Chicago homeowners Andy and Tammy Sullivan sat amid the rubble of their 90-year-old Ravenswood Manor bungalow and were forced to reconsider their present as much as their future.
The couple had begun an extensive renovation, and by a mix of Mother Nature and human folly the house tumbled to the ground two months into the project. They could have seen defeat as much as the opportunity to build something more grand and distinctive.
Instead, they looked back, and decided to recreate their Chicago bungalow from the ground up, a rare turn in an evolving city where gentrification and progress too often means wrecking balls and a break from the past.
A purchase and plans
The historic Chicago bungalow remains the city's most iconic residential home style. Both sturdy with its brick construction and elaborate with its cathedral-style elements, the bungalow is a splendid mix of history and character, simplicity and stability.
Andy Sullivan, born and bred in Chicago's Beverly neighborhood, understood the bungalow's revered place in Chicago architecture, its reputation as a muscular, middle-class home. His wife, Tammy, a native Texan, wasn't sold.
"The whole idea of having a home just like thousands of others in Chicago didn't really appeal to me," Tammy said. "But once I got inside and saw how much room they had and the sense of history, I was hooked."
After six months of searching, the couple spotted a 2-bedroom, red-brick bungalow in Ravenswood Manor. The 1919 home held much charm typical of most bungalows, including stained glass windows and intricate woodwork. Care and updates were needed, but the home held promise.
The sale completed in February 2007, and the Sullivans turned their attention to an expansive remodeling project to put a fresh spin on their early 20th century structure. Plans included modernizing and expanding the living space, including a second-story addition, while restoring the bungalow's intricate detail and warm feel from years of inattention.
In March 2008, work began on gutting the home to its brick walls. On target for an October completion, the Sullivans -- their weariness high, their hopes even higher -- treasured the project and its potential.
Demolition day
On May 2, 2008, nearly two inches of rain and hail hammered the city in one hour. Wind gusts approached 60 mph and Mother Nature turned a subcontractor mistake into disaster. The construction team, directed to do the basement underpinning in four-foot sections, elected to do 10-foot sections. Unable to endure the vicious storm, the home toppled to the ground.
The foundation compromised, the Sullivans would have to tear the home down, thereby stifling any plans the couple had for an October move-in date.
"Here was this home we thought was being built and now it's done," Andy said of the wreckage. "Truthfully, I don't think we knew what we were going to do."
Recover and rebuild
Chicagoans have a long history of rebuilding, a track record of endurance and perseverance. The Sullivans summoned every bit of that spirit to battle the months ahead.
After consulting with attorneys, contractors and other trusted advisers, they elected to move forward with new construction -- and to recreate, as best they could, the same historic Chicago bungalow they had purchased just months prior.
The truth: the Sullivans could have built any home -- a modern Georgian, a contemporary Cape Cod, a Frank Lloyd Wright-inspired three-story monstrosity. They could have scoured the streets of Chicago's gentrifying neighborhoods to find a home that caught their eye, something fashionable, innovative and distinct. They had the blank canvas to make such a choice, the freedom to build any home they desired.
And yet, they choose the bungalow, the historic Chicago variety, something that would both blend into the neighborhood as well as honor the city's spirit.
"Chicago's a unique city for its architecture and the bungalow is a significant part of that style, class and character," Andy said. "We deeply wanted to be a part of that nostalgia, even as we had the opportunity to build anything else.
"I understand others who take a different route, who build a home that fits whatever vision they have, and they have that right. But for us, that wasn't what we wanted. We wanted a bungalow and something that blended into the neighborhood."
Though brick bungalows consume the Chicago area landscape -- estimates say the city hosts as many as 80,000 bungalows in areas north, south, and west -- it is a home design that has largely disappeared from modern residential construction. Expensive to build with brick and rarely maximizing a home's available land space, bungalows do not mesh with today's new home trends.
The Sullivans' project would be a new venture for many involved, calling for fresh designs on a century-old home style.
"We are always cognizant of wanting to fit in with the surroundings, and stress that with our clients, but we had never attempted to recreate a turn-of-the-century bungalow before," said Chad Halverson of Vertex Properties, the Sullivans' general contractor.
Reinvented and resurrected
Along with Halvorson, Ron Meadows, the head of Vertex, and architect Mark Michonski of Chicago-based Jonathan Splitt Architects, the Sullivans reviewed their initial plans for the once-standing bungalow and elected to stay consistent with those elements -- expanding the living space and modernizing the floor plan.
"We treated this like rebuilding the home that was there before and then adding a second story," Michonski said.
Obeying the footprint of the original home, the Sullivans relocated key functions, creating a more usable kitchen and family room while working to retain the bungalow's long-admired characteristics, such as a formal living room and dining room. The couple even included some of the bungalow's most intricate details, including the red-brick exterior patterns, stained-glass windows and stone planters.
