ever undertake in their lives. Therefore, corporations, investors, franchisors and franchisees all have a stake in the speed and success of the total build-‐out process. It’s important, then, to understand where improvements can help optimize costs and timing for all involved. Similar to planning a wedding or building a new home, getting a retail location ready for business requires careful planning and oversight. When an expert handles the process, the results can save time and be more cost-‐effective in the long run. Too often, however, new business owners try to do it themselves and may not always understand how interconnected the phases of a build-‐out truly are. Pair that with the standard juggling of multiple service providers and tight timelines, and it’s the perfect recipe for “failure to launch” on time and within budget. This paper points out why today’s build-‐outs can run off track and proposes an alternative to the status quo. By using a build-‐out manager with the expertise to integrate and manage the phases of a build-‐out and oversee the entire process—not just one segment or service—new business owners can avoid or minimize many issues while saving time, money and headaches along the way.
Breaking down the many phases and risks of today’s build-outs. There are several key phases in the build-‐out process that happen between deciding to become the owner of a store and opening the doors for business. Although these phases are extremely interconnected, new business owners often treat them as distinct and sequential. The process rarely receives oversight from the front end to the back end and tends to lack integration from one phase to the next, setting up the business owner for failure at multiple points along the way. Here is a look at the phases of a typical build-‐out and risks associated with each.
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Phase 1: Concept Design and Site Selection
Before new business owners can seek appropriate sites for their business, they must have some idea of what the retail store will look like, what size it needs to be and what sort of functionality it should have. This requires a basic concept design that a new business owner can use in talking with a real estate agent about potential properties. Armed with options from the real estate agent, new business owners then negotiate with the owners of each property to get the best deal for the purchase or lease of a space. Some spaces may require more extensive renovation than others to meet the needs of the new business. In these cases, property owners may sweeten the deal for prospective tenants by offering tenant improvement (TI) dollars to help get the property optimized for the tenant’s particular new business. Doing so may include demolition, re-‐wiring or even some upfront construction work if the site needs to be drastically repurposed from its prior use. Even when optimizing a site is unnecessary, property owners may still offer TI dollars to entice new business owners to select their building as the final site for the new business. These negotiations are captured in a Letter of Intent (LOI). Whether leasing or purchasing a new property, new business owners who don’t have the experience to accurately assess the needs of the space may end up paying more for their build-‐out than necessary—and may even have to delay their grand opening if surprises are uncovered about a property after the negotiations have ended.
The five phases of a retail build-‐out leading up to grand opening typically lack integration and are handled in a sequential manner.
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Phase 2: Finalizing the Design using an Architect and Acquiring Permits
Once a new business owner settles on a property for the new business, he or she will want to develop a more detailed architectural plan for the space. Working with an architect to determine how the business will look and operate within the final site can be exciting to business owners who are anxious to see their business come to life. Architects and contractors, however, often have different views on the best way to give form to a retail concept. When plans are drafted with just one perspective on the project, new business owners may miss out on cost-‐saving opportunities that may be identified by contractors who are not typically consulted until the next phase. Business owners sometimes get stuck with pricey plans that they may not have a large enough loan to cover, or time-‐intensive “re-‐do’s” to get a plan that’s more in line with the lending budget. Once designs are finalized, new owners must submit them to the local municipality for permitting. Truly a wildcard when it comes to retail build-‐outs, the length of the permitting process depends on a municipality’s unique policy and varies from city to city. It can take a week or it can take 90 days for officials to approve designs, and allotting an appropriate amount of time for permitting requires prior build-‐out experience in any given city.
Phase 3: Selecting a General Contractor and Building
The next step is hiring the best general contractor and subcontractors for constructing the physical building. Selecting a good, reputable general contractor requires lots of due diligence and a working knowledge of not only who can do the work but also who will show up to do the work. Decisions made solely on price are not necessarily the best choices when low costs win out over high-‐quality results.
