Five Ways to Build a Food Hall that maximizes ROI
Food Halls have a reputation for big price tags. Big price tags are also often correlated with a high long-term cost of maintenance. So, how do you get a genuinely good ROI out of such a project? It requires a thorough understanding of the customer environment and a willingness to think through some details. But, it is very possible. Here are 5 ways to deliver an award-winning food hall that doesn’t break the bank and, hopefully, creates a great return on your equity investment.
Say yes to small spends that streamline long-term operations; be careful with big equipment spends
Think about single-story or low-rise buildings
Plan for operations to eliminate turn cost
Maximize customer experience - Aesthetic, Access, Vibe
Access operating margin
Food Halls are only fun if they generate money for everyone on the project and, given the quantity of participants, that can be a tall order sometimes. The first two bullets are about being efficient with build cost. The last three are about maximizing income. Together, they can create a good foundation for long term return.
The first point is all about capital efficiency — spend time scrutinizing big equipment expenditures. A lot of the engineering time that goes into food halls is about how to get proper exhausting for multiple hooded-cooking environments. With each additional hood added to a project, you add another variable to a complex engineering problem that involves balancing the makeup air, HVAC, outdoor temps/humidity, and cooking activities to create negative pressure environment that expels most of the cooking exhaust through the hood. The tendency is to overbuild for flexibility and tack on plenty of expensive equipment pieces that few people can see. Developers can tend to be more flexible with capitalized expenses and pressed for time, so these expensive decisions tend to get approved. Finally, lack of knowledge about the customer environment often means that excessive attention is paid to heavy equipment before understanding the experiential picture. There are some pretty costly long-term issues this creates:
There’s often not much left for aesthetics, so the projects look cheap to the customers who are supposed to love them.
Cooks often change cooking processes and food halls naturally have turnover. Engineering models often aren’t equipped to contemplate this, so the developer needs to have a nuanced baseline from which to “project” usage requirements (ideally, accurately).
There is a tendency to ignore possible streamlining efforts for the cooking tenants, because we’re busy engineering. This can massive shortening effect on lease up and rental rates.
Many of the most experientially impactful things can be the cheapest to build on the front end. For example: unified styling for signage, pre-built 120V electrical runs to the stalls, and finished plumbed-in components. Each of these things costs a tiny fraction of roof-top equipment, but allows the developer to minimize turn cost, establish some key aesthetic components, and reduce the workload significantly for a food purveyor. We’re getting a lot more bang for our buck on these dollars. This mindset allows us to devote our dollars to items with the highest payback value first, motivating us to get creative on big ticket items that you might be able to rethink with more knowledgeable planning.
The second way to deliver an award-winning food hall that doesn't break the bank is to consider single-story buildings wherever possible. The great thing about single story buildings is that poking a hole in the roof is quite cheap compared to running black iron channels. Even better, it enables pre-packaged heavy equipment designs where the components can be purchased without custom production. Hood vents can be decentralized. Ansul, too. Congratulations, you probably just cut the project budget in half. Makes you want to enjoy a cold beverage and pat yourself on the back, huh?
Third, be smart about turn cost. The best food halls actually need to rotate talent every 3-5 years in order to keep a fresh guest experience. Guests routinely remark that they are happy to see new options in their favorite food halls. This means that your 10-year leaseholder is actually three full turns on average. If you allow excessive customization to the first cooking group, then you’ve just committed to another two demo projects and another two TI allowances, on average. This is where picking some standards goes a long way. For example, plumbing in your own sinks and conduit networks allows you avoid running new plumbing (and opening walls) for the next chef while also hiding them from customer view. It also means that a chef doesn’t have to pick a plumber, get your approval, and get them to show up. It can be the difference in the necessity of a construction permit entirely. It’s also important not to take this step too far. For example, you wouldn’t want to support equipment with lots of small parts.
Fourth, and our favorite, focus as much as humanly possible on customer experience. These days, guests want to take pictures of their destinations. If you get a few emails a month asking you for referrals for your interiors selections, you’ve done a good job. By the way, expensive interiors are not necessarily beautiful. Inexpensive interiors can be gorgeous (that’s a coming blog post). How does this generate ROI? It’s free marketing that never quits. Make sure that guests find the arrival and departure experience convenient: don’t compromise on parking. If you want families, you have to enable them to get their kids in and out of the SUV easily. If you want discretionary shoppers, you need an arrival experience that they tell their friends about.
Lastly, access operating margins. By 2020, most food hall developers/owners know they should be accessing margins from bar and event businesses. But, if you visit the finished product, you might be underwhelmed. One of the beauties of a growing food hall industry is that there is also great access to skilled talent in the form of hospitality managers that can access these profit centers (without transferring operating liability to an owner). Good hospitality and specialized property managers are out there (shameless plug).
Hopefully, you can use these tips as you plan your next development!
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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.