As a Franchise, you demand a lot from your Architectural and Engineering Team. Franchises are a...
What is Cost-Plus?
Cost-Plus is a pricing model for General Contractors that clearly identifies a project’s costs, scope, and overhead. It is more detailed and transparent than a competitive bid, as every item and its cost is traceable. This is especially beneficial for tenured Construction Professionals with the brand. By having experience with many similar builds, they have a quality database of reliable data to reference as they prepare the cost. This accuracy, trust, and transparency create a truly mutually beneficial partnership between the Construction Management team, Contractors, and Brand.
The Cost:
The cost of your project! This includes materials, labor, and equipment in the scope of work.
The Plus:
The overhead required to get the project going and support the General Contractors’ support and operational costs.
How it works:
Instead of going out to bid, the Construction Management Team partners with a General Contractor for a concept. Since the General Contractor knows they will be getting that project, they reallocate the time traditionally spent preparing for a competitive bid back into the project. Not only did you just get weeks back in your timeline, but the General Contractor also got some additional visibility into your project far earlier than a traditional bid process.
This ‘jump start’ empowers them to create an efficient plan for your build and narrow the lead time gap where capable. With today’s supply chain issues, this is a massive benefit.
Meanwhile, with the bid process removed, your Construction Management team is also ahead of the curve! Instead of managing the bids (and filtering out red flags!), they are shepherding the vendors, contractors, and other parties in the right direction.
Utilizing the Cost Plus model inevitably results in a more involved, passionate team. This model is a catalyst for a long-term, successful partnership; not a one-and-done project. Since we’re only inviting our preferred GC Partners into the Cost-Plus model, we have seen this firsthand!
Safeguards
You may be thinking, "Will the contractor inflate their costs to make more than the percentage"? We thought that too – so we built in some safeguards.
- We have only invited general contractors we have wonderful relationships with – so we have a strong foundation of what to expect for the cost.
- Spark is heavily involved and ready to help review. We're not afraid to ask questions if something looks off.
- Good, consistent, similar work is coveted by general contractors – so they want to be awarded it as much as possible. We will routinely run a project through the competitive bid process (think secret shopper) to ensure that our Cost-Plus model is in line with the current market.
Summary
Utilizing a Cost-Plus model is a reliable, honest method to use that will benefit your bottom line - especially in this Construction Climate. It is proving to be a great option as you refine your Franchise Construction rollout program.
- You save time - with no bidding and partners involved earlier, more progress is made in less time.
- Your vendors and contractors view you as a partner, not a project.
- Costs are more accurate and transparent.
- Total project time is less = you get open sooner.