Creating a historic Chicago bungalow in the 21st century, the Sullivans also added a number of eco-friendly features as a member of Chicago's Green Home program, including a geothermal heating system, expanding foam insulation made from soybean oil, and a tankless water heater.
This past June, the Sullivans moved into their completed bungalow. Boxes filled rooms and work remained, but the finish line emerged within view. As the Fourth of July approached, the couple embarked upon one of their final tasks: adding grass to their city lot, one that had been littered with dirt and debris for over a year.
"It was all such an emotional roller coaster, so it was a huge relief to know that we were nearing the end and had accomplished our goal," Tammy said.
Today, the couple's home blends into a block filled with historic Chicago bungalows, looking as much the 90-year old home as their neighbors'. Yes, it looks fresh and new, but also in place, a replica of Chicago's past in a hard-charging present.
"People ask me, 'Where does the addition start?' and that's a compliment to the work done here," Andy said.
From disaster, the Sullivans found comfort in the past and a plan for the future. In the historic brick bungalow, as much a piece of the Chicago scene as hot dog stands and church steeples, they found home.
"We never plan on moving," Andy said. "For us, this is it."
Friday, September 11, 2009
Monday, June 1, 2009
The New Cost of Doing Business (QSR Magazine, January 2009)
Tucked quietly between Chicago and St. Louis, the town of Shelbyville bills itself as Illinois’ best kept secret. Hosting some of America’s richest farmland, the town’s agricultural roots reach into the 1820s and include the invention of the first commercial pick-up bailer, a marvel of agricultural engineering.
For Dale Short—and indeed many in this central Illinois town—farming runs in the blood. One of the town’s agricultural leaders and a third-generation farmer in Shelbyville, Short oversees 2,000 acres of farmland. Throughout the last 36 years, Short adhered to a standard practice of crop rotation—half his farmland received beans, the other half corn.
When the ethanol boom hit a few years back, Short, as sharp a businessman as he is diligent a laborer, immediately noted the crossroads he faced. He contemplated planting more corn to take advantage of the rising prices he could get for the crop, debating the merits as well as the economic potential. While Short debated his decision, other farmers—big and small—had made theirs and worked to produce more corn. It was, after all, the logical, practical, economical choice.
Across America’s heartland, these individual decisions played a small but symbolic step in the dramatic theater that now has food costs throughout the world rising to unfamiliar heights. Simple economic needs encouraged the nation’s farmers to follow the demand and the money, turning from food to fuel. Sprouting out corn at record levels, other crops were shortchanged; supply shortages led to higher prices in crops such as grain and beans.
Though America’s small-town farmers remain small players in this big-stakes game, they stand as the most compelling dominoes to fall in a perfect storm of swelling global demand, increased energy needs, and a weakening U.S. dollar that have merged to intensify food prices. Indeed, the era of cheap food has reached its end and given rise to a new age, one dominated by trepidation.
The End of the Cheap Food Era
Before World War II, many American families spent approximately one-third of their income on food. Following the war, however, a series of dramatic changes, including a rise in agricultural productivity and a significant post-war economic punch, produced a long, powerful decline in the price of food. Instead of spending one-third of their income on food, Americans’ investment at the dinner table fell to 10 percent.
With the exception of a price upswing in the 1970s, Americans enjoyed much of their food at modest costs throughout the final decades of the 20th century and into the millennium’s opening years. In fact, global food prices, adjusted for inflation, fell by 75 percent between 1974-2005, which delivered smiles to the faces of American households and industry insiders alike.
Still, all fine days must end.
The door on cheap food has now closed. When The Economist declared “The End of Cheap Food” as the title of a December 2007 story, it cited a startling figure: food prices had increased 75 percent since 2005, representing a complete reversal from the favorable times of yesteryear.
But it wasn’t only Uncle Sam’s homeland feeling the pinch; the rising cost of food stretches into all corners of the globe. In January 2007, riots erupted on Mexican streets after the price of corn flour increased fourfold while Argentina has suffered from a series of strikes. Recent floods in England and India as well as a drought in Australia destroyed crops and led to price increases. In Ethiopia, ten pounds of corn flour costs five times as much as it did in 2005. Many wondered how; others questioned now what?
“We’ve had the challenge of rising commodity prices before, but it has been a long time since we’ve had this level of a sustained increase in prices,” says Bill Lapp, an agricultural economist with Omaha-based Advanced Economic Solutions. “The difference today is that these rising prices have been dramatic, sustained, and across the board. We’re not going through one year in which some key commodities are up and others are down.”
Behind the rising costs, economists and analysts cite both controllable and uncontrollable factors, many which began creeping in as early as 2005.
