| Developing a Food Hall- Part 1: Is It A Good Fit?

Food Hall popularity is growing quickly and you are seeing them pop up in unexpected places around the world.
It may leave you asking if a food hall would make sense within your development?
Or how could you maximize your unique site to serve multiple restaurant operators?

In today's episode of The Restaurant Realty in 10 host, Michael Carro is joined by Food Hall Expert, Andy Simpson with Hospitality Design and Development to discuss what should be considered and planned for as a developer takes on a food hall.

Andy's working definition of Food Hall is at least 8-10 restaurants in a multi-use environment.  It may or may not include other aspects such as having a bar or other retail.

For more information on The Restaurant Realty in 10 or to get the show notes from today's show head over to TheRestaurantRealty.com

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Transcript

Michael Carro : 0:01

Welcome to The Restaurant Realty in 10. Ten minutes of uncensored straight talk for restaurant entrepreneurs. Weekly The Restaurant Realty in 10 dives into restaurant operations, facilities, real estate and investments. Welcome to The Restaurant Realty in 10. I'm your host, Michael Carro. Today I'm with Andy Simpson with Hospitality Design and Development. Andy works with food halls. He works on both creating them, designing them and developing them. And so I wanted to bring him in to talk about why would any developer decide that a food home will be right for his development. Andy, welcome to the program.

Andy Simpson : 0:35

Thanks for having me. It's fun to be here.

Michael Carro : 0:37

So let's dive straight in, you know, developers, and they come to you saying, "Hey, listen, I think a food Hall would make sense in my project." How do you go through evaluating whether or not that would even make any sense?

Andy Simpson : 0:49

Yeah, it's a tough question because really, there's a lot that goes into whether or not a project is right for a food Hall. As you probably heard, there are hundreds of them being developed in the United States right now and kind of in every type of building, the term Food Hall is being used to, to discuss a number of different kinds of food service projects. What I've determined is a Food Hall is at least 8 to 10 restaurants or more in a multi-use environment, it may or may not have alcohol, it may or may not have retail, or other things with it.

Michael Carro : 1:24

Okay, so that's a great overview of what food halls are. So now let's get back to the developer. He's got a piece of property or he has a building, and he wants to determine whether a food home makes sense for that project. What evaluation process would they go through for that.

Andy Simpson : 1:42

The best way to start that is really to get someone like me or somebody who's got some experience developing a food hall to look at their project and do a an overall quick kind of a study to say how many food operators can we fit into this, what type of a mix works here based on building cars are very different. It can be a very different scenario based on the type of property it is, where it is, or anything that it's around, it can be a very different thing. Economics, enter, and immediately, Food Halls are expensive. Generally, it's a capital intensive business, just like the restaurant industry in general, but of food halls, even more so in that a number of locations that probably work really well for a Food Hall are also ones that are tough to build in. So getting that understanding right from the start to make sure that you're not going down a path that's eventually going to lead to a rent situation for an operator, that's not going to work. I try to get to that bottom line pretty quickly with somebody just to determine what do we think it's really going to cost to do this? And can we back into making sure that that's a great opportunity for an operator?

Michael Carro : 2:53

So each developer it may depend on whether they are the owner of the building? And they're building this as an amenity to their current multi-tenant mix. Or if it is an entrepreneur looking to lease space from a master landlord, and then sublease, if you will, spaces to the individual restaurants. So there's different levels of rationale for why one may do a Food Hall, who do you primarily see come to actually build a food hall?

Andy Simpson : 3:26

That's changed a lot. The second scenario you just listed with an entity coming in and being a tenant and master leasing. There aren't very many of those left now, because the business is so hard to do from an economic standpoint, what I'm seeing more is a developer who realizes they've got a piece of property that they need great food service as a great amenity. So they understand that they need that food and beverage pretty badly. They, in many cases, have tried to find a master Leasee as you described, but there aren't very many of them out there, I was involved with a group that was probably only one of a couple around the country that were actively looking for leases. So mostly it's a developer now.

