How is a Post Pandemic Food Hall Different?
The pandemic initially affected food halls similarly to full service restaurants. They were largely viewed as crowded spaces of high risk. While that period came and went, post-pandemic food halls have evolved in a few key ways. That’s what we’ll talk about in this article. If you’re considering building a shared F&B operation and want to be current on trends, this article is for you.
Food halls are more experiential these days. People want to eat, but they also want to socialize, meet, drink, and then eat again. Filling a variety of social uses is key to lengthening hang time and increasing spend. Food halls are the epitome of mixed use environments and the movement to flexible work has only increased traffic. Food halls can capitalize on the diverse uses desired by consumers by offering shared spaces for eating, socializing, relaxing, and working, private (rentable) spaces for parties and meetings, and at least one separate space for a diversified bar concept for late night and weekend enjoyment. This has the added benefit of extending the active hours of the food hall and adding high margin revenue streams in the form of event rentals and additional bars. Along this same line, take out isn’t quite enough and we see food halls that were overly reliant on take out (busy office populations and commuter hubs) are slower to return to pre-pandemic volumes. The focus is now on bringing and keeping consumers in the food hall for as long as possible.
Contrary to pre-pandemic, it turns out that diversification of revenue streams is quite important. An online purchase process is helpful, but delivery sales volumes have mostly mean reverted for food halls, which were traditionally around 2-7% in overall revenue. In many of the recently delivered food halls, you are seeing an increased focus on aesthetic and life-style uses. This diversification largely comes from the varied bars and event spaces mentioned above but also new entertainment spaces (inside and outside the food hall) and all-day attractions/activations.
Developers view food halls as an unbeatable amenity for core mixed use developments, but are more recently realistic about required traffic sources to drive shopping demand. Food halls are traffic hungry and can quickly become chaotic if not well monitored and managed. Likewise, they are expensive to build and better underwriting standards have come more into focus across the industry. Many developers are taking the time to seek out experts in the food hall industry to perform underwriting analysis exercises in order to assess the potential of their site and determine if they can achieve the necessary traffic.
Cost to build is up and only recently has shown signs of a plateau. Material and labor are both in short supply. Repair work is hard to find and equipment can stay down for weeks as a result of parts availability.
However, consumer spend has increased substantially (up to 30-40% in some cases), without much complaint from customers. Customers are far more demanding of guest experience, which has mostly meant better hospitality (not necessarily tech). It does feel like people are spending up to twice as much per visit, but visiting about 25% less overall. This allows more room for new customers, but also means that patience for service failures is razor thin. We are excited to get 2022 expenditure data soon. Food halls that have doubled down on guest experience seem to be doing a lot better than those that have not.
Menus have also changed dramatically. Splurge dining is extremely popular, where health food is lagging. This is almost the opposite of trends from 2017-2019. Likewise, labor is way up and menus are reworked and pared down substantially. Purveyors are focusing on well-known staple dishes, fewer menu options, and lower inventory. This also means customers are fearful of adventurous ordering (since they are visiting less) and sticking to comfort dishes they know. While options are greatly reduced overall, customers seem fine with the change.
In general, the retail market feels polarized. Good retail markets are better. Tough markets are tougher. Operators are more cautious, but mostly due to labor accessibility/cost, not necessarily consumer behavior.
Profitability at food halls is largely up among owners/operators we talk to. Where they aren’t up, the biggest issue is almost exclusively weakness in fundamentals concerning retail site selection. How do we think you should deal with this?
The trifecta of:
Diversified retail traffic sources in site selection
Unwavering commitment to design based on maximizing guest experience
Patience coupled with great hospitality
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 sell software that organizes much of the routine processes. 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.