While most of the nation’s corn crop is fed to livestock to produce meat, dairy, and eggs, the amount being marked for energy usage is climbing each year, a fact many analysts trace directly to the U.S. government’s ethanol subsidies. In 2006, for instance, 14 percent of the nation’s corn crop was turned into ethanol; in 2007, that number rose to 24 percent (though an ascent is certain, some claim 2007’s figure sits closer to 33 percent). The decision to put food in gas tanks, a decision many argue was both reckless and politically charged, has led farmers to dedicate increasing tracts of their farmland to biofuels. Meanwhile, the productivity of other crops, namely grain and beans, has fallen and sparked new challenges, including rising prices in those commodities.
“When corn sneezes, other commodities catch a cold,” Lapp reminds.
The financial boom in China and India, the world’s two most populous nations and together claiming one-third of the global population, have also placed a strain on food prices. Throughout history, a rise in personal income has led to a corresponding upswing in meat consumption—termed the “nutrition transition.” The United Nations’ annual assessment of farming trends in 2007 predicts that people in developing countries will be eating 30 percent more beef, 50 percent more pig meat, and 25 percent more poultry within the next decade.
“We have a growing world demand for food and with 30 percent of our pork, cheese, and flour exported, we all end up paying more for the world demand,” says Don Vlcek, vice president of purchasing for Marco’s Pizza. “[The United States is the] prime source to fill the inventory gaps throughout the world.”
As global demand for meat increases, the need for grain follows. It takes 8kg of grain to produce 1kg of beef and 4kg of pork. The increased demand for meat and grain extends elsewhere, including amplified demands on water and oil. Furthermore, grain-designated land risks the transition from human to animal consumption.
“We’re dealing with the realities of becoming wealthier as a planet…and the technologies haven’t caught up to the increasing demand,” says Adam Mussomeli, who heads Deloitte Consulting’s consumer products supply chain analysis.
The weakening of the U.S. dollar has done little to insulate the nation. A potent mix of trade and account deficits, falling Federal Reserve interest rates, a loss of confidence in the U.S. economy, and competition from other monetary markets—the euro, for instance, wasn’t even around one decade ago—have all combined to send the dollar into a downward spiral completely independent of the supply-demand issue.
Other notable factors include the escalating price of crude oil and the wrath of Mother Nature. Oil prices, which hit $147 a barrel in July before the recent nosedive, also contribute to higher commodity prices. Greater oil prices, meanwhile, translate into higher costs to plant, irrigate, harvest, and transport product. Mother Nature shares some of the blame as well. Drought, hurricanes, and floods have all pelted the world in recent years, dealing a devastating blow to crops from Australia to Iowa.
“A lot of factors started this bonfire and now some extra gasoline’s been tossed on it,” Lapp says.
The Impact, Inherent Challenge, and Potential Solutions
While some view the current rise in food prices as little more than the natural order of things, arguing that commodity prices have traditionally taken a quantum leap every 30 years or so, such a realization does little to lessen concern across the restaurant industry. The steep, global increase in commodity prices is expected to persist for years. Two elements analysts agree on: we’re closer to the beginning than the end and demand isn’t likely to diminish.
“Food is still cheap today, but we’re at a period of time where that is becoming less and less of a true statement,” Lapp says. “We need to know there are cycles; now it’s a matter of surviving this one.”
To combat rising food costs, restaurants will have to be aggressive, analytical, innovative, and decisive. Waiting for improvement is not a strategy as restaurants everywhere face this central question: margins or market share? A successful answer will likely mean survival; the wrong answer, closing. Restaurants must be honest about why customers enter their doors and, above all, look beyond the next 12 months and 2-3 years into the future to seek answers.
Restaurants must understand that volatility will be an ever-present antagonist to an operation’s efficiency. As commodity prices proved favorable throughout the last 15 years, inefficiencies weaved into businesses because—to put it bluntly—they could. Winning overshadowed flaws and all seemed well—that is until the pendulum swung back.
“As prices have risen in recent years, it has forced efficiencies and a focus on brand and product that will have to continue,” Informa Economics CEO Bruce Scherr says.
Rather than reacting to the market’s uppercuts, restaurants will have to examine their purchasing habits more aggressively, more strategically. Pull out the spreadsheet, input the numbers, and assess where, when, and how items can be purchased at more reasonable costs. At Marco’s, Vlcek led the company’s savings of nearly $2.4 million in 2008 by competitive bidding, locking in prices, quantity orders, and utilizing local sources.
“It’s at times like these, that purchasing people really have to fill their role,” says Vlcek, who penned a letter to his vendors saying that escalating prices compelled him to investigate competitors and yet simultaneously urged their help to maintain the relationship.
Jack Graves, Chief Cultural Officer at Burgerville, says working with local vendors has helped to diffuse swelling costs at his Pacific Northwest spots. Burgerville’s focus on purchasing locally has proven to be a successful antidote to rising commodity prices. Transportation costs are kept down and the local community benefits from the company’s investment.