Michael Carro : 4:09

Okay, Andy. So let's assume that the developer looked at all the numbers, and determined that it does make financial sense to build this food hall. What would be their next step?

Andy Simpson : 4:21

Next steps are really creating the vision for what the property is. Saying the term food can go a lot of different ways. As we talked about, there are urban market food halls that are more like hallways with awesome little shops in a straight row, like you might see at a train station. There are ones that are more spread out with lots of seating in between. What we're trying to do is match what a version of a food hall works for a particular location. As an example, I'm working on one in an environment where there's a lot of residential but also has a strong daytime population. And that's one of the things that of food all is never really done well was transformed a daypart into night. Most food halls do a great job at lunch. It's a fun place to go during the day, not so much at night. So we're trying to figure out how do we transition both the environment as well as the service model.

Michael Carro : 5:14

So let's go through a sample scenario. Let's assume I have a building that has 15,000 square feet, and I come to you and I say, I want to do this and we come up with a layout. We bring in an architect, you and the architect work together on a good workflow. Do we include a commissary kitchen in the back?

Andy Simpson : 5:35

Yes, and no. Commissary kitchens are challenging personal health departments hate them as you can well imagine having a kitchen that's used by multiple different operators. In most states is and and really by National Sanitation Foundation guidelines is not an acceptable practice. As the Chipotle a nightmare showed the world having a chain of accountability for went where products are developed and how they're done, and how they're delivered to the public makes it very difficult. Now there are shared aspects that can be done. So you're not duplicating the same things over and over again, as an example, walk-in space and all that will generally put in a large walk-in divided up with cages inside, so that you don't end up having to do 10 of those you might have, you know, one or two,

Michael Carro : 6:23

Gotcha.

Andy Simpson : 6:23

Same thing with warewashing, you can do some of that. Now, the more you do outside of an operator's food store, the more they have to leave their space, the harder it is for them to manage their labor. As we all know, in the restaurant, industry, labor is our biggest challenge. So keeping everything as much as you can possibly do within their food stall is better. That's why I will generally put three compartments sinks, and as much storage as we can just for that shift or that service period within their food stalls so they're not running back and forth.

Michael Carro : 6:56

Okay, so let's assume that I've got this 15,000 square foot space, we incorporate a large walk in we have a common dishwashing area, but we don't have a common hood, where other things would be prepared. Everything would be prepared in the food stall. So we get a contractor what as a landlord, what do I typically provide to my tenants before they move in, let's kind of talk about the infrastructure that a tenant should expect.

Andy Simpson : 7:23

Yeah most food halls because they're very capital intensive, and because they're in a large multi use facility, you can't really do it the way you know a food court used to be done. A food stall is going to have some basic stuff in it with three compartment sink, a couple of floor drains in the right places, establish where that cooks line is going to be within the food stall. And then the operators can then come in and bring in some of their own cooking equipment. But you've already established kind of where those things are, and they make sense. Which is again, why it's really important to have somebody involved who understands that it's got to be not only a restaurant operator, probably but somebody who's developed a lot of restaurants so that they can kind of make sure that they're setting that infrastructure up in a way that when an operator comes to look at, they're going to go, Yeah, that makes sense to me, I can understand why you put the plumbing where you did, and I'm not going to try to move it.

Michael Carro : 8:20

Yeah,

Andy Simpson : 8:21

That's where it gets really expensive. You know, from the landlord's perspective, also, it's an engineering, everything has to work well together, you're putting in a common grease trap as an example, as opposed to a bunch of individual ones, much more cost effective overall. And that has to be done ahead of time. So you got to design that whole system.

Michael Carro : 8:41

Andy Simpson, thank you so much for joining us today and giving us a lot of insight on food halls. I know we have you planned for additional food hall podcast to discuss other aspects of that exciting environment. Thank you so much. Thank you for listening to The Restaurant Realty in 10. If you're interested in restaurants, whether operations facility Buying leads to more investment The Restaurant Realty intent is for you. Please subscribe to this podcast and you can also visit TheRestaurantRealty.com for show notes, topics and additional information.