Food courts in India


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Food courts in India

  1. 1. COVER STORYFood Courts:LongWay toGo!By Bhavya Misra FFood courts are a relatively new phenomenon in India ood courts, which started off in thewhich owes its existence largely to the growth of the mall 1980s in the West, have today become an inseparable part of malls, shoppingculture in the country and the rising purchasing power centers, airports, educational institutionsof the people. Despite their rising popularity, they need and cultural centers abroad. In India,to evolve further, expand into newer areas and overcome however, they are still at a nascent stage,many challenges if they are to become a permanent part though increasingly gaining in popularity. Indeed, many Indians go to a mall not only to shop butof the culinary landscape of India. also to round up their shopping experience with a bite from the food outlets located there, usually on the top floor. Some malls have casual dining restaurants and quick-service outlets clustered together, which become dining destinations in their own right for people looking to enjoy lunch or dinner in a sophisticated, air-conditioned and lively environment. Food courts typically exist indoors and involve a common dining area lined up with stalls of multiple F&B vendors. These cater to a wide swathe of customers: shoppers at a mall, visitors at a cultural center, employees of a large corporate park and even passengers passing through a metro station or airport. Says Amit Burman, co-founder of Lite Bite Foods which runs a number of QSRs, casual-dining restaurants and food court brands in India: “A food court is a place where consumers in large numbers can dine and enjoy different cuisines at a value-for- money price, all under one roof.” Sandeep Kanotra, 28 SEPTEMBER-OCTOBER 2011 FOODSERVICE INDIA EDITION
  2. 2. CHALLENGES OF RETAILING FROM MALLS • Availability at prime locations • Quality of development • Lack of organized mall management • Predominance of sale model • High occupancy costs • Delay in project delivery Key Takeaway: Apparels, footwear as well as food & beverages are some of the preferred categories for malls. source: Cushman & Wakefield ResearchGeneral Manager of QSR and franchise operationsat Old World Hospitality – which operates foodcourts under the Eatopia brand name – definesfood courts as a common dining space offering achoice of multiple food vendors which is generallyfast paced and self serviced. The dynamics of food courts are simple:high volumes, small ticket price, a choice ofcuisines, self-service and a fast-paced, animatedatmosphere. The food-court phenomenon in Indiais being driven primarily by a rapid rise in thenumber of malls all over the country. Malls and foodcourts have a symbiotic relationship: good foodcourts help mall managements increase footfallsand revenue, while food courts rely on a steadystream of customers generated by the shoppingopportunities at the malls. airports, there were no food courts. When there Kishore Bhatija, CEO of Inorbit Malls, says: “A were no modern highways, obviously there were nofood court is a very important element of a mall. F&B brands lining our inter-city roads. The conceptAny mall developer needs a proposition which of food courts is typically driven by infrastructure.”keeps consumers coming back to the property. And Food and footfalls are the two essential elementsfood is something that undoubtedly plays a very of food courts. These courts make sense at anyimportant role in achieving that target.” location where a large number of people congregate Travel Food Services is a sister concern of Blue and who may want to enjoy a meal. “Typically aFoods Company that operates food courts at food court would do well in shopping areas, massthe Delhi and Mumbai airports. Its CEO Rajeev transit points, schools and colleges, corporatePanjwani explains: “When there were no malls, hubs, venues for fairs and exhibitions, tourist sitesthere were no food courts. When there were no and cultural centers,” says Kanotra. FOODSERVICE INDIA EDITION SEPTEMBER-OCTOBER 2011 29