“We are aiding in the prosperity of the local region and we believe that others can do the same by following our lead,” Graves says.
Restaurants might also turn to reformulation and substitution, seeking ways to recreate the menu mix without sacrificing quality, perhaps highlighting dishes with products that aren’t as price volatile and can deliver greater margins. For example, at its Consumer 360 Conference in June, the Nielsen Company reported that seafood, dry pasta, and candy are among the products most immune to a recession. Such information allows retailers to better focus on the right categories and brands for success.
While retailers themselves might have initially absorbed the brunt of rising commodity prices, national media is now communicating the changes to consumers, including higher menu prices. Citing a rise in the cost of key commodities, the Wall Street Journal named in September a number of high-profile companies set to raise menu prices, including Olive Garden (owned by Darden Restaurants Inc.) and Yum Brands Inc., parent of Pizza Hut, KFC, and Taco Bell among others. Such debates rage on elsewhere in the industry, including Chipotle Mexican Grill, where rising input costs, mostly attributed to corn, slower sales, and higher transportation costs have put the issue of raising prices in front of the Mexican chain’s leaders.
Lapp believes that consumers can and will pay more if requested. Though challenging to increase price points in tough economic times, he says most customers understand that higher costs get passed onto the consumer.
“The thing to do isn’t to make portions smaller or to dumb down the food, but to increase prices in a well-conceived, managed, and tactful way,” Lapp says.
What restaurants must not do, however, is panic and alter their product for a short-term solution. A focus on the basics must be maintained and executed.
“To make it through this current challenge and to be successful after this, restaurants will have to maintain their principles, including standards of labor and operational execution, as well as the quality of the product that got them customers in the first place,” he says. “There can be no departure from those core components.”
For Dale Short—and indeed many in this central Illinois town—farming runs in the blood. One of the town’s agricultural leaders and a third-generation farmer in Shelbyville, Short oversees 2,000 acres of farmland. Throughout the last 36 years, Short adhered to a standard practice of crop rotation—half his farmland received beans, the other half corn.
When the ethanol boom hit a few years back, Short, as sharp a businessman as he is diligent a laborer, immediately noted the crossroads he faced. He contemplated planting more corn to take advantage of the rising prices he could get for the crop, debating the merits as well as the economic potential. While Short debated his decision, other farmers—big and small—had made theirs and worked to produce more corn. It was, after all, the logical, practical, economical choice.
Across America’s heartland, these individual decisions played a small but symbolic step in the dramatic theater that now has food costs throughout the world rising to unfamiliar heights. Simple economic needs encouraged the nation’s farmers to follow the demand and the money, turning from food to fuel. Sprouting out corn at record levels, other crops were shortchanged; supply shortages led to higher prices in crops such as grain and beans.
Though America’s small-town farmers remain small players in this big-stakes game, they stand as the most compelling dominoes to fall in a perfect storm of swelling global demand, increased energy needs, and a weakening U.S. dollar that have merged to intensify food prices. Indeed, the era of cheap food has reached its end and given rise to a new age, one dominated by trepidation.
The End of the Cheap Food Era
Before World War II, many American families spent approximately one-third of their income on food. Following the war, however, a series of dramatic changes, including a rise in agricultural productivity and a significant post-war economic punch, produced a long, powerful decline in the price of food. Instead of spending one-third of their income on food, Americans’ investment at the dinner table fell to 10 percent.
With the exception of a price upswing in the 1970s, Americans enjoyed much of their food at modest costs throughout the final decades of the 20th century and into the millennium’s opening years. In fact, global food prices, adjusted for inflation, fell by 75 percent between 1974-2005, which delivered smiles to the faces of American households and industry insiders alike.
Still, all fine days must end.
The door on cheap food has now closed. When The Economist declared “The End of Cheap Food” as the title of a December 2007 story, it cited a startling figure: food prices had increased 75 percent since 2005, representing a complete reversal from the favorable times of yesteryear.
But it wasn’t only Uncle Sam’s homeland feeling the pinch; the rising cost of food stretches into all corners of the globe. In January 2007, riots erupted on Mexican streets after the price of corn flour increased fourfold while Argentina has suffered from a series of strikes. Recent floods in England and India as well as a drought in Australia destroyed crops and led to price increases. In Ethiopia, ten pounds of corn flour costs five times as much as it did in 2005. Many wondered how; others questioned now what?
“We’ve had the challenge of rising commodity prices before, but it has been a long time since we’ve had this level of a sustained increase in prices,” says Bill Lapp, an agricultural economist with Omaha-based Advanced Economic Solutions. “The difference today is that these rising prices have been dramatic, sustained, and across the board. We’re not going through one year in which some key commodities are up and others are down.”
Behind the rising costs, economists and analysts cite both controllable and uncontrollable factors, many which began creeping in as early as 2005.
