Food court in a shopping mall – YES or No? (ENG)

Intro

After writing 8 articles in the last 2 months, I got a lot of inmail to ask from outside of the country. I realize my audience is not only Vietnamese. It’s not going to be easy. But I will step out of my comfort zone and translate my article in English for those, who are interested. However, it will be a different version of the article with the same idea. For some reason, I can see that the Vietnamese tone will not fit with the western mind. We like to chat, you like to get to the point.

So here I am.

The first article I ever published – Food court in a shopping mall
I still need to say. I am not a native speaker. So, pardon me if there are few mistakes.

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To open a food court in shopping – specifically in Vietnam, there will be 5 things that you need to know:
– Market demand and size of the shopping mall
– Size of food court
– Tenant
– Lease conditions
– Operation

1. Market demand and size of the shopping mall

We cannot deny the fact that customers no longer want to go to the shopping mall to shop. Indeed, the retail developer now has to change for the new era – Entertainment and F&B. To adopt for customer’s needs, tenant mix of shopping mall changes as well. Normally, a shopping mall will need at least 20% to 40% for F&B.

With a big shopping mall or a small one, a food court can help in diversity. If your shopping mall is small, your customers will have a chance to choose so many types of food. On the other way, the main customer of the food court is an average spender. It means that you can classify your shopper. It works perfectly for a big shopping mall.

Last but not least, the food court location is very important. Few think a food court attracts a lot of traffic. It will be no matter for them about location. It is wrong from my observation and experience with 13 food courts in a supermarket chain. It should be in a crowded area with an available view to see and access. It should be near anchor tenants like a supermarket or cinema…

2. Size of food court

The size of a food court is commonly from 250 sq. to 1,000 sq. A perfect size should be under 500 sq. and less than 5 tenants. 250 sq. is too small and it will be not enough space for customer to seat. 1,000 sq. is too big, it will need a big investment and a lot of work in operation.

3. Tenant

Vietnamese especially like BBQ and Hot Pot. Yes, we are. It would be 2 first choice in looking for a tenant.

How is the other 3?

It will depend on the local’s expectations. It can be Japanese, Korean, Vietnamese or Pizza.

Choosing the right tenant is the most important thing if you don’t want to wait for your time in dealing and operating. There are 2 types of food court tenants. They are brand and local.

Few well-known food court supply chain companies that you can name such as Food Paradise (know previously as Phi Khoa), Red Pot or Minh Ngan… You may not know about the company but I believe you know about their brands. They are the owner of Com Ngon, Lau Cong Chua, Yellow Pot, Peperesto. They are experienced and professional companies in the food court segment.

Besides, you also can work with the locals. In some conditions, the food court supply chain cannot join the local market. The only hope for you to find a tenant to work with restaurant owners in your area. However, you have to be very careful to work with them. The reason for that is their experience to work in the shopping mall. In there, we have rules.
Inexperience tenants are harder to convert and generally have little understanding of market circumstances with rents, operation in mall and lease conditions.

4. Lease conditions

a. M&E

Tenant can choose to rent a whole bare-self area and design that area by themselves. They will also need to run it and only pay for fixed rental. It sounds like a lot of work and big investment upfront. Most of them don’t like that idea.

So they go for the other. The developer does it all. Tenant only moves in, places their stuff and shares the revenue.

To start, you have to know pretty well about F&B (especially the food court’s M&E conditions). Each counter, they will need an electricity system, water system, information system, gas, and exhaust.

Electricity system: Depending on the tenant’s machine system, each of them will have a different need for electricity range. Yet the average electricity of one counter will not more than 100A for food and less than 50A for drink and dessert.

Water system: it requires for both water supply and drainage. The drainage system needs specific F&B tubes and grease separators. If the tube is too small, the water flow will go back up to the kitchen. Generally, the tenant will need to set up a grease separator by themselves. Not mention the smell in water drainage need to clean and solve usually by both tenant and landlord.

Information system: telecom is required to get connection for EPOS

Gas system: The gas system in the shopping mall is required to have a gas center outside of the mall. Nonetheless, it will be expensive and take a lot of space to create. Normally, the tenant will use gas bottles only if the landlord cannot provide a gas system.

If there is a gas system, the landlord will need to check the pressure that is high or low. That matter will affect the tenant’s cooking machine because some of them cannot work for low pressure. Applying low pressure for shopping centers will make it safer but it is costly for the tenant to buy suitable machines. In that case, the landlord can advise their tenant to buy supported lighter to use.

Exhaust system (including air conditioning): Air-con system to use in shopping mall typically is FCU or AHU. Withal, some developer chooses to use VRV if the mall is limited in space. The common issue for the exhaust system is the hood conduct system. Ninety-nine percentage of the shopping mall in Vietnam got this smelling issue. It will need the landlord to have a really careful look at setting up for the beginning.

b. Common Area

Common Area is the place that customers can sit down to enjoy food court service. This area needs to have enough space, comfortable and friendly. The design of this area normally looks simple and consistent. All counter will have the same design with different logos and menu imagine.

A typical common space is after deducting 125 sq. of counter (25 sq. for each counter), 20 sq. for the cashier and cleaning area. To note, chairs and tables should arrange logically, not too much but not too little.

c. General Lease Term

– Area: 20 – 25 sq.
– Handover requirement: basic furniture with M&E system
– Lease term: 1 year (maximum 2 years)
– Deposit: 2 – 3 months (depends on the landlord)
– Payment term: fixed or turnover share
+ Fixed rental: market price and developer’s investment decision for fixed rental
+ Turnover share (as known as GTO): Regularly, food court tenants will share 15% to 22% of their sales to pay rental price. To apply this method, the landlord should have their cashier. Sales of each day will be noted and reported back to each tenant. After 1 week or 1 month, the landlord will pay back the money without negotiated percentage rental.
Noted: both of this rental method doesn’t include service cost and VAT. The service cost of the food court is more often than not high, which is around $5-$7/sq./month

(I, personally, is more a GTO person. It helps to gain more money for the developer and also easier to keep track of the tenant’s performance. For that, you can know better if tenant needs your help to improve their sales)

5. Operation

The operator of the food court has 2 important roles as the cashier (GTO method) and pan (cleaning lady). To be clear, a tenant’s employee has a responsibility to clean up their customer’s left. Notwithstanding, staff number is limited for one counter and their job in the kitchen is also super busy. They don’t have habitually clean up right after the customer leaves. To avoid that, the developer can have their cleaning lady to clean everything up and put that to a central station. From that, pan person can separate each counter’s stuff and give them back.

One tip for pan to help to recognize their tenant’s product is color painting. Each counter can paint a specific color on their product to help pan to notify easier.

Hi, I am Hoang Anh - a leasing geek! I am basically naturally curious. If you love working in the real estate industry like me, you are in the right place. Let reveal all the secret and my secret will help you to understand more about retail and commercial leasing in Vietnam.

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