The Troubling Economics of Food Halls | Hacker News Reader

The Troubling Economics of Food Halls

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48 pointspshaw44 comments

This whole article feels like they're trying to brew trouble that isn't really there. They compare cost per sqft of rental space in a food hall, which they admin includes many extra things related to running the surrounding food hall (including build out, sanitary maintenance, etc) to renting empty business space and claims the food hall is expensive. They admit that many vendors found the food hall to be productive for their businesses, yet focus on the ones that failed without citing any comparison to success / failure rates of similar opportunities like food trucks or traditional restaurants. There's also vague criticisms about a misalignment between how the hall is marketed to visitors (creative, artisan) vs the pressures put on the vendors (simple to produce foods, low time-to-table), but this is nothing unique to food halls. Every restaurant wants high-throughput with the appearance of top quality food. Overall, strong meh from me.

The fact he has a sweetheart deal from the city and is allowed to own the only bar in the hall and keep all its profits has the real risk of him making all the money at the expense of all the other stalls.

This is what stood out to me. Margins on food are not spectacular, and this place's $4.5k/mo minimum on rent is very high. Alcohol's margins are high enough to where that's where a good chunk of the actual money is made - the landlord is making an absolute killing here given his fairly low rents to the city, and very much at the expense of the profitability of the tenants.

He's also paying 5k per month to lease the building and collecting almost 10x that much in rent from the others. A better solution might be to form some kind of collective/group to lease the facility at no profit. Like a condo association of sorts.

It's obvious these people are working for someone else.

But the issue is that putting together a collective to lease the facility at no profit plus take over everything else he's doing (finding insurance, handling janitorial and maintenance work, marketing, etc.) is a lot of work, and it's work that aspiring chefs don't necessarily want to focus their time on. That's why they come - he's providing a lot of value. Whether you think the amount of value is worth what they're paying is up to you, but the fact that he's still able to find tenants says that a lot of people think the tradeoff of not having to worry about all those ancillary things is worth the money.

The group could hire people for some of those things. The other guy certainly does.

Most dentists have had to figure out how to run a business. At some point these chefs have to decide weather they are owning a business or just cooking. This situation allowed them to confuse the two.

My main takeaway was that booming food courts lead at least some naive would-be restauranteurs to think that opening a stall is straightforward and many don't do nearly enough up-front planning and thinking.

I do suspect the whole upscale food court trend is probably overheated right now but most of them do seem to still get a lot of traffic.

> This whole article feels like they're trying to brew trouble that isn't really there.

And generalize from a few vendors at one food hall to all vendors at all food halls.

The primary issue is the sweetheart deal New Orleans gave to Donaldson. The rest is just information asymmetry that this article will serve to correct.

“Perhaps this is due to our placeless society where the town green was... and now gig workers drop packages”

Counterpoint: food courts are terrible and the food in these places is typically good, varied, and wonderful. Of course they would win over chain food courts. It’s nice to have variety. I don’t understand why the author has to insert this random, anecdotal hypothesis looking toward yesteryear.

These things are ancient. Literally been around in markets forever. This is not a new concept.

That said - abusive lease terms are no good. Definitely would read the lease before signing!

The full quote is:

"Perhaps the rise of the food hall is a reaction to our increasingly placeless society, where the town green has been replaced by the shopping mall, which has been replaced by gig workers dropping boxes on doorsteps."

This is in reference to the modern explosion of these food halls across the country (not that this is a new idea). Just on the front range in Colorado we have had 6-8 of these open within the last 3 years (of now 13 total).

This is, at least in part, a reaction to the hostile public areas of American society today. These food halls are a nice counter to these public places - welcoming, varied offerings of food and drink, and no pressure to leave as soon as your meal is done.

The massively disappointing thing about modern food halls is that they aren’t like classic ones in Seattle, Toronto, or other places where you can actually get groceries. There should be, at minimum, local bread, meat, produce, and dairy at any of these places. Instead it’s all overpriced food porn.

I imagine the rents at a lot of these places make it difficult to profitably sell unprepared food--especially things like vegetables as opposed to twee craft honey and the like.

If it's ingredients that they use anyways then instead of using some back closet for storage they can simply put them out on display.

While tidy conceptually I don't think the economics and logistics work for that - retail space is more expensive than storage. Even if the ownership could be worked out to stock the same thing competively it would make more sense to get it from shared storage than use the more expensive retail space.

Said assumption also isn't trivial in terms of "what people want to buy vs what is sold".

There are some specific exceptions. For example, it's not that unusual for "artisan" sandwich places to also sell their bread. But it doesn't really make sense to imagine a pizza place that also had un-prepped mushrooms, green peppers, etc. out on display for separate sale. It's just not their business.

A finished "artisan" bread is high value-added product with great margins. Can you also imagine if they selled flour and tried to price it at a similar multiplier as the finished bread

Places like that do exist but I agree they should be more common. DC food halls often double as market places, but other cities do seem to lack that side of the hall.

