Facts To Digest: Food Courts.
Ever wondered why food courts are so popular in shopping centres? How has food delivery affected food courts? This article covers it all.
This article explores trends in the Indian economy, however, it is also representative of global trends.
Imagine you go to a shopping mall. There is a high chance some, if not most of us end up at the food court. You see approximately 40–50 different restaurants vying for your attention in the same space.
Let’s take the example of Mr. A. He is a man in his thirties and follows a strict regimen to ensure his fitness. However, Sunday is his “cheat day”.
Mr. A has pre-decided that he wants to eat at a famous fast-food restaurant, let’s say, Mcdonald's. There are plenty of other people waiting to place their orders. They may have different reasons for eating at Mcdonald's. Some may be loyal to the brand, while vegetarians may want to have more variety in the choices available to them, a unique selling point (USP) at Mcdonald's India.
Now, if you take a good look around the food court, at any given point of time, you will find a sizeable percentage of hungry mall-goers at outlets like McDonald's, KFC, Dominos, and the like. All are famous and well-established international brands.
Indian brands are not far behind though. It’s quite common to see large crowds at the likes of Haldiram’s and Bikanervala as well.
Besides these famous restaurants, there are plenty of other outlets. It’s quite obvious that many of these outlets do not get a lot of footfall. Or do they?
I always wondered why lesser-known restaurants flock to food courts? It does make sense for well-established brands to open an outlet in a mall to cater to the mall-goers. But, for smaller and less-established brands isn’t it better to set up shop in a separate place with fewer competitors nearby. Seemingly not.
There are many advantages of being a part of the food court bandwagon:
- More customers:
Traditionally, malls were viewed as a place for shopping. Not any more. Malls have become a fun place to hang out and take a break from the routine.
Also, India is a young country with around 65% of its population in the 18–35 years category. These young Indians have witnessed a huge jump in their disposable incomes.
2. Lower Costs:
- Lesser staff: A full-fledged restaurant would obviously require more staff, more waiters, and chefs to cater to incoming customers. However, food court outlets normally rely on the self-service model.
- Shared maintenance expense: Another perk of being a part of a food court is the shared maintenance expense.
- Infrastructure: Setting up a stand-alone unit is an expensive affair and food courts help immensely. Food courts offer a “Plug n Play” model of sorts, where restaurants have to pay a rental to use a space established for the very purpose of setting up a restaurant.
- Rentals: Food courts provide an affordable alternative to high rents, especially in prime localities.
- Marketing: A lot of the marketing for food courts is undertaken by the mall itself because they contribute to a significant chunk of revenues. This helps save the individual outlet’s costs.
“In November, 2018, the NRAI (National Restaurants Association of India) estimated that close to 30–35% of the business in shopping centres is generated through food courts.”
3. More Exposure and Visibility:
Remember the Mcdonald's example I mentioned above. Let’s imagine Mr. A has “cheated” on his diet already once this week and he feels a bit guilty about “cheating” again. He looks around a little bit and sees a new restaurant serving healthy food, called H-Snax (fictional name). This gets him to think — what if he skipped the burger and went in for a healthier option.
The thing is that if H-Snax was not located in a highly frequented location as a stand-alone unit, it would have had difficulty in attracting customers, at least in the beginning.
That’s certainly not the case here.
Lots of people move around malls, with or without an intention to eat, and while they roam around they see brands that they would have probably not paid much attention to otherwise.
This advantage obviously accrues to other outlets which are not eateries as well.
While food courts do have their benefits, they do have some limitations as well:
- Lack of customization:
One of the biggest downsides of food courts is the lack of options available to restaurants to create a unique experience for the customer.
For instance, Barbeque Nation is well-known for its unique live-on-the-table grill, something that cannot be replicated in a food court. Little wonder, the chances of finding a Barbeque Nation outlet at a food court are slim.
2. Stiff Competition:
While food courts offer more visibility and cost-cutting opportunities, every outlet has to contend with much more competition. This is something that must be taken into account by smaller brands.
Social distancing and the road to recovery
Malls were gung-ho about food courts being pivotal to their success with increasing foot-falls until the COVID-19 pandemic hit the industry hard.
Overnight, going to restaurants and malls became a big no-no in fear of catching the virus.
Almost 2 years after the Pandemic began, malls are finally beginning to attract the crowds they used to. In December 2021, rating agency ICRA has stated that retail malls are expected to witness recovery up to 75% of pre-Covid levels.
Rise of food delivery services and cloud kitchens
Due to lockdowns restrictions, food delivery apps like Zomato and Swiggy came into the spotlight, and have helped several restaurants develop an online presence besides increasing their customer base.
Several food courts have also tied up with food delivery apps to make up for the lack of over-the-counter sales under these new circumstances.
Another trend that the food industry has witnessed is the rise of cloud kitchens. The rise of home delivery has resulted in the proliferation of numerous outlets which provide the infrastructure to prepare food, that is the kitchen and whatnot, but do not cater to customers in the traditional dine-in arrangement.
Cloud kitchens reduce overheads and provide a great option for growing small brands with minimal investment.
Food courts to the rescue of dine-in?
As per the PR newswire, Food delivery is expected to grow at a CAGR of 28.13% by 2026.
That’s gargantuan by any standards. Obviously, this growth will come at the expense of one thing — dine-in.
Whether we like it or not, food delivery has become the new normal and the conventional dine-in restaurants may see a decline and may never recover to their original capacities again.
United we stand. Divided we fall.
This may make operating as a stand-alone unit even more expensive for restaurants.
In such a situation, food courts may come to the rescue with the cost advantages that they have to offer, these collections of restaurants may help revive the dine-in trend.
What are your thoughts? Do comment below and share this article if you liked it.
Also, do check out my article on The Economic Impact of the Ukraine Crisis.
Disclaimer: Various brand names have been used for illustrative purposes only. The author does not endorse or intend to endorse any particular brand or item.
Sources:
- Food Courts: The recipe of success for malls — Indiaretailing.com
- https://economictimes.indiatimes.com/industry/services/property-/-cstruction/retail-malls-likely-see-recovery-of-up-to-75-of-pre-covid-rentals-in-fy22/articleshow/88185788.cms
- https://www.businesstoday.in/latest/economy-politics/story/covid-19-impact-shopping-mall-owners-revenue-fell-nearly-50-in-fy21-295415-2021-05-10
- https://economictimes.indiatimes.com/news/india/malls-take-rs-30000-crore-hit-on-covid-curbs/articleshow/83103850.cms?from=mdr
