BONUS: 3 Key Questions to Assess Food Hall Fit

Are you a food entrepreneur who's considering moving your business into a food hall?

Here's Michelle's primer on which questions to ask - so you can get the answers you need. 

She covers:
- Square footage and layout
- Common areas
- Build-out and outfitting
- Types of lease structures

It's time to equip yourself with knowledge - and Michelle's here to help!

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Transcript

Amanda 0:00

Yeah , you had mentioned three questions that you ask food halls whenever they call and I was kicking myself for not asking you what those three questions were . So what are the three questions ?

Michelle 0:13

No worries , because I was probably on a tear about you know making some other points .

Michelle 0:17

So I'm sure there wasn't much room for you to interject . I'm working on it . So three things that are always helpful and certainly relevant depending on the type of business . But for us , the first one I always ask about is square footage , because depending on where the food hall is and what the setup is , that varies quite a bit , and so sometimes they're only talking about maybe like a 250 square foot amount of space , which is really truly a non-starter for us but might work for if you're selling cookies or you have particularly something you're making off-site and you're bringing in .

Michelle 1:00

So first question is about square footage , and usually that will also lead to learning more about how the space is structured . So in many cases there are also spaces that are shared or almost like sublet within those stalls . This really varies from food hall to food hall , but that has been my experience . So question number one square footage . Question number two equipment and build out . So most cases again , you have to provide your own equipment . Sometimes the build out is being done by the development company . Sometimes that is passed on to the business . So you always want to get clear about that . And also sometimes there is shared equipment , like there's a commissary within a food hall that makes maybe operating out of a 300 square foot space a lot easier if you're only bringing your stuff up from downstairs in the same building . Other times , just what's there is there , or there might be a line of equipment that is shared by every few businesses , and then another one maybe like 100 feet away for another few businesses . So the setup can really vary .

Michelle 2:09

So first , two questions are getting about like how much space do you have , how it's laid out and what you have access to . And then the third one I alluded to in the episode , which is just about the rent structure . Many of these places do percentage rent and , as we talked a lot about , that's just not something we're a fan of . A) because it's like sharing your books , but B) because you want something that you can really count on in terms of a fixed amount when you're budgeting and when you're doing income statements and certainly forecasting and projections for a specific site . Different things work for different businesses . But that's my top three - square footage , equipment and rental structure . Because a lot of times that won't come out until the very end, and may not even come out at all if you don't ask about it directly . So that's my three things .

Amanda 3:06

Thank you very much . Now you had said that it's becoming more and more prevalent where people want a cut and want to get in on the books , do you find that there are any spaces that don't require that ? Or is that really becoming more like the gold standard, not the gold standard , but the crap standard ?

Michelle 3:27

I do not know of any for-profit food halls , especially those run by development companies . I do not know of any that don't do percentage rent .

Amanda 3:39

Interesting .

Michelle 3:41

Yeah , and would you , is that . I don't even know if the nonprofit ones . I don't think the nonprofits ones, they did again, look at your books for programming purposes and just to, literally, be able to support you .

Joan 3:51

But to help you get out , you know , to help you , incubate you to the point of getting you out of their space . You know , for some reason this conversation, I know I'm jumping into, it reminds me of common area fees , which I just drop . It's going to be in the lease and when you're in a food hall there might be a shared wash area or another commissary kitchen . There's certainly bathrooms and other areas that support your staff and your customers . And while the services may be provided by your landlord in this, many cases , aka the development company , they are still paid for by you . You all kind of pool that money . That's a common area fee .

Amanda 4:38

Gotcha .

Michelle 4:39

And that ties to fee structure too , because many places that is also a la carte . So , for example , like you would have maybe a base rent , you would have percentage rent and then you would maybe have to like schedule separately by the hour to use some of these commis- , like either the commissary or the dish room, or things like that . It really varies . They're all different kinds of models , so I don't want to confuse it by speaking generally , but knowing the fee structure , knowing what you have to pay for , knowing what's included and also knowing if there is percentage rent , how it works . Because in some cases it's a flat percentage , 3% of your sales for the month on top of rent . Some places are taking just percentage sales as the rent . So just know that those are things to look out for and ask about .