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consumer tastes. Budget-oriented diners are
increasingly finding better quality and
cheaper pricing at a wide variety of quality
fast casual concepts that have opened in the
past few years. Meanwhile, consumers willing
to spend more are finding more authentic
food options as well, and the casual dining
world is feeling that competition.
Looking forward, increasing levels of market
saturation will mean that the number of
restaurant failures and bankruptcies will
increase in 2017 as the industry’s winners
and losers become more apparent. Those
failures won’t be enough to offset growth
from new, hot concepts but it will mean that
many landlords may find themselves playing
musical chairs with restaurant tenants. So
why are we are so bullish on the success of
food halls if the restaurant landscape is
becoming more competitive?
The greatest weaknesses in the U.S. restau-
rant industry are in the casual dining and
franchise fast food categories. The fast
casual category is showing the greatest
strength. Food hall tenancy is overwhelm-
ingly made up of fast casual players whether
chains, startups or one-off locations. More
importantly, it is those concepts that offer
what millennial consumers want to eat and
that is authentic, quality food that will
succeed.
But success is not only a question of offer-
ing what consumers want. Rent is a major
part of the equation. While rents for food
hall space on a square foot basis may seem
quite expensive, the amount of space used
is generally very small. One restaurateur
active in a San Francisco food hall shared
this comment with us:
“Here I am paying about $120 per-square-
foot annually for my 300 square feet of
space. That’s about $36,000 per year. If I
would have opened my own standalone
restaurant I would have been looking at
U.S. Food Expenditures
Through June 2016:
At Home
Away From Home
At Home
Away From Home
At Home
$388.1B
Away From Home
$393.2B
In March 2016, Americans spent more money
dining out than they did purchasing groceries…
The trend has repeated itself every month since.
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
At Home
Away From Home
$ Billions
U.S. Depart ent of Commerce/Department of Agriculture
9
Food Halls of America 2016