While most of the nation’s corn crop is fed to livestock to produce meat, dairy, and eggs, the amount being marked for energy usage is climbing each year, a fact many analysts trace directly to the U.S. government’s ethanol subsidies. In 2006, for instance, 14 percent of the nation’s corn crop was turned into ethanol; in 2007, that number rose to 24 percent (though an ascent is certain, some claim 2007’s figure sits closer to 33 percent). The decision to put food in gas tanks, a decision many argue was both reckless and politically charged, has led farmers to dedicate increasing tracts of their farmland to biofuels. Meanwhile, the productivity of other crops, namely grain and beans, has fallen and sparked new challenges, including rising prices in those commodities.
“When corn sneezes, other commodities catch a cold,” Lapp reminds.
The financial boom in China and India, the world’s two most populous nations and together claiming one-third of the global population, have also placed a strain on food prices. Throughout history, a rise in personal income has led to a corresponding upswing in meat consumption—termed the “nutrition transition.” The United Nations’ annual assessment of farming trends in 2007 predicts that people in developing countries will be eating 30 percent more beef, 50 percent more pig meat, and 25 percent more poultry within the next decade.
“We have a growing world demand for food and with 30 percent of our pork, cheese, and flour exported, we all end up paying more for the world demand,” says Don Vlcek, vice president of purchasing for Marco’s Pizza. “[The United States is the] prime source to fill the inventory gaps throughout the world.”
As global demand for meat increases, the need for grain follows. It takes 8kg of grain to produce 1kg of beef and 4kg of pork. The increased demand for meat and grain extends elsewhere, including amplified demands on water and oil. Furthermore, grain-designated land risks the transition from human to animal consumption.
“We’re dealing with the realities of becoming wealthier as a planet…and the technologies haven’t caught up to the increasing demand,” says Adam Mussomeli, who heads Deloitte Consulting’s consumer products supply chain analysis.
The weakening of the U.S. dollar has done little to insulate the nation. A potent mix of trade and account deficits, falling Federal Reserve interest rates, a loss of confidence in the U.S. economy, and competition from other monetary markets—the euro, for instance, wasn’t even around one decade ago—have all combined to send the dollar into a downward spiral completely independent of the supply-demand issue.
Other notable factors include the escalating price of crude oil and the wrath of Mother Nature. Oil prices, which hit $147 a barrel in July before the recent nosedive, also contribute to higher commodity prices. Greater oil prices, meanwhile, translate into higher costs to plant, irrigate, harvest, and transport product. Mother Nature shares some of the blame as well. Drought, hurricanes, and floods have all pelted the world in recent years, dealing a devastating blow to crops from Australia to Iowa.
“A lot of factors started this bonfire and now some extra gasoline’s been tossed on it,” Lapp says.
The Impact, Inherent Challenge, and Potential Solutions
While some view the current rise in food prices as little more than the natural order of things, arguing that commodity prices have traditionally taken a quantum leap every 30 years or so, such a realization does little to lessen concern across the restaurant industry. The steep, global increase in commodity prices is expected to persist for years. Two elements analysts agree on: we’re closer to the beginning than the end and demand isn’t likely to diminish.
“Food is still cheap today, but we’re at a period of time where that is becoming less and less of a true statement,” Lapp says. “We need to know there are cycles; now it’s a matter of surviving this one.”
To combat rising food costs, restaurants will have to be aggressive, analytical, innovative, and decisive. Waiting for improvement is not a strategy as restaurants everywhere face this central question: margins or market share? A successful answer will likely mean survival; the wrong answer, closing. Restaurants must be honest about why customers enter their doors and, above all, look beyond the next 12 months and 2-3 years into the future to seek answers.
Restaurants must understand that volatility will be an ever-present antagonist to an operation’s efficiency. As commodity prices proved favorable throughout the last 15 years, inefficiencies weaved into businesses because—to put it bluntly—they could. Winning overshadowed flaws and all seemed well—that is until the pendulum swung back.
“As prices have risen in recent years, it has forced efficiencies and a focus on brand and product that will have to continue,” Informa Economics CEO Bruce Scherr says.
Rather than reacting to the market’s uppercuts, restaurants will have to examine their purchasing habits more aggressively, more strategically. Pull out the spreadsheet, input the numbers, and assess where, when, and how items can be purchased at more reasonable costs. At Marco’s, Vlcek led the company’s savings of nearly $2.4 million in 2008 by competitive bidding, locking in prices, quantity orders, and utilizing local sources.
“It’s at times like these, that purchasing people really have to fill their role,” says Vlcek, who penned a letter to his vendors saying that escalating prices compelled him to investigate competitors and yet simultaneously urged their help to maintain the relationship.
Jack Graves, Chief Cultural Officer at Burgerville, says working with local vendors has helped to diffuse swelling costs at his Pacific Northwest spots. Burgerville’s focus on purchasing locally has proven to be a successful antidote to rising commodity prices. Transportation costs are kept down and the local community benefits from the company’s investment.
