5 Underwriting Tips for Food Halls
New food hall developments have been heating up in the UK for well over a year. In our industry, the US market often trails Europe by 18–30 months, which makes me optimistic about the next wave of US development. We’re seeing the first signs of life as several projects that were shelved for years are finally being revived. However, as these projects come back online, so do the common mistakes of the past.
Here are the most common pitfalls operators should avoid:
Absence of a sound parking solution. Food halls are traffic-hungry and employee-heavy. If you are targeting revenue over $10M, you need access to roughly 500 spaces—or you must be within a block or two of a high-frequency public transportation hub (e.g., Chicago, NY, London, Paris).
Underestimating operating expenses. Most food hall developments emerge from the retail world, not the restaurant world. Consequently, true operating costs are often wildly misunderstood. Mechanically speaking, US food halls are similar to food courts; however, operationally, they are designed and staffed like restaurants. You can always tell when a developer underestimated OpEx because the site looks ten years old by its second birthday.
Assuming the bar business is "easy money." It became trendy for developers to use bar programs to subsidize the financing costs of the hall. Many over-invested in draft beer due to its perceived ease of service, forgetting that beer consumption has been on a 10-year decline. Furthermore, bars are a fickle business; customers don't value product variation as much as they do in food. Most developers find that while bars are profitable, they struggle to attract their own regulars without elite staffing—and that isn't a passive effort.
Under-planning the experience. Eating out is expensive, so the experience must feel special. It needs to look, feel, and smell great. The days of gym lighting and picnic tables are over. The hospitality value proposition must stand up to the competition. A developer recently told me, “I realized that when the customer walks through those doors, it’s not a mall—it’s a restaurant.” Bingo.
Underestimating tenant coordination. We all remember the food halls that opened three years late. That usually happens because developers try to pass MEP (Mechanical, Electrical, and Plumbing) responsibilities onto food vendors without a coordinated system for mechanicals or permitting. We call these “spaghetti halls.” No one knows where the plumbing goes or how it works. They become nearly inoperable after two vendor turns, and every maintenance request becomes an "Easter egg hunt."
Strategies for Success
Standardize for the "Turn": The average food hall tenancy is about four years. Over a 15-year run, you will experience four turns. Standardize electrical panels, guest-facing areas, hood systems, and hub drains across all stalls. Label everything—and remap the electrical panels after every tenant change.
The "Significant Other" Test: Site your project in an area with both day and evening traffic. Ensure the parking options pass the "spouse test": if your partner wouldn’t want to walk two blocks to a paid garage after dark, neither will your customers.
Audit Your OpEx: Get an experienced restaurant professional to review your operating expenses.
Outsource the Bar: Don’t take on the bar program unless you have a dedicated expert on staff. Otherwise, lease the space to a pro for a premium.
Master the Permitting: Have a permitting strategy that isn’t based on hope. It doesn't need to be as centralized as groups like Politan, but it shouldn't rely on a chef to do anything more than “submit the menu.”
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Politan Group specializes in operating food halls, bars, and bars within food halls. We also provide remote accounting, HR, and administration for food halls. If you are thinking of building a food hall or need help with an aspect of a food hall you already own, reach out to us. Politan is the most-awarded food hall operator in the industry.