Raising the Stakes

It's a no-brainer: Every house has at least one kitchen and one bathroom. Homeowners spend a lot of time in these rooms, and they get heavy use. Trends come and go, but kitchens and bathrooms will always be big sources of remodeling business. The part that's not so obvious — at least, not to homeowners — is how to go about getting a kitchen or bath remodel done.

March 31, 2006

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The Kitchen/Bath Outlook

It's a no-brainer: Every house has at least one kitchen and one bathroom. Homeowners spend a lot of time in these rooms, and they get heavy use. Trends come and go, but kitchens and bathrooms will always be big sources of remodeling business.

The part that's not so obvious — at least, not to homeowners — is how to go about getting a kitchen or bath remodel done. Perhaps even more so than other types of remodeling, the kitchen and bath market is crowded with competition. Potential clients have the option of beginning their journey at an interior designer, cabinet shop, kitchen or bath designer, plumbing showroom, architect, appliance store or home improvement retailer — let alone a remodeling contractor. And those are just the professional competitors.

To win business at a time when consumer interest in kitchen and bath design and products has added the phrase "remodeling porn" to the lexicon, remodelers need to understand design trends, space planning, product differences, customer care and sales presentation at a high level to stay ahead of their clients. That said, there are many ways to structure a remodeling company for kitchen and bath success. Three industry leaders shared their advice with Professional Remodeler, allowing us to create this FAQ, which continues online.

Designers Valerie Stuessi, CKD, JoLynn Johnson and Serena Rebechini-Hilton, CKD, of Crystal Kitchen Center take measurements and design and sell jobs, working with an in-house project manager to prepare estimates and schedules.
Photo by Steve Woit

JoLynn Johnson, CMKBD, CAPS, president of Crystal Kitchen Center in Crystal, Minn., has been trying to perfect the art and science of the kitchen and bath business since buying her company 12 years ago. Founded in 1975 by Crystal Cabinet Works as a retail outlet, Crystal Kitchen Center (CKC) mainly offered cabinetry to home builders when Johnson acquired the company, with just 20 percent of its business coming from remodeling.

As her homeowner clients began asking for more products, installation and design, Johnson focused the business toward design/build, kitchen/bath remodeling. Now CKC's average kitchen sale is $82,000 for a complete package and $57,000 just for cabinets and counters. Earlier this year CKC moved to an 8,800-square-foot building, half of it occupied by a showroom and the remainder by a selections center, conference room, offices and warehouse space. CKC subcontracts labor.

At Case Design/Remodeling, headquartered in Bethesda, Md., kitchen and bath remodeling is broken out as a separate division of the full-service firm. Associate vice president John Audet serves as general manager of that division, which handles any kitchen/bath jobs that stay within the home's existing footprint. That adds up to more than 200 jobs annually.

Many of the additions and whole-house remodels that run through Case's design/build division include kitchens or baths. Audet's division partners on those projects. Much of the construction is done in house, including plumbing and electrical. As at CKC, the designers at Case double as salespeople.

D&J Kitchen and Baths, located in Sacramento, Calif., operates as an interior-only, design/build kitchen and bath firm. CEO Darius Baker, CR, CKBR, who does the design and sales himself, will take on structural work such as moving walls or vaulting the ceiling, but leaves additions and whole-house work to other remodelers.

Should I have an in-house designer?

Partnering with a kitchen/bath studio, plumbing showroom or designer is always an option. When Baker started remodeling 21 years ago, he often built from plans created by interior designers, kitchen designers or architects. Too often, he says, they looked pretty but didn't consider function or lacked complete information.

"My personal preference is to design in house. I'm more of a control freak," admits Baker. "Who better to build something than the person who conceived it? Who better to have an idea of how to design it within a stated investment figure?"

Audet recommends checking references before working with an outside designer. "You have to know the products and what you're working with," he says. "There's a huge difference between stock cabinetry and a full custom line. If you're not familiar with it, you can be in trouble."

What kind of training should a kitchen/bath designer have?

Design software allows Serena Rebechini-Hilton to help clients visualize their project. CAD skills are a must for new CKC h ires in sales and design.
Photo by Steve Woit

Keeping abreast of trends is the least of the knowledge a designer should have. As Johnson puts it, "You could lose your butt with someone who doesn't know how to measure down to 1/16 of an inch."

Three of CKC's designers, Johnson included, have NKBA credentials. Certification isn't a must for hiring, but potential design employees need some kind of formal training and a desire to continue their professional development. For instance, the company's receptionist has a certificate in kitchen and bath design from a local community college and wants to be a kitchen designer. Johnson plans to have her learn on the job about product lines and pricing and then spend time shadowing Johnson.

Case, too, encourages employees to achieve NARI or NKBA certification. Some of the designers, Audet notes, also have professional backgrounds or academic degrees in interior design.

"That helps them in the customer service end, where you sit down and pick colors," he says.

Baker, who comes from a more typical remodeling background than Audet or Johnson, recommends a range of coursework and practical experience to be sure the designer can address electrical, mechanical, plumbing and code issues as well as space planning, room function and aesthetics. That's why he led the development of NARI's Certified Kitchen and Bath Remodeler program.

How should I charge for design?

