How are Food Halls Managed and What Does it Cost?
Most retail developers seek out a food hall when they want to drive consumer interest towards a greater development project and elevate the value of surrounding retail property (like an anchor). However, many developers also want an arm’s length relationship with the daily operations of a food hall because they are invariably time-consuming and relationship intensive. This article looks at the different types of management relationships and how they work.
The primary activities of food hall management are similar to property management with a few notable differences. Here’s a general list of the areas food hall managers undertake that are also within typical property management services:
Routine cleaning (nightly, weekly, monthly, quarterly)
Repairs and Maintenance
Preventative maintenance contract administration
Purveyor contract compliance
Property accounting
Tenant management
Then, there are more interactive elements that are/should be present in the management for most food halls:
Bar management/service
Event sales/operations
Greeting/concierge/service failure recovery
Customer service and wayfinding
Social media management
Activation programming
Vendor/tenant sourcing
Operational accounting and budgeting
Another way to look at this is through levels of hirable services. If you are hiring a property manager specialized in food halls, the following are typical service levels. An important note here is that there is an inverse relationship between the level of service and the ongoing involvement of the property owner. Finally, if you’re building a new food hall, you probably need to skip to the highest level, which involves most of the pre-development, design, forecasting, budgeting, and general setup features.
Management Systems - Tools are the first layer of service. The benefit of structured software tools is that they allow an owner to hire local talent in the management positions, but also provide structure by which those people can manage the food hall. This is important since local hospitality personnel rarely have experience in a food hall setting. This is also beneficial for owners, so that when they experience employee turnover they don’t lose all operating knowledge.
Adding Back Office - This typically allows an owner to hire a local hospitality manager but have a remote back office team that understands food halls to guide them along the path with budgeting, accounting, cash management, AP, and compliance management.
Adding Onsite Management - This is a big step, because it means that the management company will operationally staff and run the food hall with an onsite operations team. This typically includes tenant relationship management, meaning that the property owner/developer no longer has to manage an operational staff, which provides a big boost to passive involvement.
Adding Specialized Revenue Centers - This step adds significant onsite earnings through the operational earnings of bars and private events as well as a managed brand and social media step. This is the most significant boost to earnings that an owner can take advantage of.
Adding Project Development - This is the option to select if you are pre-development as it allows you to capitalize on the educational efficiencies of the industry operators. An operator who makes a living running food halls can tell you how to avoid costly areas of over-expenditures. They have industry relationships with other experienced purveyors that you’ll need AND they’ll be ready to hit the ground running when it is time to operate the project.
Adding a Fractional Regional Manager - As food halls find a core operating a team and age over time, a fractional manager with expertise in food halls can be helpful to keep projects on track, maintain systems, and coach the team through routine financial management, marketing planning and other core elements in the ongoing operations of food halls.
Frequently Asked Questions:
Can I hire a consultant and an operator separately?
Yes, this is possible, but we recommend that you hold some time/budget back as there are inevitable differences in development style between pure consultants and pure operators.
How much does it cost to hire a manager?
For the first two layers of software and back office support, you can expect to pay fixed fees for use. That means a subscription fee and/or an hourly rate for services. Pricing is fairly standard and transparent, so you really need to focus on hiring the team that you feel is the right fit experientially and interpersonally for your project.
For the second three layers that involve onsite management, the industry typically utilizes a management fee structure that is similar to other industries like contract food service, hotel management, property management, or restaurant management. Most agreements include a startup fee, base management fee, and an incentive fee. The startup fee is a consulting fee for setup and development and is a fixed number. The base fee is a percentage of the gross sales of the enterprise to maintain the operational regime. The incentive fee is a minority share of EBITDA that incentives profitability. It is typical for an incentive fee to also have a promotion structure.
Can any manager manage any food hall?
No. Hospitality managers are people management companies. This means that with each head added, there is a layer of management support that has to be present. This management support gets bigger with each new geography added. This means you will inevitably get better deals from a manager whose home base is closer to your project.
Relevance is also exceedingly important. Your area may have a great multi-unit BBQ entrepreneur, but her experience with multi-tenant food service may be limited. In general, you should be looking for someone with regional experience in a relevant specialized management capacity, otherwise you’re going to end up with the pain and expense of a learning curve.
This obviously doesn’t apply to the first two layers of back-office service.
How does tenant procurement work?
A specialized manager can oversee the process. They typically use a combination of internal resources and local brokerage relationships. Brokerage fees are typically a negotiated flat fee, which is most often proportional the cash security deposit provided by the purveyor as a part of the agreement.
Are food hall management services necessary?
Most retail developers who have opened a one-off food hall have later stated that they underestimated the time and attention it takes to do it well. A management company focuses on this task exclusively and depends on maximizing financial performance as a part of their routine income, which aligns interests with an owner. Remember that the right manager can also add operational earnings through bars and private events while indemnifying the owner for associated risk.
Can I start small and scale up?
You can. However, it is wise to remember that a consumer’s first impression often dictates the probability of a second visit.
Politan Group specializes in operating food halls, bars, and bars within food halls. We also provide remote accounting, HR, and administration for food halls. Finally, we provide fractional management services for existing food halls where a team needs a leadership group that understands the business of food halls. If you are thinking of building a food hall or need help with an aspect of a food hall you already own, reach out to us. Politan is the most-awarded food hall operator in the industry.