Foodhalls: The resilient business model the restaurant industry needs.
As input costs continue to escalate and consumer habits change, margins in the traditional restaurant industry are being dramatically squeezed. The search for more resilient operating models is driving the resurgence of the foodhall, which offers both economies of scale and consumer appeal.
Even before the Covid-19 pandemic, the food service industry was grappling with rapid increases in input costs – including electricity, labour and rent – as well as stiff competition and a shift in consumer habits as on-demand delivery took hold and younger audiences sought new experiences.
Because the industry is characterized by low margins, scores of restaurants were unable to weather the pandemic. And just as the sector begins to emerge from lockdowns, Russia’s war on Ukraine is adding further pressure on supply chains, fuel and electricity costs and overall food prices.
While plenty of traditional restaurants will undoubtedly continue to thrive, alternative models are coming to the fore. We believe the foodhall, a centuries-old format, is poised for a remarkable comeback, albeit with a modern twist. The business model is already proving its worth across the world’s food capitals.
Travel and experiences magazine Time Out has had much success since it provided a shared space for independent chefs in Lisbon in 2014. In fact, the marketplace soon became Portugal’s single largest tourist attraction.
One of the many other global foodhall operators, Eately, has enjoyed similar growth. Unlike Time Out, it runs the entire operation, giving it the advantage of being able to curate its offerings and leverage supply chain efficiencies.
The US is proving to be fertile ground for the foodhall business. Real estate services group Cushman & Wakefield counted 223 operational foodhalls in the country going into the pandemic, with another 165 in development.
Beyond Covid-19, much of the independent restaurant community will need a rebuilding mechanism – particularly one that taps into the desire to socialize again, Cushman & Wakefield says. “One with lower inherent risks for all, a better operational model that allows for higher profit margins, and low barrier-to-entry. Foodhalls will be where the industry rebuilds first.”
CHEFS has opted for an owner operated business model which has higher barriers to entry as the initial capital outlay is far greater than the smaller franchised restaurants operators and multi-vendor traditional foodhalls. However, this allows scale for cost and operational efficiency.
In the third quarter of this year, CHEFS Foodhall will open the country’s first owner-operated foodhall, in Cape Town’s Cavendish Square. With 2,000 square meters of floor space, it will compete for the title of the largest owner-operated foodhall in the world.
With seating for 400 people, the marketplace-style eatery will offer a wide range of cuisines, along with a bar area and range of beverage options.
By centralizing resources – including storage and refrigeration space, the food preparation area, fittings, equipment, and supply chains – the start-up and operating costs per kitchen in the foodhall will be significantly lower than for a standalone restaurant.
We will further enhance efficiencies by sourcing products from local suppliers. This reduces the need for costly cold chain storage and logistics solutions and shields the marketplace from ongoing global supply chain disruptions.
Award-winning restaurateur George Jardine, who has taken on the role of Culinary Director of the group and Executive Chef of the Cavendish operation, is leveraging his long standing supplier relationships to maximise local produce.
Naturally, the modern foodhall requires a strong technology backbone. Visitors at the foodhall will be able to place at the point of sale or via a dedicated app, which will reduce queueing times.
All in all, the scale of the operation will allow CHEFS to provide quality and unique food – at affordable prices.
This, we believe, is the model of the future. After opening the first foodhall in Cavendish, CHEFS will work with landlord partners to expand the business, and we expect that the concept will catch on across the country as it proves its resilience.
By Campbell Stevenson, Managing Director CHEFS Foodhall