I had lunch at a Five Guys last week; coincidentally on the same day I had read this excellent post; like ketchup and vinegar, I made the connection – housing’s commoditization through poor quality product may be over.
Up until 2006 mediocrity was OK and sellable at least at a mediocre rate. … A mediocre product will return a mediocre profit when the market is good. When the market turns south and it’s time to go into survival mode…mediocrity will lose every time, as has been evidenced time and time again.
Five Guys have built their business by offering a commonly-available product that is better than the competition, but is not priced so much more than the competition as to be out of reach for the “common man.” There is a reason their growth and success rate is so remarkable – they do a few things – burgers and fries, and do them very well.
Buyers seem to want smaller, smarter space that is put together with a high degree of quality – better flooring, cabinets, countertops, smoothly mitred corners – and this new market allows them to demand this quality. Notably, many are also ready, willing and able to pay for said quality, and they are willing and able to wait for this whatever it is that they want.
Mediocrity had its place when the market was smoking hot – builders could vomit up hundreds of homes, demand (and get) premiums and move on to the next landscape demanding to be decimated. No longer.
Do some quick market research and see what people are saying about McDonald’s, the quintessential example of commodification and then compare that to the chatter about Five Guys.
Which one do you want to be – McDonald’s (not that there’s anything wrong with that) or Five Guys?
Poppy Dinsey
July 23, 2008 at 5:27 am
This post has made me unspeakably hungry, we don’t have Five Guys in Europe but I need to get me one of these bad boys for lunch. Stat. Oh and as for mediocre…yeah mediocre is lame. Now pass the ketchup.
Matt Stigliano
July 23, 2008 at 5:51 am
I saw a great example of mediocrity in my neighborhood recently. Builder built two houses on a bit of land. From the outside I just knew I had to see these houses. When I previewed them the layout was great and looked similar in design to a builder I think is top notch. But upon close inspection the house was full of “mediocre” work. The builder built a luxury home, but with bargain basment costs in mind. Sad part is he’s selling them for top dollar and to be honest I don’t think he can or will (they’ve been on the market awhile now). If you’re going to spend top dollar you would certainly eant stellar work, something you’re not going to get in these two houses. Makes me sad to see, but it is the reality of the “building boom” where every Tom, Dick, and Harry saw money in building and decided to give it a shot.
As my wife always says, “You’ve got one job to do, at least do it right.”
Matt Wilkins
July 23, 2008 at 6:22 am
Jim:
First, I will just come out to say that I LOVE Five Guys (and it doesn’t hurt that there are 3 of them in my town).
I agree with mediocracy in a hot market but you also have to look at examples of the same thing in a slow market. My market went through a huge slowdown in the mid 1990s. Many high end home builders that were big in the late 1980s and early 1990s either completely went under or changed their strategies. One of the things they did was to use lower costs materials so they could sell homes at the lower market price and still make a profit.
THere’s a fine line that any business has to walk between holding the highest standards and keeeping the doors aopen and the operation profitable.
Jason Sandquist
July 23, 2008 at 6:29 am
Uh… yeah that burger looks unbelievable.
The ‘cookie cutter’ houses are finally disappearing, slowly but surely the builders are choking on there vomit. Mediocrity should never be accepted, not in this business. I have seen so many shotty work on houses, ie: putty for corners, floors that squeek when they are freshy built, siding that wasn’t installed right, drywall mud that looks like crap, the list goes on and on. Homeowners shouldn’t have to deal with so many call backs in the first year.
My vote goes for Five Guys
Paula Henry
July 23, 2008 at 7:22 am
I am a big fan of In-and-Out and now will have to scope out Five Guys locations.
The one certainty I have noticed with todays buyer is, they are either looking for unique and quality or a fixer where they can put their own quality and unique touches into the home. There is rarely an in-between home buyer who is just looking for a home.
Matt Stigliano
July 23, 2008 at 7:44 am
Jason – How did you know the builder I referenced used putty for corners? Man, you’re good. Best part is, he let the putty dry and crack and it was crumbling as he showed me the great windows he put in (about as cheap as the ones on my 1986 built house). The property is listed for over $300,000 which in San Antonio will get you some nice places…not so much on this one.
Paula – You mentioned In-And-Out. I am officially jealous. I miss Los Angeles for that alone. Well that and Baja Fresh. And Poquito Mas. And the Rainbow (best cheese sticks on the planet…I guarantee it). Dear San Antonio, please give up on your Whataburger obsession. Thanks, Matt.
Vicky Henry
July 23, 2008 at 8:04 am
The burgers look great! Wish they had a Five Guys in a Owasso Oklahoma. Whole hearted agreement here in Tulsa OK. I am starting to hear this more and more in all price ranges but the upper-end specifically. People walk into a $300,000 home they expect to see higher quality on the inside as well as the outside. And guess what? The average “joe” does know the difference.
Matthew Rathbun
July 23, 2008 at 9:01 pm
FIVE GUYS ROCKS!!!! Worst thing that every happened was working in an office next door to a Five Guys. The customer service and the food is outstanding. I’ve actually used the McD’s versus Five Guys analogy in customer service oriented classes. Quality is as important to a hamburger eater, as it is to a steak eater.
With fast food I have low expectations, already. So if I’m treated poorly with already low expectations, it’s really bad. I don’t go back…
Upstart Agent
July 23, 2008 at 11:23 pm
I think you’ve really summed it up pretty well, especially the line “vomiting up homes” – we have a few plans in the area by some of those mediocre builders that once sold in days, now sit on the market for several months, price reductions, and seller tears.
Erin Fogarty
July 24, 2008 at 2:19 pm
Mmmmmm… Five Guys…..
As for the mediocre, cookie cutter type homes from the builders… we have an over-abundance of them where I am. There are two such houses on my block alone that have sat empty for over a year. Both are brand new and never lived in, both are on the market for dirt cheap, and neither is even getting a second glance. I laughed at the builders that are “vomiting up homes”, since that sums it up pretty well, especially for SW Florida.