That's right: The question is not whether to charge for design, it's how. Baker used to design on sales calls in prospect's homes. It created buy-in, cemented the relationship and drove sales, he says, but soon proved unproductive. He then switched to only doing design after clients had committed to a construction contract. For the past year, he's used what he calls a scope of work program. For $1,000 to $2,500 upfront, Baker measures the home, develops a conceptual floor plan, creates a takeoff and produces a complete line item bid with some allowances. Once they sign a construction contract, he requires $1,000 to put them on the production schedule (California contractors can't ask for more than a $1,000 deposit). At that point, he puts the scope of work fee toward the job.

Case uses a variation on that approach, charging an upfront fee that ranges from $800 to $1,800 depending on the size and scope of the project, according to Audet. The fee includes all space planning and selections. Half of that amount, he adds, gets credited back when the client signs the construction contract.

CKC charges a lump-sum design retainer that depends on the designer and the project scope. Johnson's fee starts at $1,500. Most of the time the retainer is applied toward the construction price, but not always — in fact, her design contract says it won't. That way she can recoup the cost of her designers' time when an extra-demanding customer requires more service than usual. If the customer doesn't go to contract, CKC charges an additional $1,000 to buy the plan. In 2005, the company did $41,000 of business just in design.

Is a showroom necessary?

While the Internet is a great source of information, nothing replaces seeing and touching products in person. That doesn't have to mean building a showroom, though.

"Having some way to show product effectively is essential, whether it be your own showroom or you're aligned with local showrooms or if you have a number of samples," says Audet. Two of Case's four Washington, DC-area locations have showrooms that display kitchen cabinetry, and one is being renovated to incorporate counter, faucet, tile and lighting samples, as well as more cabinet options.

"The product itself is probably the smallest cost to the showroom," Audet adds. "The space to have the showroom is probably the most expensive."

Johnson felt having a showroom was important enough to move to a larger one in a more prominent location. "We were lucky if we got eight new people through the door in a month," she says. "Here we get eight to 10 in a day."

It's too soon to tell how many of the walk-ins are tire-kickers, but already the showroom is helping to educate consumers that CKC can do more than just kitchens, Johnson says. The showroom leads will be a good way for new designers to begin building a client base and growing sales, she adds.

Is a design program necessary?

In a word, yes. Consumers need some kind of help visualizing the end result. But in software, as in kitchen design, there is no "right" answer — it all depends on the user's needs. CKC uses 20-20 Design, popular in the kitchen/bath industry because many cabinet manufacturers support it. Johnson also likes Planit Fusion, and plans to introduce AutoCAD or Chief Architect in the next two years.

Case uses a combination of 20-20 and SketchUp for renderings and visualization, says Audet, turning to VectorWorks for final construction drawings. Baker prefers Chief Architect as an all-purpose product, using it for conceptual design, drawing the existing structure and creating new floor plans or rooflines.

Is pricing different in kitchen/bath remodeling?

With prices for kitchen and bath products readily available to consumers from retailers or the Internet, high markups can be hard to achieve.

"Appliances are maybe a 20, 25 percent markup," says Johnson. She prefers using high-end professional brands because they use UMRP — unilateral minimum retail pricing.

"People aren't price shopping," she says. "Otherwise there are places that go dirt cheap, and we do all the work of selling it but don't make the money."

Baker views UMRP more negatively because this strategy doesn't offer a price break to professionals. He chooses not to mark up appliances at all, instead adding an installation fee as a line item for each appliance. Overall, D&J averages a 67 percent markup and 40 percent margin per project, but Baker varies the markup as he feels appropriate per line item. For example, on a recent $200,000 remodel, he marked up $23,000 worth of plumbing fixtures by only 25 percent.

How important is fast turnaround?

"The kitchen and bath are the two most lived in and used rooms in the house, so our time there is as short as possible," Audet comments. Minimize down time with lots of planning. "The scheduling, because of the different trades that are involved, is critical. Be focused on systems and processes to keep the project going smoothly."

He recommends presenting homeowners with an individual job "forecast," a word he prefers to schedule, that includes a brief description (demolition, rough-in) of what is going on each day as well as key milestones.

Case also might make suggestions or assist in putting together a temporary kitchen with counter, microwave, coffeemaker and a water source somewhere in the existing space. "Try to get them running water as soon as possible," Audet advises.

For more kitchen/bath Q&A and more Best Practices, visit www.HousingZone.com/PRbestpractices

 

The Kitchen/Bath Outlook

According to architects, the market for kitchen and bath remodeling continues to grow. A recent survey of 600 residential architects revealed the following:

  • 30 percent report improving conditions for kitchen/bath remodeling
  • 41 percent report the number of bathrooms per home is increasing
  • 44 percent report the size of residential bathrooms is increasing
  • 25 percent report the number of kitchens per home is increasing (this includes butler's pantries, outdoor kitchens, beverage centers and the like)
  • 41 percent report the size of residential kitchens is increasing

Source: February 2006 AIA Home Design Trends Survey


Top Eight Items on High-End Kitchen Remodel List

1. Countertops
2. Cabinetry
3. Plumbing fixtures
4. Wall finishes
5. Flooring
5. Lighting
7. Cooking appliances
8. Dishwasher

Top Eight Items on High-End Bathroom Remodel List

1. Faucets
2. Flooring
3. Showerhead
4. Wall finishes
5. Lighting
5. Toilet
7. Basin
8. Vanity

Source: 2005 HIRI Kitchen & Bathroom Remodeling Study

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