August 27, 2018
Where to place your food business: Alfresco, casual dining or food courts?
If you are looking at joining a food franchise, doing the retail location planning for a franchise system or just opening your own restaurant, you need to think of what is growing, and what is slowing.
The standard food court site seems to be a bit on the nose – as Luke Bayliss of Suma Salad is telling the major shopping centre owners – with his actions.
What is HOT and what is NOT?
Over the last 10 years there has been a steady increase in the growth of casual dining in alfresco areas, both in major shopping centres and some unique other areas across Australia. The major shopping centre operators (Scentre, Westfield, Federal Vicinity Centres and others) are building areas to house 200 – 300 seat restaurants together, and normally anchoring them with a mega screen complex. In my view this is the HOT at this time.
Food courts may be reaching their limits!
Food courts have become larger and larger, and whilst the rents have continued to rise, the number of food outlets in most shopping centres is also continuing to rise – with minimum increase in the total pedestrian count.
Luke Bayliss of Sumo Salad took the drastic step in June 2017 of aligning his problem leases (all in food courts run by the major shopping centres – mainly owned by Scentre and operated by Westfield) into 2 separate companies. He then placed them into Voluntary Administration as a way to try and force the Shopping Centre managements to realise they were squeezing so hard the businesses were going to go broke.
Luke’s tactic is seen as fairly drastic, but it may give him a better negotiating position on these leases, but I assume he has decided his future in most shopping centres will be very limited, as memories will be very long.
“The formula is to attract the client in, come for a meal, low numbers over lunch, but a major destination over dinner.”
Time will tell how this tactic will work out for his future franchise network planning, as we assume solicitors are being briefed from both sides to sort out this situation. The other problem with food courts is they really are a lunch time service.
They rely on people in the shopping centre spending about $10 for lunch, and have normally eaten and moved on in about 15 minutes. They are really not a very pleasant place to hang out, very bright, quite noisy and sitting on hard seats in a communal area.
Coffee and cake shops throughout the Centre
There has been a big expansion in the more casual “coffee and cake” shop in the middle (walkways) of shopping centres. Companies like Gloria Jeans, Jamaica Blue and many others look to have a good space with their own seating, and service the casual coffee and cake market. These sites are normally much more comfortable than in the food court for chatting, meeting others for business or pleasure or just to hangout.
Freestanding QSR’s
We have seen the likes of KFC, McDonalds and many others populate the pads of shopping centres as it gives them access to the shopping centre patrons combined with good access to sell a high % of their products through the drive thru. These sites combine all options such as drive thru, walk in and take away and some form of casual dining.
I believe these will remain viable in most cases as there is many different customer segments and many options for how that customer wants to be served – be that pick up at the drive thru, eat in or take away.
The new breed in Alfresco - casual dining
The Alfresco – casual dining areas have been growing rapidly over the last 10 years. I recently visited Westfield Knox Shopping Centre and see there are more new casual dining operators about to open in their expanding Ozone section. The core of most of these alfresco – casual dining centres is a very big cinema complex in most cases. The restaurants can service the theatre goers, and the many other people who are attracted to the great casual food dining on offer.
The formula is to attract the client in, come for a meal (low numbers over lunch, but a major destination over dinner), and have them sit down for a meal with alcohol licenced to be sold in most cases.
Many of our well-known brands are heading in this direction, at the expense of moving out of some food courts, or just not becoming so involved in those upgrades. Some operators like Nandos and Rashays (new Sydney casual dining brand) now see this as their prime business model for expansion.
Summary
If you are looking at joining a food franchise, think very carefully who you wish to partner with, but also think what type of food business you wish to run, and maybe a larger casual dining – alfresco location may be the best for you.
