What is a PIP?
The initials PIP stand for property improvement plan. A property improvement plan is an action plan for a property to bring it into compliance with brand standards levied by the brand manager or franchisor. The PIP usually calls for improvements to things such as exteriors and façade, amenities, bathrooms and common areas, furniture/fixture/equipment, lobby and elevator cab, ADA compliance or safety advancements. A PIP also includes a timeframe for making the improvements.
The Purpose of PIPs
PIPs are written by brand franchisors for franchisees to bring properties into compliance with brand requirements. Basically, a PIP is long-term plan to upgrade and improve a property to improve guest or customer experiences and to provide customers with the experience they expect based on the brand’s sales and marketing promises.
A good PIP can increase market share, propel revenues, defeat competitors by producing competitive advantages, boost customer satisfaction, lower costs and help improve safety, efficiency and profitability. A good PIP is a win-win for the brand, for customers, for owners and operators.
PIPs are used in almost all industries including hotels, apartments, automotive, beauty, business services, child care, cleaning and janitorial, health and fitness, printing/copying/shipping, senior care, education, pet care, sports, recreation, and professional services.
PIPs are typically written when a property changes ownership. They are also written under continued ownership — for example, under a long-term management agreement, the brand franchisor may have a right to propose a new PIP on designated events or times.
Elements of a PIP
The specifics of a PIP will vary depending on the industry and the property being reviewed.
The plan may include any combination of the following specific items: life safety improvements, ADA compliance recommendations, exterior and physical structure upgrades and repairs including façade, signage, parking lots, exterior lighting, and landscaping; amenity improvements to bathrooms, kitchens, swimming pools, workout areas, conference rooms and common areas like lobbies and elevator cabs; and furniture, fixtures and equipment upgrades including computer systems and security systems.
The plan also includes recommended standards and criteria for the upgrades along with a recommended timeline for their construction and implementation.
The PIP Process
The PIP process is highlighted by the following phases:
- Development of the brand standards and criteria for assessment by the brand team
- Research into the specific property of the franchisee including history, competition, market share, customer satisfaction and a boots-on-the-ground review of the property
- Assessments for improvement based on the research of the property by the brand franchisor
- Initial PIP requests in writing to franchisee
- Research and initial response to PIP by franchisee
- Negotiations between franchisor and franchisee on final PIP actions to be taken, to what standard, and by when
- Construction according to agreed upon standards and timelines
- Post-construction
Conclusion
Planning for, examining, knowing the “real” costs and negotiating PIPs can significantly help owners of properties reduce their costs and increase their returns. Seek out experienced professional help, like the Ultimate Owner’s Reps at DAE Group, to help you successfully navigate this complicated journey.
