It was the situation that everyone dreads. Out of the blue, the anxiety-filled request was made—the CEO had summoned me to his office. Thoughts raced through my head—mostly bad thoughts, mind you—of why I was being asked to join him and the COO in an impromptu meeting. Had I messed up a marketing budget? Did I misspeak at a press event? Did we miss gross profit projections? This can not be good.
“Matthews, we wish to have a word with you,” it started out. As my career flashed before my eyes while the CEO went on and on, I started to build my case in my head. Then I noticed that his tone was actually complementary on how well my departments were excelling. Then it dawned on me—I realized that I was being set up for more work! “John, we have decided that we want you to add another department to your group. We want you to head up Facilities.”
Upon hearing that, I mustered up my most eloquent response and stated, ”What the [heck] do I know about facilities management?” To which they responded, “You are a smart guy, you will figure it out.” In five short minutes, I had assumed the entire facilities management for 1,400 stores in addition to my other departments. I walked back to my office and started to “figure it out,” and they were right, I did. It dawned on me in time, that facilities management is nothing more than managing projects and process. Once I got past the shock, I realized that this was right in my wheelhouse, and this is how the facilities department was comprised.
Repair & Maintenance (R & M): Anyone who has ever owned and operated a store knows that “stuff” breaks. Equipment, structures and any moving parts all fall victim of wear-and-tear. Setting aside a budget that addresses items as they break as well as preventive maintenance programs creates a proactive approach to managing your store. The customer expects a well-run and operated store that portrays an updated, clean look. An ongoing R & M budget and plan keeps your store investment well-tuned. Most of the expenses in this category are considered “stay-in-business” investments—they need to be made in order to keep the facility up and running.
Capital Management: This is the most intriguing part of facility management. Capital management involves facility investments that are more discretionary in nature—in other words, these investments are expected to return incremental revenue and profits to the store. New store builds, adding new equipment, expanding existing foot prints, etc. all constitute discretionary investments. Generally, a good rule of thumb for the expectations on the profits generated from these types of investments is around 20-25%. That means that the aggregate investments will pay for themselves in 4-5 years.
Construction: Construction is generally included in the capital management section, but by breaking it out, you can associate all of the activities of building a new store. Design, permitting, planning, build out and post analysis on all construction projects can be tracked per project. In addition, assigning capital labor expenses to engineers allows for the project to truly capture all associated expenses for a more representative ROI analysis.
Environmental: In our case, not only did we have 1,400 stores to manage, but 800 of them had gasoline. Of course, any time there is a gasoline spill of 50 gallons or more, it becomes an environmental issue that has to be reported to the state and plans to remediate the situation are put in place. These plans include outside contractors, state officials and internal personnel all working in concert to clean up the mess. In some cases, this can take years to complete, so managing the processes of each spill is specific to the issue and the state in which the work is to be completed. Let’s just say that it is an extremely complicated process, so it’s best to avoid any spills!
Purchasing: It is astonishing to me how much money can be saved through a prudent purchasing process. From paper clips to phone plans to shipping, the amounts of dollars that are lost due to not reviewing expenses on a line-by-line basis are staggering. One example, I remember, saved us nearly $200K annually, just be rightsizing our store waste containers by both size and frequency of pickup. The stores didn’t see one hindrance to their ability to operate with this rightsizing initiative and $200K fell to the bottom line. Other savings came from consolidating phone plans, renegotiating shipping methods and so on. The money is there to be saved, if the process for saving it is implemented.
Overall Management: Lastly, for companies that do not feel that they have adequate resources in-house to manage facilities, the option of outsourcing the management comes into play. In this case, the facility manager is the key “puppet master” for a team of subcontractors that manage the daily requirements of the facilities. Generally, an overall management fee is agreed to on a monthly basis, and estimates on this fee are determined by the amount of work expected. This type of management enables the company to remain focused on their core business while still maintaining their stores.
While I was in shock leaving the CEO office that day, in hindsight, it was a terrific learning opportunity for me. The processes and procedures required to manage 1,000+ stores can create value for the enterprise if managed prudently. Without that oversight, dollars are lost and forgotten.
John Matthews is the founder and president of Gray Cat Enterprises Inc., a strategic planning and marketing services firm that specializes in helping businesses grow in the restaurant, convenience and general retail industries. With more than 20 years of senior-level experience in retail and a speaker at retail-group events throughout the U.S., Matthews has recently written two step-by-step manuals, Local Store Marketing Manual for Retailers and Grand Opening Manual for Retailers, which are available at www.graycatenterprises.com.