Shubhranshu Pani, Regional Director – Retail Services, JLL India
Food and beverages have evolved from being retail’s poor cousin to being the sector with the dominating edge. F&B and eating out as a concept in India has undergone a post liberalisation sea change – from once a month, the number of times young Indians and their families eat out has risen to as much as once or even twice a week. Indians are also more amenable to experimenting with various cuisines and have developed ‘global palates’. On the heels of these changes in mid-set and demand, F&B in malls is no longer restricted to fast food options but now also encompass fine foods and multi-cuisine options under a single roof.
- The Business Proposition Of Food Courts
Food is a major footfall driver, and food courts give single customers and entire families the option of partaking of a variegated choice of cuisine. As such, they are often a primary reason for people to visit malls in the first place. Since they are usually on the top floor, customers are required to pass all floors below to access them. This increases the opportunities for impulse shopping. Food courts also boost overall sales because they offer panoramic views of what is available at the lower levels, thereby raising aspirational levels. By virtue of being open format, a food court is able to meet entire families’ tastes simultaneously, with price points that are a draw for all categories of mall visitors.
Food court space is usually immediately absorbed in malls. Many visitors now see malls primarily as a repository of cost-effective multi-cuisine food and entertainment. In other words, food courts (along with multiplexes) represent a completely separate set of retail with its own dedicated clientele. The conversion rate in food courts is always extremely high, since they generate multiple sales simultaneously. This is not the case in conventional retail outlets.
Food courts are universal revenue generators. No matter how badly a mall is doing, food courts will pull crowds on their own steam. For this reason, there is no likelihood of rentals for food courts increasing. Along with anchors, these represent the factor that brings in assured footfalls, and no mall owner would risk making food court occupancy less tenable and attractive by increasing rentals.
- Achieving The Right F&B Equation In Malls
How food courts are positioned in malls depends on the format in question. Sometimes, entire floors are dedicated to food outlets because they are such big draws. In luxury malls, the accent on food is highly exclusive, subdued and status-oriented, so a food court is less viable than a carefully calibrated selection of fine dining restaurants.
Ideally, mall operators should aim at achieving a ratio of at least 15% or higher for food courts in context with the entire development. With the pressure on retail because of the onslaught of online shopping, food and entertainment are going to increase in their role as foot fall drivers in shopping centres.
Typical food courts in India are between 15000-25000 sq. ft., with a majority of them averaging at 15000 sq. ft. A proper food court needs to have at least 13-15 kiosks and food counters in order to be viable. Because of FSI constraints and the cost of real estate, food courts in India have been limited to this size, which is the bare minimum required by a food court in a decent sized mall with good footfalls.
Food courts are typically leased, either to a single food court operator or to various counter operators, with the mall managing the overall food court. The rentals in the food court segment are usually stabilised and based on what the operators can afford to pay. In some cases, food court space may be sold for a lump-sum, with the price based on the occupied square footage. Common area maintenance charges for food courts are higher than for other retailers, since the CAM costs encompass common seating and air-conditioning, which are added and apportioned on the food court counters.
Some malls charge a higher proportion of revenue towards food court rentals, and this invariably results in a reduction in margins and consequently reduction in quality of the operators. As a rule, this needs to be avoided. Mall developers should also make sure that the quality of food being turned out in their food courts is checked, monitored and maintained to highest standards of quality and hygiene to ensure that the food court performs and attracts well.
- Hitting The High Notes With Fine Dining
As a vital sub-category of food retail in malls, fine-dining restaurants offer a controlled operating environment atmosphere and provide parking, which is a very essential factor to any retailing establishment’s success. Also, because they are juxtaposed with other and often lower-grade eating establishments, they offer the opportunity of displaying a visible degree of class differentiation. Mall developers consider fine-dining restaurants very important to their overall tenant mix because they help the establishment to attain a degree of exclusiveness and give customers a more holistic experience.
Over the last couple of years, fine dining restaurants have been on the rise in India, and many operators are coming up with novel concepts. The upwardly mobile Indian customer has lapped it all up, and there is a significant increase in interest by mall operators to include fine dining options. There is a lot of space for more brands in the ecosystem, and this market is bound to grow astronomically over the next 3-5 years.
- Where Indian F&B Still Falls Short
India still lacks the depth of F&B operators and categories seen in other countries. The quality of operators – and their ability to expand, given the crunch in funding and manpower – continues to be a challenge. The period between 2012–‘14 saw a boost in the funding environment, but Indian F&B still has a long way to go but in terms of operation and management. Also, though the eating-out trend in India has grown, it has not yet matched the levels seen in South Asia, Europe and the US.
A fairly large ongoing issue in the Indian F&B industry arises from the multiplicity of licences that is needed to operate a restaurant or food court. Operation timings are another major hindrance – many cities restrict time of operation to 11.30 PM, and this seriously restricts the ability of F&B operators to cater to customers, resulting in lower rotations.
Encouragingly, some of the more proactive state governments are now looking at increasing the time to 1.30 PM. Apart from taking into account the evolving needs of Indian consumers, such policy-level initiatives will boost to the profitability of operators by as much as 25-30%, and this also will favourably impact their ability to pay their dues to the government exchequer.
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