Phase 4: Ordering Furniture, Fixtures & Equipment (FF&E)
This phase involves locating, ordering or manufacturing the less permanent items for the space, such as cabinets, displays, shelves, lighting, desks, computers, interior and exterior signage and more. Exterior signage alone is an often-‐overlooked build-‐out component that can require careful consideration. FF&E must comply not only with brand standards but also with state and federal code—and again, must be functional in the retail site. Lack of experience or time in this phase can lead to trouble with final inspections, operations and even costly and time-‐consuming rework if items don’t fit the retail space.
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Phase 5: Installing the Final Pieces
Bringing everything together in this final phase can be a very exciting and stressful time for business owners who are nearing the finish line of opening a new business. While it may seem that nothing could possibly go wrong here, this is really the place that everything can go wrong. Mistakes and decisions made “up-‐stream” in the earlier phases can collide here, creating a pile-‐up of emergency issues for owners to manage. This leaves owners fighting to find time to finish critical tasks necessary for on-‐time openings. And if any of the prior contractors used up extra time in one or more of the earlier phases, new owners may find themselves completing final tasks at breakneck speeds in an effort to meet the grand opening deadline.
The problems with multi-phased build-outs today. Separate silos. While all of these phases are connected and should be managed both with an eye on the start and the finish line at all times, this is not how most build-‐outs are managed today. Currently, build-‐outs occur in very distinct phases—generally managed by a different service provider (i.e., an architect, a contractor, a fixture manufacturer, etc.). It’s no wonder build-‐outs can get messy. Their one-‐after-‐the-‐other, sequential “silo” design encourages service providers and business owners to make decisions within each phase without regard to what happens in the next phase, or in the one prior. Big, fat timelines. As mentioned before, service providers may pad their timelines with excessive time buffers to protect themselves against “missing a deadline,” thereby increasing the length of time necessary for each phase and subsequently, for the entire launch timeline, too. Ineffective communication. Treating these phases as distinct may also result in ineffective or poor communication across the different service providers. Much like a game of “telephone” in which simple sentences change each time they’re passed on, communications within each phase of a build-‐out can be misinterpreted from one provider to the next. Without end-‐to-‐end transparency and integrated communication across the entire build-‐out process, business owners run the risk of unforeseen costs and time delays.
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A peek at possible pitfalls in each build-out phase. Managing a build-‐out can be like wandering an obstacle course, each phase presenting its own hurdles that could delay the completion of the project. With no clear strategy as to the shortest way through the course, new business owners will struggle over wall after wall on their way to grand opening. The following scenarios demonstrate a few of the obstacles lurking in each phase of the build-‐out process. Concept design phase: A child-care center doesn’t build in enough TI padding for padded floors. A chain of child-‐care centers negotiates enough TI dollars to install padded mats over the concrete floors of its new location. The fix doesn’t quite meet state regulation for children’s play areas, however, and the company ends up paying for more thorough padding out of pocket. Architecture & design phase: A clothing store finds itself between a rock and a hard place. A rock-‐climbing equipment retailer wants a cylindrical climbing wall in its new location that customers can use to try out products. A contractor builds the wall as designed, but the wall fails to meet structural engineering standards and must undergo costly architectural re-‐design during the construction phase. General contracting phase: A no-show construction team delays the game for a sports facility. When the time comes to build a concessions area in a new indoor sports facility, the construction team doesn’t show up for work. With a little digging and a few calls, the business owner finds out it’s because the contractor double-‐booked his team and another project the contractor is working on is running behind. The small sports-‐center franchise has little power to fix the situation, having already entered into an agreement with the irresponsible contractor.
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Furniture, fixtures & equipment phase: Special rice maker cooks up extra fees for a sushi restaurant. The owner of a chain of sushi restaurants asks a relative who runs a foodservice equipment manufacturing company to provide custom rice cookers for several new restaurant locations. The restaurant owner runs into problems when an inspection reveals that the custom rice cookers fail to meet National Sanitation Foundation (NSF) standards. Installation phase: Elevating hospital beds lead to elevated rework costs. When a shipment of hospital beds arrives at the site of a new doctor’s office, the contractor is surprised to discover that the beds are adjustable and require electricity. Had he known this, he would have wired the hospital rooms with additional outlets during construction. Instead, the rework racks up additional costs for the co-‐owners of the new office, an expense that could have been avoided through more effective communication across the build-‐out phases. Steering clear of mishaps like these requires a level of experience or an investment of serious time. When new business owners choose to juggle unfamiliar processes and decisions of a build-‐out, he or she may simply get distracted from other key tasks of opening a business, creating more risk and headaches than a new owner should take on. So, business owners have two distinct choices. The first is to manage the process from beginning to end themselves, investing valuable time and effort—and assuming mountains of risk. The second is to work with a team of experts who will help integrate the process from the front end to grand opening. By managing all of the details for the business owner and serving as a key advisor, this team helps to reduce risk, optimize costs, get the doors opened on time and ultimately save a lot of headaches along the way.