“We are aiding in the prosperity of the local region and we believe that others can do the same by following our lead,” Graves says.
Restaurants might also turn to reformulation and substitution, seeking ways to recreate the menu mix without sacrificing quality, perhaps highlighting dishes with products that aren’t as price volatile and can deliver greater margins. For example, at its Consumer 360 Conference in June, the Nielsen Company reported that seafood, dry pasta, and candy are among the products most immune to a recession. Such information allows retailers to better focus on the right categories and brands for success.
While retailers themselves might have initially absorbed the brunt of rising commodity prices, national media is now communicating the changes to consumers, including higher menu prices. Citing a rise in the cost of key commodities, the Wall Street Journal named in September a number of high-profile companies set to raise menu prices, including Olive Garden (owned by Darden Restaurants Inc.) and Yum Brands Inc., parent of Pizza Hut, KFC, and Taco Bell among others. Such debates rage on elsewhere in the industry, including Chipotle Mexican Grill, where rising input costs, mostly attributed to corn, slower sales, and higher transportation costs have put the issue of raising prices in front of the Mexican chain’s leaders.
Lapp believes that consumers can and will pay more if requested. Though challenging to increase price points in tough economic times, he says most customers understand that higher costs get passed onto the consumer.
“The thing to do isn’t to make portions smaller or to dumb down the food, but to increase prices in a well-conceived, managed, and tactful way,” Lapp says.
What restaurants must not do, however, is panic and alter their product for a short-term solution. A focus on the basics must be maintained and executed.
“To make it through this current challenge and to be successful after this, restaurants will have to maintain their principles, including standards of labor and operational execution, as well as the quality of the product that got them customers in the first place,” he says. “There can be no departure from those core components.”
Tuesday, January 20, 2009
Writing Sample: Repositioning is key to faster home sales (Chicago Sun Times, January 16, 2009)
Dr. Roger Kula had to temper his expectations. He had no other choice.
A Chicago native now living in New York, Kula and his younger sister, also a New York resident, welcomed their aging mother to the Big Apple in 2005. A permanent move, the siblings debated what they would do with their mother's Downers Grove home, a residence that held fond childhood memories for both. Initially, they elected to keep the property, using it as a Chicago area retreat and gradually clearing the space for a future sale.
In May 2008, against the threat of capital gains taxes, Kula listed the home with Downers Grove-based agent Jill Luckett of Coldwell Banker. While aware of the real estate market's downward trend, Kula and his sister still anticipated a $300,000-plus sale for the 3-bedroom, 1-bathroom brick ranch in one of the suburb's stable residential communities.
"Jill told us off the bat that we were probably too high given the area's inventory levels, but we gave it a shot at $289,000 to start," Kula said. "In retrospect we probably hit on the worst of the wave because the market has only gone further south."
With few lookers and even fewer offers, Luckett and Kula sat down to re-examine their price as summer approached, a challenging feat given that the area held few comparable sales. In a scene repeated throughout the Chicagoland real estate market, Kula was forced to face a sobering, unkind reality: he wasn't going to get the dollar figure he desired. To sell his boyhood home, Kula would have to confront the most recent data, measure his motivation to sell, and "reposition" the home.
A term once used sparingly by real estate insiders, repositioning has increasingly entered the American lexicon as the housing market captures headlines. No longer can Chicagoland sellers ignore the market's tumult. To secure a deal, today's home sellers must be realistic, responsive and open to repositioning.
"When a seller puts their home on the market on day one, they very well could be the best priced home in the best condition," said Tricia McEneaney of Coldwell Banker's Gold Coast office. "But if over the next 30 days 10 more competitively priced homes come on the market, then the seller's home may no longer be in a position to sell."
Today's real estate market is more fluid than in any recent era and tough love -- a k a repositioning -- awaits many sellers.
"The market doesn't come to you any more; it's going the other way right now and that's a reality throughout Chicagoland," said David Hanna, president of the Chicago Association of Realtors and owner of Prudential SourceOne Realty in Chicago and Hinsdale.
What is it? How's it done?
In its simplest form, repositioning consists of accessing current data, noting the market's movement, and reassessing a given home's price, condition and promotion. Some Realtors sit with sellers and interpret the latest info as often as every two to three weeks, specifically with the most motivated sellers; others, particularly in a community frigid on sales numbers, might analyze the info every 60-90 days. Either way, such conversations have emerged a common slice of the Realtor-seller relationship.
"We're repositioning now more than ever before," said Dean Rouso, owner of Prime Property Partners in La Grange. "We're meeting with sellers, gauging their motivation, and providing the most recent data to help hit the right price point."