Interesting read even if a lot of it boils down to the restaurant business being tough and that's true even if food halls simplify some things (while bringing their own set of costs and constraints).

The piece also highlights how some stalls probably haven't given enough thought to how their menu works in the context of a food hall. Certainly some menus have more all-day appeal than others which is a problem for the latter, especially if they're required to keep a full range of hours.

Food halls are just food markets without the market, for the "upwardly mobile".

Baltimore Lexington Market was an indoor food market established in 1782, and still exists today. It's enormous. There are dozens of vendors selling everything from cosmetics and electronics to fresh fish & meat, and lots of prepared foods. One of the city's most famous crab cake eateries, Faidley's, has been operating here since 1886.

Another famous one is Philadelphia's Reading Terminal Market. Established in 1893 (young whipper snapper!), it's the same idea as Lexington Market, but a bit more upscale. Tons of vendors selling an array of products, and an easy (if not crowded) meeting place.

There are very few original food markets left in the US, but the few that do exist are community gathering places in addition to being a good meal at a decent price, and a place to do some shopping. They're not inscrutable or poorly understood. But they're also not regular restaurant businesses. Stalls come and go every year, and the really good ones (usually family owned and operated) thrive with a repeat customer base as well as tourist flare.

We visited Philly and Baltimore for Army-Navy Football games. When in Philly, the Reading Terminal market was our favorite and primary food source.

It was interesting that while there certainly were a lot of tourists there, you still enjoyed meals elbow to elbow with locals.

I can't remember if we went to the Lexington Market in Baltimore, (we stayed near the inner harbor area) kind of bummed we didn't check it out when we had the chance.

I have no idea what the economics of the European ones are, but there sure are a lot of very old "food halls" (usually combined with markets) in European countries. Presumably they have the economics figured out, since they've been there for a long time.

I've often wondered if a low-end food hall might be a good business idea in the U.S.

In many parts of Asia, there's the concept of the "hawker center" [1] where food vendors each occupy a single stall and sell particular types of food (specific dishes) at low prices. Many of these businesses are intergenerational, so the food is refined over decades. The quality of the food is usually very high despite the dishes being inexpensive (vendors rely on volume). There's even a hawker stall in Singapore that's holds a Michelin star.

The late travel host Anthony Bourdain was so enamored with the idea of hawker centers (from his travels to HK and Southeast Asia) that he tried to start one in NYC but the conditions just didn't align for him. [2]

It is happening organically elsewhere however. In Chicago, there's a Chinese restaurant startup incubator in Chinatown where upstart restaurants rent a small space in the basement of a building where they try to build up their business hawking regional Chinese cuisine. Some succeed and eventually move to larger spaces. This is food entrepreneurship at the grassroots level.

However in order for hawker centers to really succeed certain factors need to be present: willingness of vendors to slog for years at a low margin high volume business, low cost of doing business (cheap labor), consumer culture of regularly eating out, relatively mild winters, etc. Not all U.S. cities fulfill these conditions.

Few people know this but many hawkers of popular dishes in Asia tend to end up being financially well-off after paying their dues (early mornings, late nights, kitchen heat, repetitive work, scrimping and saving for years). Your regular soup noodle or chicken rice guy may be humble-looking in terms of dress, but many have Audis and Benzes parked in the back. They're a bit like plumbers in that sense.

[1] https://en.wikipedia.org/wiki/Hawker_centre [2] https://www.thedailymeal.com/anthony-bourdain-market-cancele...

Low-end food courts are extremely common in the US. There's probably one in just about any mall. The problem is that low-end food court in the US mostly translates into fast food chains which are mostly... not very good.

I expect you'd need a culture that was more open to low-cost non-branded ethnic cuisines. You have it to some degree here and there. Food trucks (though those are often a bit higher price point), international food stalls at outdoor events. But hawker centers (which are one of the things I love about Singapore) are probably tough to transport to a lot of other situations--though you do have good street food in a lot of places in Asia.

I've had Itamae (the Peruvian stall mentioned towards the end of the article) a whole lot and I have to say that is definitely one of the best food spots in all of Miami.

I've got two pretty nice food halls within a short walk, but I don't ever go there unless I'm in a group that just can't agree on where to eat. Unlike the place in the article, the vendors at these places seem to have their own hours, but that really hasn't felt like a bad thing since there are always other options when a place is closed. And I think they do have some things that make them attractive.

Pros:

- Groups can eat out together without having to deal with splitting bills on venmo

- Many vendors had established local food trucks before setting up shop, so if I'm craving my favorite curry truck, I don't have to track them down on Twitter and drive to them.

- Kid friendly (dog friendly too), so I can take my family members who have children and know they have plenty of options, even for kids who are picky eaters.

- it's fun to be able to mix little bits of cuisines for a meal (nachos appetizer from Mexican place and sushi entree)

Cons:

- The seating situation is the wild west. Food comes out at drastically different times, so usually one person has to hold a table, which can get awkward as there never seem to be enough tables

- prices tend to be high

- Very loud atmosphere every time I've been there, often filled with teenagers (probably because it's a place a group can gather and hang out without everyone spending money)

I think the problem with the management described in the article can be fixed. I also think there's a big potential for the vendors to run something like this as a co-op.

