The “virtual” food hall conspiracy…
There have been many recent articles about food businesses transitioning to online / delivery only models. Many of these articles have defined these virtual businesses as a “food hall”. Let’s be clear…an entirely online/digital/virtual business CANNOT be a FOOD HALL!!!
A Food Hall is about the physical experience of bringing people together in a social environment to eat and drink. It’s a create-your-own environment that is practically veto-less regardless of dietary restrictions, the age or the number of guests. The best Food Halls balance an appropriate amount of energy with a sense of discovery that can act like a destination, but ideally is convenient and accessible.
Food Halls, Food Incubators, Ghost Kitchens and operating multiple “concepts” out of one restaurant kitchen are NOT the same business model…and that is ok. All of these models have a place in the hospitality ecosystem, and some are definitely better suited to handle the current environment. All have pluses and minuses — and location plays a big role.
Let’s clarify a few things…
Food Incubator: A collection of businesses, largely start-ups, looking to rent commercial kitchen space, typically with the maximum flexibility for both economics and timing, available often with shared equipment and facilities. Many businesses focus on consumer products rather than prepared food direct to consumer. Food Incubators do not provide a consumer-facing direct physical presence. From a business perspective, the Incubator are often found in less expensive (read warehouse / industrial) spaces due to the operating requirements (loading, trash, ceiling heights, etc.), the lack of need for foot traffic, and the need to keep overall operating costs low.
Ghost or Cloud Kitchen: A collection of businesses looking to rent commercial kitchen space exclusively for the product of prepared food for delivery to consumer and without a physical consumer-facing presence. Typically, each business has their own purpose-based kitchen station. Similar to Food Halls, the barrier for entry is far lower for Cloud Kitchens compared with traditional restaurants. Ghost Kitchens theoretically incur lower costs by eliminating the need for any front-of-house operations, floor space for seating or high rents for storefronts in prime locations with high foot traffic. In return, Ghost Kitchens often produce lower sales than those with physical consumer presence, due in part to the inefficiency of the digital ordering and delivery models.
Operating multiple “concepts” out of one restaurant kitchen: Restaurants that have seen much of their business go online with the rise of delivery apps are taking advantage of their existing kitchens by adding delivery-only brands to their in-house offering. This approach allows them to squeeze more out of their labor and space. They are also able to offer orders for pick-up from their physical location. The delivery-only menu items could be similar to what the restaurant currently offers, or it could be completely different. An Italian restaurant, for example, might offer a delivery-only pizza brand out of the same kitchen, or it could diversify and offer takeaway gyros for delivery or pick-up. There are potential downsides to this model. First, the kitchen is not purpose-built for delivery, so the delivery orders may be bumped down the list of priorities when the restaurant is busy. It may also impact the experience for diners, having delivery drivers from multiple providers coming in and out and waiting for orders in the restaurant. And things can get messy trying to juggle multiple orders with two sides of the business getting in the way of each other.
Food Hall: As one of the largest developer/operators of Food Halls in the United States, we often struggle to perfectly define this term. While it does help to explain what we do, it is also limiting (we often have non-food uses in our Food Halls) and unbalanced (is a 30,000-square-foot space that includes a full-service restaurant, a butcher shop, a liquor store, a knife sharpener and a falafel stand the same as a 6,000-square-foot space that includes a pizza stall, a pasta stall, a wine bar, and a gelato stall, all owned and operated by the same team?) Similar to a Ghost Kitchen, a Food Hall has lower start-up, operating and labor costs than a traditional brick-and-mortar restaurant. Food Halls provide food and beverage entrepreneurs with an opportunity to test new concepts in a shared customer traffic environment that would be difficult for one business to achieve on its own. Food Halls largely focus on small business, but established operators have also experienced a lot of success. Food Halls can participate in the current delivery model so many are focused on, but what separates a Food Hall from a Ghost Kitchen is the experience. With a Food Hall, everyone can select from a variety of food offerings and still have a communal meal. Or you can sample cuisines from several different vendors to create your own custom meal that would be difficult, if not impossible, for a single restaurant to offer. The social and experiential aspects of Food Hall dining are especially attractive to the millennials and other generations who find the concept attractive for their lifestyles.
So, what’s next? All of these concepts will continue to evolve — the current climate has forced this — rethinking space, strategy for sanitation and safety, upgrading technology, etc. The lines in some cases will blur, while others will become more defined for each segment. While there has obviously been a movement toward online/delivery model businesses in the last six months, humans are naturally social creatures. There is a desire in us to interact once again with our family, friends and others. Food Halls create value for both their underlying physical locations and their surrounding neighborhoods in a way that Food Incubators and Ghost Kitchens will never be able to achieve. Food Halls will once again be the centers of activity for their communities.