Repositioning shines a consistent light on a specific area's real estate market. Rouso, who spoke about pricing at November's National Association of Realtors convention in Orlando, advises his staff to look at contracts generated in the last 90 days -- first in the neighborhood, then in the greater community. Such data shows the demand surrounding a community, even if the deals never closed.
"If we have a home that's been successful and similar to ours, then we need to take a strong look at that sale as well as the homes priced lower," Rouso said, adding that the Realtor's task is to interpret the information for sellers rather than simply handing them printouts.
For repositioning to be most effective, data must be collected in as narrow and near a time frame as possible. The real estate market's longtime adversary has been its inability to foresee the future; Realtors have access only to historical data. Packing that data into the latest window soothes the market's evolving wrath and provides a more insightful portrait of housing trends. It's a reactive treatment, the industry pros admit, but it remains the best tool available.
With timely data in hand, sellers encounter their options, frequently choosing between a lower price or patience. Some sellers might also decide to offer incentives, make repairs or even pull the home off the market. Most Realtors agree that the current housing market is not a dangle-your-toes-in-the-water time. Today's housing world is only for the most motivated, reasonable sellers and repositioning forces many sellers to reconsider.
"If you're not motivated to sell, then it's best to wait; you'll only frustrate yourself," Rouso said. "There are enough 'have-to-sell folks' out there that they'll keep dropping their prices to the detriment of your bottom line."
We've repositioned. Now what?
After the initial repositioning and its most frequent outcome -- a price drop -- sellers do the one thing they're learning to do best in these challenging real estate times: wait. In some instances, a Realtor will lower the price incrementally over a period of time (say, $1,000 a day for five days) to get the property on hot sheets, a list of homes that have entered the market or changed price in a given day.
"The idea is to maximize the presentation of that price reduction," Hanna said. "It's about getting the maximum amount of exposure to the maximum amount of people."
Then, return the home to the prospective buyers' attention. Have a new open house. Record the number of showings and hits on the Web site to assess if interest in the property has surged. If progress doesn't arrive in 30 days, it could be time for more tough love. Sadly but realistically over the last year, the market likely took another dive in that time.
"Property values are declining, yet too many sellers think their property is the exception," Hanna said. "Hope is not a business plan. When we see prices move in either direction, we need to adjust."
But sellers and their Realtors should also re-examine other parts of the home's public face because price isn't always the culprit. A home sells thanks to the convergence of three points -- price, condition, and promotion. If the home isn't marketed well with expanded information, vibrant photos, and accurate information, then change must occur. Sellers should also take a close look at the home's condition, making sure that cleanliness and clutter-free characterize the space. Such tasks are as much a part of repositioning as slashing prices.
"In today's market we're in a price war and a beauty contest. The home must win both to sell," said Coldwell Banker's McEneaney.
A happy ending?
Pre-AIG, government bailouts, and daily foreclosure reports, Kula might have hoped for a $300,000 sales price on his boyhood home. As autumn unraveled, however, he understood that the market had him cornered. Realities had shifted and he needed to counter the momentum.
He sat with Luckett and discovered the grim truth. If he wanted to move the house, he would need to lower the price.
"The year was closing and it was a rush to the finish line," he said.
He joined Coldwell Banker's nationwide October promotion. For 10 days, he lowered his price 10 percent to $252,000. Multiple offers arrived, including an as-is purchase for $235,000, which he and his sister accepted.
"We could see what was going on," Kula said. "You think you should be getting more, but you also know it could be worse. At some point, we had to face the realization that this was the going rate."
A Chicago native now living in New York, Kula and his younger sister, also a New York resident, welcomed their aging mother to the Big Apple in 2005. A permanent move, the siblings debated what they would do with their mother's Downers Grove home, a residence that held fond childhood memories for both. Initially, they elected to keep the property, using it as a Chicago area retreat and gradually clearing the space for a future sale.
In May 2008, against the threat of capital gains taxes, Kula listed the home with Downers Grove-based agent Jill Luckett of Coldwell Banker. While aware of the real estate market's downward trend, Kula and his sister still anticipated a $300,000-plus sale for the 3-bedroom, 1-bathroom brick ranch in one of the suburb's stable residential communities.
"Jill told us off the bat that we were probably too high given the area's inventory levels, but we gave it a shot at $289,000 to start," Kula said. "In retrospect we probably hit on the worst of the wave because the market has only gone further south."
With few lookers and even fewer offers, Luckett and Kula sat down to re-examine their price as summer approached, a challenging feat given that the area held few comparable sales. In a scene repeated throughout the Chicagoland real estate market, Kula was forced to face a sobering, unkind reality: he wasn't going to get the dollar figure he desired. To sell his boyhood home, Kula would have to confront the most recent data, measure his motivation to sell, and "reposition" the home.
A term once used sparingly by real estate insiders, repositioning has increasingly entered the American lexicon as the housing market captures headlines. No longer can Chicagoland sellers ignore the market's tumult. To secure a deal, today's home sellers must be realistic, responsive and open to repositioning.
