When our team purchased the Colorado franchise rights to Newk’s Eatery in December 2015, the retail market was hot. A year later, when we started researching sites, Denver’s market was on fire – a landlord’s market with retailers clamoring to get into the hottest centers.
Luckily, Newk’s was ready. Our corporate construction team spent the better part of 2016 reviewing every line item in the construction budget, then making the tough choices necessary to streamline the process. As a result, construction costs for our first Denver locations – in Arvada and Lone Tree – were approximately 20 percent less than when we signed on as franchisees. That’s big savings, particularly at a time when Colorado’s average construction cost index rose by about 3 to 6 percent, according to Mortenson Construction Cost Index.
Three major factors helped us accomplish this feat.
1. Look at everything. The Newk’s team reviewed every line item on the construction budget, then went out into the field and reviewed them again with vendors, contractors, developers and landlords.
The process was not for the faint of heart. At the time, Newk’s was building in 14 states using different architects, contactors and subs in each market. We learned some valuable lessons from those countless meetings, though. In some cases, we learned the contractor wasn’t for us. In most cases, it was Newk’s processes we had to “fire.” Slack in our design process was leading to expensive delays and change orders, so we created an airtight schedule that keeps the full design, construction, operations and training teams informed throughout the process.
The process worked like clockwork for our Arvada and Lone Tree locations, which opened right on schedule. Our cash registers opened on time, and our landlord recognized its revenue more quickly and with far less hassle.
2. Involve the design team early. Before the lease is even signed, Newk’s real estate team engages architects, landlords, contractors and developers in the process. When we sign a lease, we want to build a building; by engaging the full team very early on, we can ensure that the site works for our customer base and, just as importantly, that it will be cost-effective to build.
This allows us to reject sites that may cause unseen costs – a second-generation restaurant rehab, for example – or conversely, identify cost savings and troubleshoot issues in the sites we do choose to prevent overages or delays.
A recent example involved an in-line location in a new strip center (not in Colorado). In most cases, the developer would pour the concrete slab before the tenant began construction. But with the eatery’s unique floor plan – with an open kitchen in the middle of the dining room instead of locating it at the back of the space – would have required contractors to cut into the slab and relocate the plumbing, which costs time and money. By starting early, we were able to make sure the landlord didn’t pour a slab, and instead ran our plumbing first and poured our own slab, with a credit from the landlord. Our construction costs were lowered, our timeline was shortened, the landlord didn’t have to hassle with the slab and not a single change order was needed.
3. Be willing to slay some sacred cows. No, we aren’t talking about the petite tenderloin steak in our salads, sandwiches and pizzas. But we did have to challenge many of the design and construction techniques that were “how Newk’s has always done things.”
Recognizing that every possible inch of space in a restaurant needs to generate income, we changed seating areas and added square footage for takeout, even while decreasing the average size of our restaurant. We moved doorways, redesigned our patios and ended unproductive vendor relationships. One thing that will never change? The open kitchen that sets Newk’s apart, designed by founder Chris Newcomb on a napkin (which he still has, framed). But we constantly make sure we keep learning and creating more efficient designs for our business.
We also killed a sacred mantra of the real estate industry: “Location, location, location.”
Of course, we know a good location drives success. But we found that a “great site” might not be “great” for us. We vary in daypart from most fast-casual chains in that we don’t offer breakfast; instead lunch, dinner and catering comprise our business. A robust daytime population drives our lunch traffic, including our grab-and-go, pick-up, delivery and catering. Rooftops and evening traffic drive our dinner business, which includes a wine and beer license and a focus on outdoor dining and families. So, while we analyze locations using the same metrics as our competitors – for example visibility, traffic, access and parking – we factor in the psychographics and demographics of the market.
When taken together, these three major changes to our construction and design schedule allowed us to open new restaurants as much as 10 days early – delivering up to $60,000 in top-line revenue. Talk about the early bird getting the worm!