What is the future of the food hall?



Food hall concepts have exploded in recent years. What was innovative in 2011 and on-trend in 2017 is now rapidly becoming ubiquitous in most UK and European metropolitan markets. Will it still be a viable model in coming years? Based on our own work and research we think the answer is yes – but only if the fundamentals are in place, the strategy is clear and the execution is razor sharp.


I remember my first experience of a modern food market in the form of a shipping container park on the docks in Brisbane, Australia, when living and working there in 2013. Having heard Roger Wade’s story of developing Boxpark – among the first in the world to go down that route – in Shoreditch in 2011, I am sure this was an inspiration for the project on that Australian dockside.


A recent report suggests there are now more than 350 such schemes, developments planned or under construction in Europe, and our own research highlights more than 40 in London right now. 


The universal appeal of the food hall

In hindsight it is clear to see why food halls became such a hit, and looking back it can be difficult to understand why they didn’t materialise sooner. Consumers love the format as it offers informality, good value, choice and, perhaps most importantly, flexibility around a casual meal. In our own research for various food hall projects we have worked on recently, we hear most often customers like they don’t need to pre-book or pay a deposit; the ability for different members of their party to choose their own dishes, not bound by what the others want; and they like the “artisan” food, cooked in front of them from real ingredients. With any format comes challenges of course, and customers often complain of limited and uncomfortable seating, long waits for food from inexperienced operators and the interruption to a night out by queuing several times.


Food vendors – many of them independent and entrepreneurial – love the low risk and low capital requirements, the simplicity of operating their own business without the complexity of a full restaurant organisation and the footfall generated by the entire food hall community. Many of the independents we met were happy with the situation. Much like the tenanted pub relationships of old, if they work in the venue themselves and put in the legwork, the returns can be healthy.


There are several different commercial models – from straight rental fees with or without a service charge, to a percentage of turnover – with minimum expectations. We heard of one major provider charging 25% of the top line, with its own EPOS solution being used by all vendors, allowing the operator to collect rent in real time – thus avoiding a common risk of the food hall model with a high turnover of entrepreneurial vendors. Different schemes vary hugely in terms of equipment provision, with some offering full kitchen fit out, while others are offering shell only. Interestingly, there was little parity between the percentages of rent with this provision.


Looking at the food vendors, the revenue comes from their food and soft sales, and the key is having a blend of vendors that successfully cover different cuisine types and occasions without stepping on each other’s toes. But from our investigations it is fair to say the food hallsthat do best from the operator’s commercial point of view are those with a considerable drinking crowd – as food hall operators will often generate the majority of their returns from operating the bar. This is the case with three of the most successful operators in London. As the space becomes more competitive, operators are also diversifying the use of the spaces, inviting leisure and lifestyle retail operators into their spaces. Even co-working is making an appearance.


Looking ahead

One multi-site operator spoke to us about feeing excited by taking their first food hall location live earlier this year, but the subsequent reality was trading was lower than projected – and for a business with a head office, it really didn’t cover the costs and ended up as a management distraction.


With the growth in the number of such schemes you are seeing a natural evolution of the format, but also seeing more people interested in it as a potential option. Many developers have seen the success of London Union, Market Halls, Time Out Market and Boxpark and want a slice of the action. I can’t tell you the amount of enquiries we’ve had in relation to getting involved in this type of scheme as both consultants and venture partners. The reality, however, is there are lots of nuances in developing this type of outlet, not least the need to constantly curate the offer and give people a very compelling reason to visit – through entertainment or a changing food offer. This makes the barrier for entry for new projects higher than you might imagine. 


There are clear opportunities for the format to continue growing, particularly outside of London. Some brilliant examples are Altrincham Market and Mackie Mayor in Manchester, the recently launched Duke Street Market in Liverpool by Graffiti Spirits Group and Market Halls' The Hall at Intu Lakeside.


London is a different story, however. Look back two years and there was still a degree of novelty to launching a food hall in the capital. Now you hear about a new scheme opening almost weekly. This means you have to apply more strategic thinking to the suitability of the format for the space, in the market positioning and in the subsequent selection of operators. We believe success increasingly requires a deep understanding of customers’ needs – leading to a clear vision, diversity in offer and distinction from competitors. Examples of developments with far more specialism include the Arcade Food Theatre, which has worked with more upmarket concepts, and Ichiba, Europe’s biggest Japanese food hall and retailer, at Westfield London – the latter also showing the potential from a market with a narrow and common theme.


It’s important to point out it’s not been all plain sailing for these developments either. It is well documented one large market operator in this space has seen a considerable churn of food vendors at one site and has fallen short of filling its latest scheme that launched with a fanfare late last year. 


There is still a lot to watch out for in this space. In the next couple of years we will see Time Out Market launch in London after successfully trading in Lisbon for five years; Market Halls' launch in the former BHS in Oxford Street; Kerb Market taking its first permanent site at Seven Dials; The Market at 22 Bishopsgate being developed by Rhubarb; Mercato Metropolitano will be scaling to Mayfair; and Eataly launching in the city after huge success across the US and Italy. This week, we’ve also seen Boxpark announce its intention to launch ten further sites over the next five years, with two new formats – BoxOffice, a co-working space, and BoxHall, a food hall concept – presumably because of the limited opportunities with the original format due to space and investment.


There is still clear consumer demand for this type of offer and probably an even greater opportunity spied by landlords who are sitting with space previously destined for a declining retail sector and struggling mid-market restaurant operators. The challenge will be keeping it fair for all involved, and avoid that the full risk will only be borne by enthusiastic but unprepared entrepreneurs. 


You just need to look at the staffing levels in some of the units to see it cannot stack up in the long term, so with the projects we are working on with landlords and operators we are very much pushing the need for education, coaching and mentoring of the vendors to ensure it is a win-win for everyone and sustainable as a business model.


What started as a brilliant innovation in 2011 is now rapidly becoming a standard offer in many markets. The ubiquity has raised the bar, but the food hall model still has the potential for being a win-win-win proposition for consumers, vendors and operators. We look forward to seeing and being involved in the evolution of this emerging sector.

© 2019 by THINK HOSPITALITY LIMITED

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