"When a seller puts their home on the market on day one, they very well could be the best priced home in the best condition," said Tricia McEneaney of Coldwell Banker's Gold Coast office. "But if over the next 30 days 10 more competitively priced homes come on the market, then the seller's home may no longer be in a position to sell."
Today's real estate market is more fluid than in any recent era and tough love -- a k a repositioning -- awaits many sellers.
"The market doesn't come to you any more; it's going the other way right now and that's a reality throughout Chicagoland," said David Hanna, president of the Chicago Association of Realtors and owner of Prudential SourceOne Realty in Chicago and Hinsdale.
What is it? How's it done?
In its simplest form, repositioning consists of accessing current data, noting the market's movement, and reassessing a given home's price, condition and promotion. Some Realtors sit with sellers and interpret the latest info as often as every two to three weeks, specifically with the most motivated sellers; others, particularly in a community frigid on sales numbers, might analyze the info every 60-90 days. Either way, such conversations have emerged a common slice of the Realtor-seller relationship.
"We're repositioning now more than ever before," said Dean Rouso, owner of Prime Property Partners in La Grange. "We're meeting with sellers, gauging their motivation, and providing the most recent data to help hit the right price point."
Repositioning shines a consistent light on a specific area's real estate market. Rouso, who spoke about pricing at November's National Association of Realtors convention in Orlando, advises his staff to look at contracts generated in the last 90 days -- first in the neighborhood, then in the greater community. Such data shows the demand surrounding a community, even if the deals never closed.
"If we have a home that's been successful and similar to ours, then we need to take a strong look at that sale as well as the homes priced lower," Rouso said, adding that the Realtor's task is to interpret the information for sellers rather than simply handing them printouts.
For repositioning to be most effective, data must be collected in as narrow and near a time frame as possible. The real estate market's longtime adversary has been its inability to foresee the future; Realtors have access only to historical data. Packing that data into the latest window soothes the market's evolving wrath and provides a more insightful portrait of housing trends. It's a reactive treatment, the industry pros admit, but it remains the best tool available.
With timely data in hand, sellers encounter their options, frequently choosing between a lower price or patience. Some sellers might also decide to offer incentives, make repairs or even pull the home off the market. Most Realtors agree that the current housing market is not a dangle-your-toes-in-the-water time. Today's housing world is only for the most motivated, reasonable sellers and repositioning forces many sellers to reconsider.
"If you're not motivated to sell, then it's best to wait; you'll only frustrate yourself," Rouso said. "There are enough 'have-to-sell folks' out there that they'll keep dropping their prices to the detriment of your bottom line."
We've repositioned. Now what?
After the initial repositioning and its most frequent outcome -- a price drop -- sellers do the one thing they're learning to do best in these challenging real estate times: wait. In some instances, a Realtor will lower the price incrementally over a period of time (say, $1,000 a day for five days) to get the property on hot sheets, a list of homes that have entered the market or changed price in a given day.
"The idea is to maximize the presentation of that price reduction," Hanna said. "It's about getting the maximum amount of exposure to the maximum amount of people."
Then, return the home to the prospective buyers' attention. Have a new open house. Record the number of showings and hits on the Web site to assess if interest in the property has surged. If progress doesn't arrive in 30 days, it could be time for more tough love. Sadly but realistically over the last year, the market likely took another dive in that time.
"Property values are declining, yet too many sellers think their property is the exception," Hanna said. "Hope is not a business plan. When we see prices move in either direction, we need to adjust."
But sellers and their Realtors should also re-examine other parts of the home's public face because price isn't always the culprit. A home sells thanks to the convergence of three points -- price, condition, and promotion. If the home isn't marketed well with expanded information, vibrant photos, and accurate information, then change must occur. Sellers should also take a close look at the home's condition, making sure that cleanliness and clutter-free characterize the space. Such tasks are as much a part of repositioning as slashing prices.
"In today's market we're in a price war and a beauty contest. The home must win both to sell," said Coldwell Banker's McEneaney.
A happy ending?
Pre-AIG, government bailouts, and daily foreclosure reports, Kula might have hoped for a $300,000 sales price on his boyhood home. As autumn unraveled, however, he understood that the market had him cornered. Realities had shifted and he needed to counter the momentum.
He sat with Luckett and discovered the grim truth. If he wanted to move the house, he would need to lower the price.
"The year was closing and it was a rush to the finish line," he said.
He joined Coldwell Banker's nationwide October promotion. For 10 days, he lowered his price 10 percent to $252,000. Multiple offers arrived, including an as-is purchase for $235,000, which he and his sister accepted.
"We could see what was going on," Kula said. "You think you should be getting more, but you also know it could be worse. At some point, we had to face the realization that this was the going rate."
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