Food Halls need to evolve to come out of this mess alive
I have been a bit surprised to read a number of articles suggesting that food halls are “well-positioned to bounce back” from the recent disaster. The reality is, the economic model of a food hall is very difficult already and there were several challenges to overcome before the pandemic hit.
Economics: For the most part, food halls have worked — financially speaking — in areas where there is a very dense population because it takes a lot of foot traffic to drive the volume needed to make the economics work. Based on locations where the density exists, the investment cost is significantly higher than a typical restaurant. Putting 10–20 exhaust systems in a large building is just one example of many expensive difficulties involved. The economic model is tough and determining if it meets the goals of the investor isn’t a “one size fits all” discussion. The amenity impact a vibrant food hall has on a building and the surrounding area is significant and has to be considered in the occupancy expense a building owner hopes to achieve. The development costs vary greatly depending on the location as well and there is no good average cost per square foot number you can bank on.
Technology: Food halls are not able to easily adopt new technologies as well as single-unit operators or chains. One of the best aspects of a food hall is that it’s a collection of creative, independent operators making unique food. That aspect, however, also makes operating cohesive systems in a large facility very challenging. At a minimum, single-source online ordering and payment (across concepts), in-house delivery as well via a third party (at least currently), ordering kiosks, ordering via your device at the table, and the ability to locate guests within the facility to run the food to them are much needed. Aside from the numerous customer-facing technologies, an opportunity exists to analyze and act on facility-wide data that in most cases isn't being looked at.
Ability to generate evening business: Food halls have, for the most part, functioned as great places to eat lunch. Few have managed to turn a food hall into a dinner destination. In most cases, location, atmosphere, and service style don’t lend themselves to a great dinner/nighttime experience, but I believe they can. The dense market, lunch focused model is not the only way to execute a food hall. There are different ways to design, curate, and program based on what’s appropriate for a location. We have recently worked on a concept in response to this. One thing that doesn’t change, however, is that multiple food, beverage, and entertainment venues need enough traffic to make the economics work. That means not overbuilding and providing an occupancy cost structure that works for the operators and the landlord.
Off-Premise: Food halls aren’t set up for delivery and off-premise sales. There are some that are doing it better than others, but in general, food halls weren’t built around the idea of off-premise sales. It’s been a challenge for them to get up to speed and will continue to be. Small spaces, difficult access, and difficulty with the speed required are some of the challenges. Food halls can become a go-to for off-premise, but it will take some effort. While technologies play a huge part, so does the design of the spaces. The most important ingredient will be a coordinated effort, requiring leadership to execute. Food halls can become the best takeaway and delivery venues ever. Who else has so many different options? No one. Is it easy? Nope. Is it possible? Absolutely.
Operator mentorship and support: The best part of a food hall is the unique collection of independent operators. In many cases, the same people who create interesting foods have limited experience and knowledge in effectively crafting and presenting the menu in a way that is both executable and profitable. Given that the rent structure in many food halls is based on a percent of sales, the smart thing to do is work with the operators on an ongoing basis to evaluate results, evolve the offerings and provide the type of support similar to that of a strong franchise organization. Want to keep your venue vibrant? Then it needs to constantly evolve and, to do that, the operator's success must be the primary focus.
Service: In most food halls there is little, if any, service once you walk away from a vendor’s counter. I used to get asked how a food hall is different than a food court. My short answer was that the food and the environment are better. I believe that now there is a huge opportunity to dramatically improve the service element at a food hall, which will have a number of positive effects on the guest experience. This is all about leadership.
Finding the right operating partner to oversee the venue: The path to improvement lies in leadership. We have learned that great guest experiences mean more than curation, leasing, and promotion. Food halls have great potential that is often missed because the leadership of such a venue is difficult and takes a different approach than traditional spaces. Good leadership at this level is a lot more than the ability to run a restaurant or lease a venue. You need to be able to get a creative, diverse group of independent people to function together as a team. Finding the right operations partner has proven to be a huge challenge for many developers. Who would be the right operating partner? One part franchise support person, one part creative visionary, one part tactician, one part culinary innovator, one part promotions expert, and a few parts inspiring mentor.
We are talking about this topic on Resolute live this Friday 9/18/2020 at 2 pm EST, during our weekly video show. You can also catch this anytime on the YouTube channel https://www.youtube.com/channel/UCq5MZcSVBA8XPY-oq8BHSXw?view_as=subscriber. No registration needed. Definitely not your typical boring webinar with a bunch of talking heads answering canned questions. There are spontaneous tangents, dissenting opinions, beer, and occasionally a mouthful of expletives to back up a passionately held belief.