  3. 3. COVER STORY PREFERRED LOCATIONS “Food courts are typically built around quick service and fast turnaround of customer’s order. Parameters Malls Main Streets Local Markets From an operator’s point of view, foods which can Food & Grocery * ** *** be assembled and served within a maximum of two Apparel & *** ** * minutes are best suited for food courts,” Kanotra Footwear informs. “The food court consumer is not very Consumer ** *** * adventurous and sticks to either a branded product Durables or the national or regional cuisine. This trend is (CDIT)/Mobile fast changing in metros, but in the tier II cities, the Stores youth – which forms the majority of the food court Jewellery & ** *** * users – are attracted to the brands due to their Timewear aspiration values,” he adds. Food courts have become popular with Pharma Retail * ** *** customers because of the numerous choices they Food & *** * ** offer in terms of food. All members of a family are What is Beverages sure to find a food offering of their choice. This is the compelling proposition that a multi-brand foodgoing to Source: Cushman & Wakefield Research court offers to consumers.happen over a Note: *** most preferred optionperiod of timeis that onlythose foodcourts whichhave theright brandsand the rightcategory mixwould be ableto survive inIndia.– Rajeev Panjwani, CEO, Travle Food Services Location Equation The massive private and public infrastructure push in recent years in terms of airports, metro trains, highways and expressways along with the rapid creation of new malls and office complexes is creating modern new spaces with high footfalls where food courts become an attractive proposition. In the near future, malls and airports are the two sectors which are expected to contribute the most to the growth of food courts in India. According to a report by CAPA (the Centre for Asia Pacific Association), Indian airports are expected to handle 450 million passengers per annum by 2020, with $30 bn to be spent on their modernization over the next 15 years. The report notes: “For any business involved in travel retail, this is a market that cannot be ignored. An economy growing at 9 percent per annum, a multi- billion-dollar airport modernization program driven 30 SEPTEMBER-OCTOBER 2011 FOODSERVICE INDIA EDITION
  4. 4. 2010 AIRPORT TRAFFIC SUMMARY ACI Stats Total Aircraft % Change Total % Change Total Cargo % Change N° of Regions Movements Passengers Airports AFR 2 590 933 4.4 155 979 778 9.5 1 715 838 1.9 154 ASP 11 635 928 5.7 1 294 834 11.3 31 856 866 18.5 172 546 India’s EUR 19 263 177 (0.5) 1 466 758 533 4.3 17 920 309 15.5 454 airports are LAC 7 602 460 7.0 403 676 303 13.2 4 665 694 14.3 263 expected MEA 1 974 916 7.7 206 622 059 12.0 5 881 214 13.7 53 to handle NAM 31 387 228 (1.4) 1 509 836 2.5 28 709 087 13.2 222 450 million 075 passengers ACI 74 454 642 1.1 5 037 707 6.6 90 749 008 15.3 1318 per annum by 294 2020, with Footnote: In Asia-Pacific, India’s traffic grew nearly 15 per cent and China’s nearly 14 per cent, as the region once again $30 bn to be increased its global market share. spent on their Passengers: total passengers enplaned and deplaned, passengers in transit counted once. Cargo: loaded and unloaded freight and mail. modernization Aircraft Movements: landing and take-off of an aircraft. over the next Source: Airports Council International 15 private sector investment, combined with rapidtraffic growth and an increasingly sophisticatedIndian traveler, make this one of the most excitingopportunities in global retail.” A report by real-estate consultancy CB RichardEllis estimates that 6.1 million sq. ft of mall retailspace got added in India in the first six monthsof 2011, with the NCR around Delhi, Mumbai,Bangaluru, Pune and Chennai witnessing most ofthe retail expansion activity. Commercial property consultancy Cushman &Wakefield (C&W) says in a report: “Based on thegrowth of organized retail and entry of new playersby 2013-14, there will be a likely requirement of45 million sq. ft of quality real estate in the top fourcities of NCR, Mumbai, Kolkata and Chennai.”Food and beverages are set to emerge as one ofthe top takeaway categories for malls apart fromapparel and footwear, the company says. Apart from malls and airports, the rapiddevelopment of highways under India’s NationalHighway Development Program is also expected tocontribute to the growth of food courts.Commercial ViabilityFood courts occupy large spaces rangingfrom 15,000-30,000 sq. ft. With retail rentalsskyrocketing, how does their operational dynamicswork out? From a commercial viability perspective,three factors are a very important part of the food-court equation: rental costs, labor costs (hiring when placed with anchor brands, fetch incrementaland sustaining employees) and the throughput of business. This incremental business is veryvolume. Says Panjwani: “While volumes at airports important in generating enough revenue for theor malls may be promising, the rentals and labor food court and keeping all the brands out of thecosts eat into a lot of business generated by a food red.”court.” The home-grown food brands are the heart of A unique characteristic of Indian food courts is any food court in India because they help createthat the operators rely too much on the international appeal in the eyes of consumers. “The absenceF&B brands, café concepts and established QSR of domestic brands is a challenge that has notchains. This approach has its limitations. Adds been adequately addressed in India yet. This, IPanjwani: “There is a critical need for Indian food think, is because these are early days yet and F&Bcourts to host a good number of home-grown conceptualization in the industry is still nascent,”brands too. It is these domestic brands which, says Panjwani FOODSERVICE INDIA EDITION SEPTEMBER-OCTOBER 2011 31
