The growth of food halls has exploded in recent years, with research suggesting the market will triple in size by the end of 2020. Get ready for more food halls, coming to a city near you.
The big question: How do you get involved in one?
This article covers everything you need to know about food halls, including:
A food hall is a sprawling market that showcases a variety of local mini-restaurants, food vendors, and one or two food-focused shops, all under one roof. You can also expect to find bars, a butchery, various activities, and live music.
Unlike food courts – which are located in shopping malls and often consist of a collection of fast food chains – food halls are often in urban (remodeled) warehouses or ground floors of mixed-use buildings and focus on local rather than chain restaurants. Food is usually prepared fresh to order – no heat lamps here.
These halls are flipping the old food court model on its head. Food is no longer an amenity but the main reason why people visit these areas.
Although food halls have been around for awhile, they’ve only recently stepped into the spotlight. In 2010, there were just 25 halls in the entire U.S., but by 2015 that number had more than doubled to over 50.
From there, growth only accelerated. At the end of 2017, there were 118 across the entire country and, one year later, that number is closer to 180. Based on this growth, some predict the number will explode to 300 by 2020.
Food halls represent the same kind of shift that came with food trucks in 2008, when people wanted to move away from larger chains in search of something unique but still fast and affordable. A changing food culture, rising labor costs, skyrocketing urban rent, and the growing realization from retailers that food attracts people – these are all playing a role in the rise of food halls.
The inherent success of food halls is also fuelling this growth — only three have failed out of the more than 100 that have opened across the U.S.
When you think about the many benefits for customers, retail developers, and restaurants, such an incredible level of success shouldn’t be all that surprising.
It seems like food halls are popping up in every state and city, with some already constructed or under construction in the major food scenes of New York, Chicago, Philadelphia, San Francisco, and Los Angeles, as well as smaller cities like Austin, Plano, Portland, Maine, and Omaha.
Below are just some of the many food halls in Chicago and New York.
What draws the average person to a food hall? Check out some of the top benefits for customers.
Why would retail developers want to get involved in food halls? Here are a few of their favorite things…
If you’re wondering why you should get involved with a local food hall as part of your marketing plan, check out these benefits:
Add a food hall to your marketing plan:
Below is a five-step process to get involved:
While you may understand the many benefits of food halls, there are drawbacks. Compare the below cons against the pros to help you make an informed decision about whether to get involved:
These cons suggest there may be a saturation point where halls lose their appeal and customers return to quiet restaurants. The big question, if there is a saturation point, when will we reach it? How many food halls is too many?
Each hall will have different rules, regulations, and contractual stipulations. While these details may differ, there are similarities in how landlords structure contracts, calculate rent, and conduct financial assessments.
Most food hall contracts will be a license and not a lease. Licenses are shorter, less complex documents that don’t require you to get a lawyer’s review (although a legal review is never a BAD idea). These licenses are usually valid for anywhere from one to three years, whereas standalone restaurant leases remain valid for up to 10.
As mentioned earlier, landlords structure these licenses to give you the flexibility to opt out. Landlords, in turn, have the freedom to rotate vendors who aren’t doing well.
These licenses typically include:
Landlords typically don’t calculate rent at a cost per square foot like many city storefront rents because the space is just too small. Instead, expect a base rent plus a percentage rent fee – either as a percentage of daily sales or based on a sales threshold.
Some landlords may also include staggered rents. You pay a low monthly rental in year one, followed by gradual increases in year two and three.
So how much can you expect to pay? The prices will vary by location. In Denver, for example, expect to pay roughly $2,000 per month and, in New York, anywhere up to $8,000 for 200 to 300 square feet.
Landlords will conduct a full financial assessment to understand your risk profile. This assessment will include a credit check and analysis of past balance sheets and income statements.
However, the financial check is less important than the actual concept. If a landlord likes your restaurant concept, chances are good they’ll offer you a license.
With roughly 180 food halls across the country, especially the long lists in Chicago and New York, there’s no shortage for you to choose from.
The application process will vary for each food hall, but you should start by visiting their website to get more information on how to apply.
Chelsea Market, for instance, provides a contact page for leasing inquiries, while Legacy Food Hall in Plano, Texas has an online form to complete which includes a detailed explanation of your “Big Idea.”
Once you’ve gone through the application process and produced the required documents, the final step will be to review your contract. Ensure you examine the details of your agreement with a fine-tooth comb to avoid surprises later on.
Once you’re happy, you can sign on the dotted line and start your food hall journey.
Food halls have seen a rapid rise in recent years and provide many benefits for participating restaurants. Sure, there are challenges to consider before jumping in, but this trend has an upward momentum that could carry you into a successful year ahead.
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