Taking on a build-out alone: is it worth the juggle?
The major decision to open a new business comes with a full load of prep work that deserves new business owners’ full attention: • Ordering inventory • Developing sales and marketing strategies • Hiring and training new employees • And more When new business owners choose to manage their build-‐out on their own, they must juggle these core tasks along with many complex build-‐out decisions. They should ask, where is my time best spent as I prepare for grand opening?
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Using an expert to integrate and streamline the build-out process. In order to manage a build-‐out without all the costly errors and stress, the barriers between the phases need to be broken down so they can overlap and flow together. Doing so takes extra time and experience, which new business owners tend not to have. In an integrated approach, an experienced project manager takes on the burden of coordinating the various phases of the build-‐out, working to streamline the process from start to finish so stakeholders can focus on other important things necessary to launch the new business.
An experienced project manager knows how the build-‐out phases “fit together” and can coordinate them so they overlap. Doing so condenses the process, saving new business owners time and money on the way to grand opening.
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Because building out a new business location is such a huge undertaking for most people, managing the process is about more than just choosing the right paint and the thickness of the wood. It’s about entering into flexible, trusting relationships with contactors and suppliers so that a business dream can become a reality. When corporations, franchisees, franchisors or investors choose to work with a build-‐out manager, they sign on to have a trusted partner and advisor every step of the way—someone who will protect business owners from mishaps and guide them to a successful launch. A build-‐out manager is an industry expert, or in some cases, a larger management team, who takes on several roles in order to guide the build-‐out process, including:
• Serving as the single point of contact for corporate teams, franchisees, franchisors and investors, taking the hassle out of the build-‐out process and walking them through it
• Using a team approach that balances all perspectives and incorporates design, construction, budget planning and owner involvement to create a perfect build-‐out solution
• Focusing on effective management of transitions throughout the build-‐out to shrink gaps and cut out unnecessary costs
• Finding win/win solutions rather than trade-‐offs at key decision points along the way • Maximizing communications and visibility between all the people involved in the
process Not all project management companies have the resources or experience necessary to manage all of the phases of a build-‐out and deliver value to new business owners. Here are several qualities new business owners should look for in a retail build-‐out expert:
• Offers frank guidance grounded in industry experience • Always selects contractors from multiple bids to get the best work for the best price • Selects contractors from a network of trusted providers gained from years of doing
business across a variety of retail concepts • Makes sure every aspect of the project is compliant with local and national regulations • Cares about the project and long term success of the client and makes socially
responsible decisions
“A build-out manager is an industry expert, or in some cases, a larger management team, who takes on several roles in order to guide the build-out process.”
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The many benefits of using an integrated approach. A build-‐out manager uses industry expertise to deliver new business owners the BEST VALUE when it comes to their build-‐out. Different from least expensive, best value is most appropriately defined by optimizing four key variables—time, service, quality and price (the TSQP model™).
Optimized timelines. The faster a new business owner can begin offsetting the cost of the build-‐out and earning money toward rent, the better. By
overseeing the entire timeline, a build-‐out manager can help create overlap among the build-‐out phases and conduct certain tasks simultaneously. By carefully coordinating several tasks at once, the integrated service expert reduces or removes unnecessary time. In some cases, new business owners may even open their doors for business before they start paying rent.
Impeccable service—and fewer headaches along the way. Using an effective build-‐out manager takes the build-‐out burden off the new owner’s plate and offers a single point of contact throughout the entire process so they can focus on the other responsibilities of opening a new business, like ordering inventory, training and planning for sales and
marketing. The business owner holds the build-‐out expert accountable for overseeing every detail and for reporting on progress frequently, but no longer has to manage each task alone.
