Considerably more specialized than food courts and traditional markets, food halls are an upscale breed that bring together unique curated concepts, local chefs, and food purveyors under one roof. Unlike typical restaurants, this trend focuses on social experience and experiential discovery. The business model provides an elevated dining concept for consumers with lower overhead cost but higher footfall for operators.
Food halls offer practicality, versatility, and compromise. They also serve as a platform for aspiring restaurateurs and veteran chefs as opening in one defrays startup costs of the restaurant gamble. Well-established chefs capitalize by opening their established or new concepts in food halls as pop-up kitchens due to its attractive financial upside at a lower risk, more chances of innovation, and the ability to reach more discerning customers.
1. Business model
There are various business models that apply to food halls. Developers and landlords can choose to lease out or operate a food hall themselves. Other food halls are direct partnerships or joint ventures between operators and restaurateurs or vendors who will potentially manage the place. The latter requires less investment, but this entails less control of operations.
Choosing your location should be based on cultural nuances, market segmentation, competitor research, and trends. Consider setting up a food hall in a revolutionary location: reclaimed warehouses, basement floors, retail stores, breweries, and even converted auto showrooms. Breathing new life into historic, repurposed buildings also adds value to the food hall.
3. Brand identity
Food halls prove the continual shift from the mere transactional to the experiential concepts that customers clamor for. Stemming from this, the food hall should be revolutionary, while offering viable solutions to tenants vis-a-vis catering to various palates. Start off by having a clear picture of your concept aligned to the demands of the market. The main goal: to offer something people want or don’t know yet that they want. The challenge is to identify things people don’t have enough of and find ways to provide them.
There are two options when leasing out stalls. First, call out for interested parties and ask them to pitch their ideas. Second, directly reach out to prospects who will fit into your concept. Either option should measure up to the food halls’ long-term goals. Prepare contracts that will keep tenants from leaving instantly. Downpayment on rent should also be imposed, but also consider matching the vendor to the best stall size for proper operation. Lease out larger stalls to vendors that might need more kitchen space. Consider operational expenses in terms of communal spaces; make sure this is covered by rent paid for by tenants.
5. Tenant curation
Product differentiation should be top of mind when curating tenants. If one tenant specializes in chicken wings, try to prevent other stalls from highlighting chicken on their menu. This allows for equal market share among tenants. Put together a list of offerings of all tenants and look at it as one mega menu; cross out items that might clash. This decision also stems from limiting the number of tenants that will allow for healthy competition. Consider also pinning down a price range agreed upon by all tenants. Make sure to tap into consumers’ need for variety, quality, convenience, and affordability.
6. Design and construction
A stall’s design should be identical to the food hall’s overall concept. The whole look of the place should be homogenous—from the entrance to the dining area to every corner of the space. To keep things under control, request that a stall’s design be approved by management before construction commences. Another option is to let tenants hire the same contractor as that of the food hall’s.
7. Operational complexities
Manage the operational complexities of the food hall to ensure smooth performance and good working relationships with the tenants. Set up protocols for ingress and egress times, dishwashing space, back service alleys, storage area, waste upkeep, and exhaust and electrical requirements. Creating healthy environments internally and externally will increase productivity and profitability.
A well-operated concept can thrive on quality, consistency, and creativity, but there should be marketing support as well. Build heavy online presence at the right channels and create a marketing plan aligned with the food hall’s objectives and metrics. Don’t rely on the tenants’ own marketing initiatives; set up channels that will allow equal opportunities for all, including the food hall itself. Information such as operating hours, menu, store number, and address should all be readily available. Brand awareness strategies such as display ads, newsletter blasts, PR partnerships, media launches, events, websites, and social media community management can generate exposure and widen the reach of the brand.
Being in food halls offers more flexibility and creativity with their store. If a concept doesn’t work well, develop new offerings, collaborate with experts, and improve the core offering immediately. It’s also important to listen to the market not only at the beginning of the business but all throughout. The trick is to engage a market that will push tenants to improve their offer every day.
A common practice that might come up during the food hall’s operation is for tenants to act solely on their own. This should be avoided by management by promoting healthy competition among all tenants. Try monthly meetings with representatives from each stall and even promote collaborations on menu offerings. This ensures consistency in terms of product, service, and operations.
Nothing is fail-safe and businesses close for various reasons. Death can even happen at the beginning when there is poor planning. Among food halls, the common reasons are: weak management structure, failure to understand the market, unprofitable business model, wrong location, tough competition, inconsistency of quality, and poor tenant relations. Some concepts in food halls close because their offshoot concepts lack quality from their original branch, or the niche may be overbuilt and concepts may seem passé if the market is saturated. It also has to be emphasized that all vendors should be kept afloat because there is a direct effect to one tenant if their built-in neighbors fail or close. These can combine and collectively put down the business.
Originally published in F&B Report Vol. 15 No. 5