McDonald's vs. Smashburger Theory of Homebuilding
Comparing new-home construction to ordering a burger sounds insane, but it makes sense.
We've built hundreds of homes in about a dozen markets over the last 4 years.
As we enter a market, we often see other builders' signs in nearby areas: "(Insert major homebuilder) Homes Starting at $300,000."
It's pretty intimidating at first. These companies quickly clear the land and break ground on these projects, almost as if they had a direct phone line to the head of the city's building department. Then come the homes. Rows of houses with the same two to three finishes, color palettes, and fresh landscaping cover the land that is now unrecognizable. The realtors pull up soon after in their BMWs with their clients, who move in shortly thereafter. Rinse and repeat. That's how these companies roll.
Our firm likes the rinse-and-repeat concept, but we don't yet have the economies of scale that the big homebuilders have. We buy smaller plots of land, often infill lots. We have to go to the building department personally and ensure that our permits don't get lost in the city's big pile of permit applications (this happens a lot). We represent ourselves as real estate agents when selling or renting homes. As we've grown, we have created systems that have helped us become more efficient, like the big companies, but we are still very much the little guys in developing communities.
In the scenario above, the big homebuilders are like McDonald's; we are a local Smashburger joint.
McDonald’s is your typical prominent corporate builder—think Pulte or DR Horton. It serves a consistent product, maybe even some variety, but it has a “set menu” that rarely changes.
Your local Smashburger joint is the smaller builder—perhaps you or I—who can swap in special sauces, seasonal toppings, and local ingredients or even cook your patty medium if you want.
Which one sounds more delicious?
There’s a real lesson here for anyone building homes: better design and speed of customization can be your secret sauce.
Big builders (McDonald's) have efficient systems for mass-producing homes. They excel at predictable floor plans, limited color palettes, and bulk pricing. Smaller builders (Smashburger) can quickly iterate on trends or customer requests outside the standard blueprint.
One example was Ocala, where we introduced a smaller, 1,000-heated square foot (sf) three-bedroom, two-bathroom floorplan. All the builders in the area offered floorplans starting at 1,200 sf, which made sense given the market data. We also came into the market with our standard "McDonald's" style 1,200 sf, two-car garage home. As we started showing the homes, we noticed a demand for something smaller and more affordable but with the same number of bedrooms and bathrooms. We pivoted quickly and modified our floorplan to a 1,000-square-foot home with a one-car garage. A year later, we could sell and rent all these homes despite a market downturn. Their affordability due to their size was attractive to new homeowners, especially those priced out of the big builder's homes due to the higher interest rates. That is just one example. In other scenarios, we've altered our designs to include a den or an extra bedroom. We’ve even added a garage to a duplex to meet local needs. It's that adjustability that allows us to compete and continue to grow.
A smaller builder can use its size to compete and profit despite the competition of big builders in three main ways.
Adaptability
As shown in the example above. Smaller developers typically aren't managing thousands of homes across many subdivisions. This gives you the freedom to pivot on a dime. You can redesign and alter floorplans and include materials or details not previously thought of without needing a corporate sign-off. You just do it. The Smashburger kitchen is always ready to whip up a new "special."
Personal Touch and Collaboration
Homebuyers want to be heard, especially when committing to buying a new home. As a smaller builder, you can provide the attention they need from your design team, your site manager, or even yourself. It may be as simple as curating the paint colors or tweaking the kitchen layout. This is your chance to serve the burger exactly how the customer wants.
Focused Quality Over Quantity
The more you scale, the less you can fuss over the small details. Because a small builder is not racing to meet a giant pipeline of hundreds of homes at once, they can take care of the small details that bigger builders overlook. Perhaps the most significant difference can be made by subcontractor selection. Smaller builders can come into a market and get a better feel for who the better subs are in the area. Bigger builders don't have that luxury. Better subcontractors will ensure that the details are handled, particularly in the interior finishes, such as paint, cabinetry, and flooring. It’s like hand-pressed patties on the grill: you taste the difference in every bite.
Being a small builder doesn't have to be a disadvantage. Yes, the McDonald's style builders can undercut on pricing and volume, but there is a superpower that comes with being small—the ability to go above and beyond. Real estate is and will always be a people business. After all, people live in and occupy these spaces. As a Smashburger joint, you can deliver an authentic, personalized design that makes the end user feel like they tasted something truly special, something that will keep them coming back.