Modular construction and ROI

 
April 2, 2014 | by Greg Swistak

In my last post, we talked about a few of the advantages of integrating modular construction into building projects for retailers, foodservice operators and others.

In essence, any company that may have a need to set up inside a larger existing structure, or create a structure comprising many similar units, can enjoy greater efficiency, higher quality and lower costs with modular construction. These environments include retail malls, airports, hospitals, dormitories, college student centers and more. Even cruise ships are built with each cabin constructed offsite and plugged into place at the appropriate time.

But how much difference can modular construction really make to the bottom line? There are two considerations: Money saved, and faster move to revenue generation.

Modular building can mean dramatic costs savings. For example, we know that it costs between $700 to $1,000 per square foot to build out in an airport. Industry standards say that modular construction can save a builder between 30-50 percent.

Let's work with averages of both numbers — supposing $850 build-out costs with 40 percent savings — and in a real-world hypothetical.

A McDonald's in the Minneapolis-St. Paul airport is 1,800 square feet. At $850 per square foot, the build would have been $1,530,000. Done modularly, it would have required a check for only $918,000 — a savings of $612,000.

The other financial consideration relates to sales. The sooner a store or restaurant opens, the sooner it begins returning on the company's investment. Modular construction can save considerable time, allowing the operator to start serving the public as much as 50 percent more quickly.

Let's say it takes a construction company on site 60 days to build out a store or restaurant in a mall. If our hypothetical McDonald's has $1,100 sales per square foot, we can calculate that out to $5,424 revenue per day. If the modular construction can shave even 40 percent off the build time, the company can start selling 24 days sooner, earning it $130,176 it wouldn't have had otherwise.

Combining the savings of $612,000 with the $130,176 additional income, the total value to the company is about three quarters of a million dollars.

Good economy or bad economy, that's real money.


Topics: Equipment & Supplies , Restaurant Design / Layout


Greg Swistak / Greg Swistak is the president of Ikoniq, a provider of custom carts, kiosks and repurposed shipping containers.
www View Greg Swistak's profile on LinkedIn

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