Expert: Roger Zona - 8/8/2008

Question
My wife and I are in the process of opening a patio style take-out restaurant (southern cooking).  After a lot of trials and errors we are finally at the point of hiring a GC.  

We got the final plans back from the architect.  We bought a prefab metal building.  The architect did the interior design and everything associated with the turnkey project.  

This is all totally new to me as far as the hiring of a GC. I have several GC's lined up for bidding on the project.  Two of the GC's actually own a restaurant.  My architect advise me not to just 'give' the plans to too many GC's without a sure way of getting them back.  I just paid $12000.00 to have these plans done and future plans are to franchise the business.  

Can you please advise me from this point as to how I should proceed?  My loan officer at the bank told me I should pay a GC anywhere from 5% to 10% of the cost of the entire project. Is this what I should expect the GC fee to be?  I thought about hiring someone to oversee the bidding process.  My budget is very tight at this point due to some unforeseen cost.  I put the process on hold for now b/c I don't want to screw this up.  But time is of the essence 'so to speak'.  I've been working on this for 2+ years.  I have nearly $40,000 of my personal money into it already.  

I've written to 'allexperts' quite a few times and you guys have been a Godsend.  You guys have helped me so much and I want to thank you in advance.  I really, really appreciate your advice.

Answer
Hello Arthur,
Welcome to the world Of "unknowns"!  Not really, but you are starting out right by getting reasonable and logical answers.  

First, as a former Architect and now a developer/builder, I was used to overseeing the bidding process for my clients.  It really is part of an Architect's job.  Granted, he does get paid, but he should be completely neutral and unbiased.

If that's not the case, then lets start over.  Yes, the bidders should give you a deposit for the plans.  Keep the checks and when the plans are returned, return the uncashed check.  It's not unusual for "bidding documents" to not be the final set of plans that is submitted to your building department.  They may vary a little when your bidders recommend substitute materials.  Most specification will spell out a specific product but then qualify it by stating "or approved equal" - which gives the bidder latitude to substitute.  I have designed and built "franchise" buildings.  As a designer, I insisted on specific products because they may be a hallmark of the franchise.  This applies to colors as well.

First qualify the contractor.  Have them send you a "resume" and list of their projects.  Restaurants can be quite special.  I have designed them and built them (never owned one) and there are many things that are not common in other buildings - a bar, refrigeration, fire protection, sanitary flooring, etc., etc., etc.

I think five bidders will provide a fair example of what your budget should be.  Invite the bidders, ask for a plan deposit ($200), and set a reasonable deadline - 4 to 6 weeks.  Make sure all the items are either specifically specified or referred to on the plans.  For example, your air conditioning/heating system should be designed to keep a constant temperature in the dining space - even when all the tables are occupied and you have people standing by for seating.  I would suggest a separate A/C system for the kitchen and pre area.  I
think you get my drift!

OK - you've got five bids now.  Set aside the low and high and see how close the other three are to each other.  You may be surprised at how similar they may be.  If the low bid is considerably lower, it is a sign that he may have missed a major item or he is low-balling on the hope of getting the job and then swamping you with extras.  Lets assume you received a fair and acceptable bid.  Next you need a very specific contract.  It should spell out everything that is expected of the contractor including time limits.  IF there are any extras or change orders, the contract can specify the markup or profit allowed over and above the cost which must be verified by receipts.  The contract can be an AIA standard form but they don't get specific enough to suit me.  Use it as a guide and supplement the terms and conditions where necessary.  This is where an attorney comes in.  He will probably charge $250 an hour but he may save you more than his fee.  When paying on the contract, have someone (your Architect) approve that the work was done satisfactory and keep a 10% retainage of the amount requested until 60 days after completion of the project.
Most contractors are accustomed to this (although they don't like it) but it usually is their profit at the end of the job.  Be sure you get releases of liens from every supplier, subcontractor, materialman, and the G.C. before each payment - even if they did not file a Notice to Owner.  Your Bank will want all these records.

I could go on and on about some pitfalls to avoid but, as you said, time is of the essence.  When you franchise, you should have an experienced someone on staff that handles construction and who is very trustworthy. There are many ways to show favoritism to subs and suppliers by the gifts and perks they offer - free work on a home, prepaid travel or cruises, new trucks, etc., etc.  

I have worked with a company in Ohio that builds restaurants all over the US.  Some are Theme type (like a McDonalds) that is duplicated over and over and some are specially designed (like when in a shopping center bay) but they know their business.  They assign an on site field supervisor to each job who sees it through from ground breaking to opening and works with the building dept. and all the inspections required.

I hope this has been helpful and good luck to you.

Roger