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Higher quality results. There are two main reasons why a new business owner can expect higher quality results when using an integrated services expert. First, the expert generally brings access to a network of reliable service providers who can get each phase of work completed. In some cases, business owners – particularly
those launching their first business – may not have the same knowledge of or access to such a reliable network. Secondly, a build-‐out manager’s prior experience in the process provides knowledge of how one decision will affect another. This type of upstream/ downstream management allows them to help new business owners avoid pitfalls and often times leads to a final product that meets or exceeds the owner’s original vision for the space.
The right price for the project. With years of industry experience, build-‐out managers are able to help new business owners identify opportunities to save as well as areas where paying a little extra will go a long way in delivering a quality end-‐result. Similarly, just as build-‐out managers work to shrink timelines and steer clear of pitfalls, they
also find ways to avoid unnecessary costs and make investment dollars stretch a little further. As specialists in their industry, build-‐out managers may also have greater buying power than individual business and will likely be able to source higher quality materials in bulk for less.
Catering to more than just cost.
A retail build-‐out can be compared to throwing a big party. Some hosts will opt to prep the food themselves, but others will work with a caterer who has the experience and resources to provide quality food to a large group. Choosing to cater frees up the host’s time to take care of the million other things that need to happen before guests arrive. Like working with a caterer, using a build-‐out manager saves new business owners time and hassle, facilitating a high quality build-‐out for an optimized price so new business owners can focus on the task of opening a new store.
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Integrated services’ expected return on investment. Utilizing an integrated services build-‐out expert will cost a new business some additional upfront money. In practice, however, these services not only pay for themselves, but also sometimes exceed the initial investment in “soft” returns that are difficult to measure. Reputable companies who offer these services will provide business owners and stakeholders with an accounting throughout the project and at the end of the project on where cost savings occurred. In some cases, these will be solid numbers that can be derived from purchasing power savings or timeline savings. Other costs, like the avoidance of potential risks or less hassle for the business owner, may be harder to measure. In any event, given the magnitude of importance of this event and only one chance to succeed, many new business owners typically find that build-‐out management fees pay for themselves multiple times over. Partnering with a build-‐out manager also offers corporations and franchises a long-‐term payback benefit. These companies have two options when it comes to sustaining ongoing retail growth: they can either pay for the salaries and benefits needed to support an internal retail build-‐out team all year long, or can outsource the work with a trusted build-‐out manager when it’s needed. More often than not, retail growth occurs in peaks and valleys, and supporting an internal build-‐out team can be expensive for corporations and franchises to support financially during slow-‐growth periods. Building a trusted relationship with a reputable integrated services build-‐out manager provides a more cost-‐effective means of weathering the peaks and valleys of retail growth.
“Many new business owners typically find that build-out management fees pay for themselves multiple times over.”
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Conclusion: An integrated process new business owners can feel better about. In summary, the phases of a retail build-‐out are extremely interconnected, and decisions made at any point in the process have both upstream and downstream repercussions. Anyone deciding to become the owner of a new business can either manage these decisions on his or her own or seek the guidance of an experienced build-‐out manager. Clearly there are reasons for an experienced business owner to manage the process on their own. But in many cases, investing in an integrated services expert might not only help eliminate risk and headaches for the business owner, it may also provide opportunities for upside income potential. Sometimes, the extra set of “hands on deck” can provide just the right recipe for beating grand opening deadlines so business owners can begin collecting an income stream before even paying rent. One thing is certain: integrated services experts provide a powerful and viable new alternative to assist business owners with this very important and intricate process. New business owners seeking a smooth, productive start in their dream business should heavily weigh the costs and benefits of both options before it’s too late in the process.
About the author. Founded in 1975, F.C. Dadson is a manufacturing and program management company specializing in creating, designing, constructing, fabricating, fulfilling and installing retail environments and kiosks. Headquartered in northeast Wisconsin, F.C. Dadson combines personalized service with a corporate infrastructure and supplier network to provide clients with convenient and cost-‐effective end-‐to-‐end project management. For more information, visit www.fcdadson.com.