The oyster example has me wondering if they would have been better off subletting if say split the morning slot with a breakfast place and do a change over at some point. The main objection being enpty booths harm the common's benefit.

One issue is that sharing your facilities with a different business (which probably has significantly different physical plant requirements) has its own set of problems. It's actually pretty common in cities more generally that you have coffeeshops that are closed in the evenings in the midst of a bustling restaurant and bar scene.

As I recall, Starbucks actually looked into doing some sort of wine bar transformation in the evenings at some locations. But I've never seen such a thing so it presumably didn't work out for whatever reason. And that's a single business.

As I recall, Starbucks actually looked into doing some sort of wine bar transformation in the evenings at some locations.

They implemented in at least one store in a Seattle suburb. I'm not a wine drinker, so I just know they had a flyer for it a few years ago. I don't know if it is still on-going. But your point stands: I don't know that one can flip baristas to sommeliers with a switch at 5:00. So is there a shift change? Employees are trained on both? I dunno, I applaud the thinking, but don't know that it's practical. I should run up to the Woodinville SBUX sometime and see if they're still doing it.

I thought it was practical because they already have the real estate and coffee sales gotta drop off a lot in the evening.

Pivoting into wine is easier than dinner.

And a lot of Starbucks’ customers would like a wine bar and don’t have great alternatives in many areas.

Only issue I could see is that a lot of places don’t let you take alcohol out of the bar you served it at.

I'm not sure about any Starbucks that transform into a wine bar, but several of their Reserve locations do serve alcohol.

Ah. Yes, I assume that's what the wine bar idea they were talking about a bit a number of years back has morphed into.

https://www.foodandwine.com/news/starbucks-reserve-store-sea...

It makes sense although I suspect it's more difficult than is obvious to handle rather different uses at different times of the day. (It's also probably notable that they're doing this in locations that are already pretty differentiated from the standard grab a Cafe Latte in a paper cup on the way into work.)

Now that you bring up specifics, I would believe you are correct. My fuzzy memory kinda confirms that it's more "you can have a glass of wine...or not" rather than "no coffee, only booze".

I've literally never seen one of these - are they the new thing? Sounds like an upscale hipster version of a mall food court. No surprise that owners are looking to hold the vendors over a barrel - everybody sees dollar-signs at being able to capture upscale dollars with "rustic" setting.

I mean, we have an indoor farmer's market with eateries in it in my city, and of course it is a popular destination for hipsters. But I could see how trying to force that experience could just make a mess.

>Sounds like an upscale hipster version of a mall food court.

Sort of. Yeah. There are bigger ones that mix in markets, crafts, etc. But there's definitely an increasingly common subset that's entirely or mostly "fast casual" food options catering to an artisanal vibe.

I know a number of ones in NYC. One also opened up relatively recently in Boston near but distinct from the Quincy Market area.

Food halls are typically in large urban areas with a thriving tourist industry that can support them outside of typical lunch hours. I have seen them in Portland, San Francisco, etc.

I wish SF still had a decent food hall. Used to love "The Hall" on market, but that place was only temporary as they demolished the space to build condos.

It was in a terrible part of town (south end of Tenderloin), but I ventured there because of it. Now I actively avoid that area.

When I was in Denver last, they had 3 or 4 of them that all seemed to do pretty well. Basically these huge warehouse spaces sub-divided up. Some of them even had full fledged restaurants, art studios, breweries, coffee shops, etc.

The "landlord" usually puts a bar in the middle, which is obviously the highest margin part of any restaurant. They get the benefit of making money on drinks and events, plus they give patrons a great reason to come there to drink with so many food options.

If you could make money by renting a space and selling food everyone would do it. Kinda like if everyone could buy a shovel and dig for gold they would do it. If you could buy a FB or Google ad and make money everyone would be rich.

The US has 1 industry...selling dreams, everyone else is on the bottom of the pyramid feeling the crushing weight of the people at the top.

My brain kept leaping to this analogy...

Chef : Software Engineer

2017 : 2010

Donaldson : Apple

Alcohol : iMessage

Food Hall : App Store

30% : 30%

My biggest takeway, too, was the amount you paid for rent was based on the percentage of sales.

Also of interest was the 20 - 30% of spending was done on the bar, which the person running the food court got, too. So, basically the Food hall is taking in 60% of the revenues.

Not a bad business model. Naturally, they are incentivized to make the individual stalls work as a business, so I imagine there's some negotiation that can go around for the price they charge....

>Alcohol : iMessage

What? Alcohol is high margin. iMessage has zero revenue and is a loss leader. Also, you can offer/sell any chat apps you want on the App Store, unlike with alcohol in Donaldson's food hall.

Yeah, that's true. I could have chosen a better example there. I was trying to pick a tech that Apple tended to prevent competition in back then. Perhaps Safari/Webkit would have been a better example.

iMessage is more like... seats or heating in the food hall.

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