Proofing Stage
Proofing Stage examines the origins, progress, struggles, and setbacks of entrepreneurs through the lens of its founders, who, among other things, have run a bagel business for the past 8 years.
Join us, as we share wins and cautionary tales from that space between “atta girl” and “I told you so!” Co-hosted by Joan Kanner and Michelle Bond, with Season 1 contributions by Amanda Schwarz.
Proofing Stage
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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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:No worries, because I was probably on a tear about you know making some other points.
Michelle: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: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: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: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: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:Interesting.
Michelle: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: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:Gotcha.
Michelle: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.
