Brewery Buildout: Choosing a Contractor
Now that you have secured the funding or your brewery and have found your perfect space, you will need to pick out a commercial contractor to help build your vision. This part of the process needs to be done carefully with due diligence taken seriously so you are not taken advantage of. It has been my experience, that contractors especially, will take advantage of you. They see you as an easy target as someone who may not know the “ropes” when building out your space. The construction of your space is very expensive and can take you out of the game before it begins if you are not diligent in monitoring every single cent spent and paying close attention to every single step taken by your contractor. Your contractor needs to have a very detailed plan laid out by you, so they can be on board and share the passion that you do. This works best if it is a collaborative effort that everyone is invested in for more than just a paycheck. Locating companies and individuals to share this with can take what seems like an eternity, but it will be worth it and will be accomplish correctly. The time and effort put in now, will pay off during construction and the overall ease of brewery operations day to day. “The devil is in the details” as they say.
Oftentimes when building a brewery, contractors tend to think they can make a little “free money” at the expense of an inexperienced owner. It is very irritating to see outrageous prices on bids and the contractor not submit a very detailed and itemized statement explaining all work to be completed. These general line items like just putting down “plumbing”, “electrical” or “HVAC” with high dollar price tags are just so they can throw a big number out there and hope you don’t notice and agree to it. Once you agree to the cost and sign contracts, you’re stuck. I’ve seen brewers go broke before they even opened due to negligence and high “necessary costs” during construction.
If you are building your brewery in an area that already is well populated by breweries, go hang out with the other brewers, pick their brains and ask them who they used and how their experience was. We are all friends and love to share information. Utilize your local friends in the industry to get you started in the right direction. Having a contractor who has already built breweries can be a huge benefit and save you a lot of times and explaining why things are done like they are. If they haven’t built breweries, locating one that has built restaurants or food production facilities will have a fair understanding of certain aspects, will help in your build out and will already know your basic needs. This article is not about building out your space right, many people have done this well already in very informative books you can purchase from the Brewers Association. This article is to help give you an idea on how to manage your contractors and construction managers to work for you and your budget and not themselves.
Once you have selected 2-3 contractors that look like they can fulfill your needs, you will want to take them into your space (if they haven’t already asked to see it) with your blueprints and building layout with all the major utilities marked so they can begin the bidding process for you. You may be thinking, “Why do I need 2-3 contractors to give me bids? “. This is to create a competitive atmosphere where you will end up getting the lowest cost with the highest quality work from your selected contractor, while also giving you an idea of who will be the most reasonable, responsible and detailed. Also, be sure you verify their license through your local state and access the Better Business Bureau to see if they have any significant complaints or lawsuits pending. This can big a big red flag to run away.
Once you have bids in hand, you will want to go over them with a fine-tooth comb. Look at every single line item laid out for you and its associated cost. Most bids when first given are very general and are marked up significantly. I always choose one of the bids that looks the best and start making a list of very detailed questions for the contractor on the costs of each item. Schedule another appointment with them to go over the bid at your soon to be brewery location. First thing, ALWAYS tell them, no matter what, that it looks to be a high cost. Most of the time they will agree and start being more reasonable with pricing. This is to show them that you are paying close attention to what they are doing, and will set the tone for this potential relationship. Remember, you are paying them a hefty sum of money to work for you to build your dream, not the other way around. You are paying for service and you want the best service. Don’t short change yourself. You would not sacrifice a good beer recipe to just stock the cooler, so don’t let others do it to you. To do this, you need to know how the bidding process works.
How bidding works: When a contractor comes in to bid a job, they look at everything, supplies, labor, duration of project and profit for themselves along with “Club Dues”. Club dues are for all their office overhead to complete your project as well. They will cover the expected costs on their end and then add at least 30%-45% on top of that for profit and they will also add a markup on material costs to increase their profit margin. Then, once they have that completed, if you remove an item like a 30-foot plumbing run for water to your taproom or bathrooms that isn’t needed any more at a savings cost of $6,000.00, they will still have the 45% markup that is $2,700, for something that is no longer being performed and it just free money for them along with the material markup still being paid as well, even though it has been removed. If you have them remove an item, make sure you tell them you want the percentage that was added for profit and material increase, to be removed for that line item as well, otherwise you just gave them $2.700+ for doing nothing. They do need to make a profit and you are not trying to take that away from them, it just needs to be earned honestly.
Yes, this is tedious and being very picky, but your budget is all you have and it can be blown very quickly by a greedy contractor or unknowledgeable owner who has been too busy to pay attention. If you are not careful, and they will take advantage of you. Pay attention to every single piece of the puzzle. This will be the story of your life being a business owner now. The only difference? You can have a beer while at work. Hooray!!! I’ve seen too many owners taken advantage of and loosing tens and sometimes hundreds of thousands of dollars. We don’t want that for you. I understand you may not have time to watch the contractor all hours of the day. That is okay. You will know this in the beginning so that is when you utilize a construction and or project manager to represent you on site daily.
Your construction manager or project manager will be the owner representative throughout the design and construction phase. Why do you need a construction manager with you? As a new business owner, you want to minimize risk and avoid foreseeable mistakes. A space that may seem perfect in your mind may require more time and money than you were hoping to invest. A construction manager will help you establish a preliminary budget and schedule to your vision. They will be onsite daily, monitoring all work being completed. Making sure it is up to your local and state codes, along with making sure it is up to your standards and needs. With the right construction manager on board early, allowing you the time to successfully plan for, and assess the crucial business decisions.
Now that you have an idea of the bidding process, you and your construction manager can make your detailed list of questions to ask during your second meeting with contractor #1. Once your second meeting has concluded and you have “saved” a little more money by making sure the contractor removed unneccessary items and costs, they will send you a second bid. If that bid looks to be satifactory and fair, you can start the bidding war between the contractors. Take this bid you have spent all the time on and show it to the other 2 contractors. Ask them if they think they can beat it. If they say yes, then let them have at it and get you a revised bid undercutting contractor #1. Once that is complete, take that bid to contractor #1 and see if he can beat the bid and then throw contractor #3 in the mix and see what he can do. If so, fantastic. You then have the lowest cost buildout for your soon-to-be brewery and hopefully have saved yourself from loosing money from a greedy contractor. You don’t always need to go the cheapest, sometimes, you will just know which contractor is a good fit. Trust your gut and go for it once they have reached their bottom dollar.
I hope this article has given you a small idea on how to navigate the bidding process with contractors and be sure you are being treated fairly while also preserving your budget as much as possible so it can be utilized in productive ways.
For any more information or brewery services, you can contact Skylor the “Beer Slave Extraordinaire”™ at Landlocked Brewery Consulting any time day or night. (913)701.5757. Landlocked Brewery Consulting is a full service company that can handle any aspect of your brewery build from business plan to expansions. Landlocked has worked all over the country and been a part of many fun projects. We utilize our vast network of brewery professionals when working on projects and constantly work in and around the brewing industry to keep up on trends, techniques and what equipment is the best. We do all our business by word of mouth. There are no fancy websites or marketing & advertising departments. We love brewing and that’s all we do. We let our clients success speak for itself. Good luck on your build!