In repurposed buildings, utilities are another issue that need to be considered, especially in older structures with substandard electrical wiring. "If a building is set up for 220 volts, it may need to be upgraded to a three-phase service, for example," Belletto says. "For a 40-year-old structure, this can cost $50,000 or more."
When taking over an existing space, Barker will literally crawl through the building to assess and survey what needs to go to auction and what can be repurposed. "Typically, if an operator is purchasing a used business, it's like buying someone else's problems, since the previous owners most likely didn't maintain it well," he says. "We were involved in a recent site conversion where the last three building owners didn't maintain anything. Our clients basically bought an HVAC issue."
When changing spaces, project teams should use a detailed punch list to bring things like mechanicals, utilities and equipment up to code. It's best to make these assessments prior to purchasing the building or signing a lease, which leaves room for negotiating with the owner or landlord.
If inspections aren't thorough, unexpected issues can crop up. Something as simple as a water line that hasn't been jetted regularly can cause a buildup of bacteria, which will produce foul odors and require a pricey fix.
"When taking on an existing site, it's important to take care and look under the hood," Barker says. "[A number of things may be uncovered], such as foundations sliding or load-bearing walls that were improperly built. There are many variables with these projects."
Prior to creating the new space's design, a foodservice designer and/or architect, as well as a code-compliant expert, need to conduct an on-site visit to the building. "This should be done before the lease is negotiated or sale of the building is completed," Belletto says. "This creates negotiating room with the landlord to provide some utility upgrades, like changing a 0.5-inch water line to a 1-inch size."
One of Belletto's clients was about to rent a 100-year-old building, when he recommended the foodservice operator's lawyer add into the lease that the roof had to be structurally sound. It ended up that the landlord had to spend $50,000 in structural engineering costs to ensure the roof could hold the weight of the large air conditioning unit.
When repurposing a space, ensuring that the bones and structure are sound will save time and money on the back end. "This gives us a guideline in terms of moving forward, because the rest of the project will consist of surface aspects, such as paint, fabric and textiles," Barker says. "We can always bring the décor up to relevance if the bones are there."
Still, in both an on-site renovation and repurposed existing site, there remains a certain contingency of money that is necessary to keep up the relevancy of the space. "The contingency on the upkeep of carpeting is every couple of years, so we hardly spec it anymore," Barker says. "When a space starts to look like an antique store or an old house, that's when the relevancy of a brand starts to slip and customers become disengaged."
Specifying the proper pieces and elements is important, but quality and durability also need to be top of mind. Anywhere from 500 to 1,000 decisions may need to be made with a remodel project, and decisions can be as mundane as deciding how much semi-gloss paint should be used. Each decision, no matter how trivial, will impact the new operation's overall operating costs.
Rising costs have impacted construction budgets as well as rent amounts for business expansions. "In the past, in terms of materials and labor, operators sought to stay under 65 percent prime costs, but certain cities, including Seattle and Los Angeles, require 50 percent prime costs," Barker says. "From the recent economic shift, we used to see rent fall to between 7 percent and 13 percent of an operation's annual sales range. Now we don't go into a facility unless we can keep the rent percentage under 6.5 percent of a business' annual sales."
In every remodel, no matter what type, each team member has to consider the overall picture. Team meetings where everyone communicates what is needed are crucial to ensure no one is in the dark.
By making sure everyone is on the same page, doing the necessary homework in terms of what will be kept and discarded, conducting site surveys and ensuring there are no code violations, unexpected expenses and issues that typically plague renovation projects can be kept to a minimum.