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No Free Lunch: Restaurants Represent a Good Market, But They Require a Full Effort

If you dine out very often, you know that restaurant food and/or service can range from good to bad to everything in between. Not only that, this same range can often be found in the same restaurant. And the six contractors from around the country that we spoke with for this article report that doing wall and ceiling work for restaurants is also a mixed menu. Restaurants represent a good meal ticket, but you have to work for it, and there are a number of challenges you have to deal with.

Let’s first look at contractors doing chain outlets, then move to high-end chains, and then to upscale restaurants—without being too rigid about it, since some contractors may have an emphasis on one type but do other types as well.

“We do a lot of restaurants, usually in a chain situation, so if you do a good job you can do them in multiples,” says Justin Nealeigh, general manager of Ted Nealeigh Company in Greenville, Ohio. “The work seems to come in waves, so when it’s hot, up to 30 to 50 percent of our business is restaurant. Right now we’re doing outlets in subways for Tim Hortons, a chain that is moving through the region. We’ve done a half dozen Taco Bells and about 25 Bob Evans. One of the big advantages is that, though they are not large jobs, they represent nice, steady work.”

Typically, for the standardized fast food chains, Nealeigh says, “They stick with the tried and true. They have their formula down for buildings, so once you go through one or two, you know the formula.”

One challenge, Nealeigh says, “is that the there is a pretty demanding time schedule, but, once you’ve done some, and have solved the things that first surprised you, you get more and more efficient. We’ve been able to get 12- to 15-day jobs down to five days.” This, Nealeigh continues, “helps us to both lower the bid and raise the bottom line.” The typical fast food chain is not open to negotiated work. “We’ve found the bottom bid still rules,” Nealeigh says. “Like everything else, you try to get in with a fair price and good service, and if they like your work, there’s a little leeway about the bid. After doing 10 to 12 restaurants in a chain, the bid becomes almost a formality for stand-alone restaurants.

“This is usually more of a niche market. Your reputation brings you there more than price. Typically it’s a more custom environment, one of a kind, and often you’re creating it as you go along.”

How About Payment?

“Typically payment from the chains is pretty good,” Nealeigh replies. “That’s part of their formula too. They don’t have to make up their accounting system as they go along. On the other hand, though the chains are a little better, the stand-alones and restorations are not too bad.”

“We like restaurants,” says Gary W. Dillman Jr., CEO of Baylor Plastering & Drywall, Inc. in Daytona Beach, Fla. “We’ve done several Pizza Huts and other fast food outlets. You get with any kind of franchise, they like to stay with the same contractor.”

With restaurants, he continues, “There’s a lot of acoustical ceilings with vinyl tiles, FRP panels for the kitchen, need for sound panelization, and custom type panels throughout the restaurant. We do plastering, studs, drywall, acoustical ceiling wall panels, interior and exterior applications in stucco. It’s lucrative for us, but also for the customer who can get it all from a single source.”

For this reason, Dillman says, he does get a certain amount of negotiated work, for higher margins, along with the bid jobs. One drawback he acknowledges is that “sometimes restaurants don’t have a lot of drywall work. They like siding, so that can limit that aspect.”

In terms of payment, Dillman says that “collections are better than average. You don’t have the politics and red tape and paperwork you have to deal with in the public sector. The franchises have done it over and over, so they are used to the payment process. Private owners have generally been pretty good.”

“Yes, we have done and continue to do restaurant work, mainly for the high end chains such as Cheesecake Factory, Tosca and Macaroni Grill,” says Robert A. Aird, president of Robert A. Aird, Inc., Frederick, Md. “We do EIFS and stone and Venetian plaster.”

Aird, however, has cut back on restaurant work, and is not enamored of the market. “We bill at the end of the month and hope to get paid within a reasonable time,” he says.

A major problem, Aird says, is “schedules are always changing in a way that makes things difficult. You have different trades crawling over other trades. There’s no room for storage, and usually no room for parking.”

All this suggests that “you need a general contractor or construction manager who is very organized and very professional, but this doesn’t always happen.” Part of the problem, Aird explains, is that general contractors would use their own manpower to fill in voids and keep the work moving. Now, with the arrival of construction managers, who tend to push paper and not get their hands dirty, that has changed. Many general contractors have moved on to become construction managers. Some are good, Aird says, and some not so good. The good ones will put a general contractor in charge who will coordinate all the trades and maintain discipline; the others will just go to the cheapest bidder.

“Another major stumbling block is the lack of timely and usable design criteria from the design architect, engineer and interior designer,” Aird says. “In the early 1990s, when the market bottomed out, architectural firms let a lot of people go. The seasoned people are gone, leaving those with less experience. Now that the market is tightening up, they don’t have the resources to do the job right.”

How to Cope?

Aird handles the situation “by planning the work and having the material and men we need. We also have someone go check out to the site ahead of time so that we don’t have to show up and then, because the other trades have not been able to keep to their schedules, turn around and go home.”

“For sure, restaurants are challenging, says Mark Cone, estimator/project manager for Delta Dry Wall, Inc., Denver, which also focuses on high-end chains. “We do very ornate, beautiful work for the Cheesecake Factory,” Cone says, “and also for others like Maggiano’s, a high end Italian restaurant chain, which looks like a villa, with multiple floors, and all kinds of ornamentation—certainly not your usual box.”

One of the problems, Cone says, is that for this type work he usually deals with out-of-state contractors, and, for this reason, the payment is typically slow. “It’s a fast-paced schedule, and you need to get things done very quickly,” he says. “But you’re often cramped in the kitchen areas, where there might be 20 people working at the same time. We’re in there putting up the steel walls, RFP over that, and the vinyl grid ceilings, and the plumbers and others are working under us.”

The way Delta works and makes the situation work for the company instead of against it, “is we’ll sometimes have multiple crews, sometimes have two shifts going, working at night when no one else does.” By the same token, Cone says, the company has picked up jobs when the other subcontractors couldn’t maintain the schedules.

Cone says that, although the hard bid is the standard and cost may be the ultimate criterion, it doesn’t always necessarily work out that way. “We’re not necessarily the low bidder in the work we get,” Cone says. “What I like to do is send prequalification packages with the proposal, so they can see our qualifications and reputation. This can help with out-of-state contractors.”

Daniel Cassidy, vice president of the Franklin Park, Ill.–based Cassidy Brothers, says his company works in high-end restaurants in hotels. “You have to work in compact spaces in the kitchen while the equipment is going in, and it’s similar to working in health care in that the textures have to be washable and withstand high temperatures for grease wash—which is not foreign to us because we do a lot of high-end work,” he says.

One of the problems in this arena, Cassidy says, “is the restaurant owners are very opinionated and are used to having their own way. But they don’t have a construction background, so they can be hard to deal with.” Payment, Cassidy adds, “comes in no faster than it does for other work.”

Also working in high-end restaurants in hotels or casinos is Jon Miklos, senior vice president of Performance Contracting, Inc., Lenexa, Kan. “It’s very demanding work,” he says. “The owners are very discriminating and set high standards. There are specific commercial regulations for food preparation that have to be followed.

“It’s certainly a very large market, with a very sophisticated clientele and high quality standards. Many times, as you are completing work, the owner is moving in bulky equipment you have to work over. The scheduling is very rigorous, and to be successful you have to meet deadlines.

On the other hand, we’re able to differentiate ourselves from other contractors who are not suited to that type of work. We go after these higher end applications, and a lot of the work is negotiated.

“Often times, our restaurant work leads to much more work in hotels and casinos, for we’ve gotten our foot in through the kitchen—the back door, so to speak.”

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