  5. 5. COVER STORY A lot of evolution still has to happen, but one thing is clear – given the all-pervasive mall culture in urban India, the food courts are here to stay. Combine this with the upcoming modernization of 34 airports across the country and it would seem that F&B operators have merely scratched the surface of the Indian food court pie. However, it is not necessary for the food courts model to succeed despite these growth factors. Says Panjwani: “What is going to happen over a period of time is that only those food courts which have the right brands and the right category mix would be able to survive in India. And that will depend on how closely the food court operators An F&B work with the mall owners as well as authorities at the transit locations.” He argues that theoperator commercial viability of a food court, especially thatmay find it paying high rentals or revenue share, would dependeasier to run on how proactive were the mall developer and the food-court operator at the conceptualization stage.a food court Malls are not the only option for a food court inin alternative terms of location. Considering the high rentals,locations many operators are attracted to other alternatives such as educational institutes and corporate parks.because of Says Amit Burman, Chairman, Lite Bite Foods:low rentals, “It’s a matter of choice completely and it is about choosing your captive audience.”but the daily Ultimately, everything revolves around turnoverrevenue may and return on investment. An F&B operatornot be very may find it easier to run a food court in non-mall locations because of low rentals but the dailyhigh either. revenue may not be very high, leading to a longer gestation period before costs can be recovered. – Amit Burman, “If an operator invests `35-`50 lakhs to open an Co-Founder, outlet at a food court in an educational institution, Lite Bite Foods he might not have to pay rentals as these locations treat F&B as a service. But if the same operator opens an outlet in a mall with a similar investment and then goes on to do a business of `50,000- `70,000 a day, his ROI would come in much more quickly,” says Burman. For F&B operators, there is no certainty that the business volume of food courts at corporate parks and educational institutions will ever increase as much as desired. However, with a mall location, the operator can be certain there would be a predictable number of footfalls every day, with incremental footfalls being an added bonus. Paying Up Malls are currently the most lucrative and popular location for setting up food courts, but a lot of discontent exists among F&B operators about the way these are managed by the mall owners and the terms offered to operators. 32 SEPTEMBER-OCTOBER 2011 FOODSERVICE INDIA EDITION
  6. 6. Says Kanotra: “Good food in a mall is as essential together at the ground floor or any other floor?” heas good decor, air-conditioning and music. questions.Unfortunately, mall owners are often over-ambitious Not everyone agrees with this, however. Sayson the revenues generated by F&B operators. Bhatija of Inorbit Malls: “I would disagree onI think sharing a percentage of revenue is the clustering all food brands on the same floor in amost logical and fair option because the business mall. I believe we do need some amount of foodgenerated by a food kiosk is almost always directly option for shoppers at each floor of the shoppingproportional to the mall owner’s efficiency in center. A consumer who feels tired might likegenerating footfalls for the mall.” to pick up a snack or sip a cup of coffee on the When the mall phenomenon initially started out in ground floor, or any other floor. We do not want toIndia, there was a large inflow of traffic. But as the create fatigue among mall visitors by driving themnumber of malls proliferated, the traffic and footfalls to one fixed floor or area each time they are in anbecame more diffused and variable. This is directly urgency to feed themselves.” Theimpacting the quality stroke and profitability of food According to him, food courts contribute 5-6 phenomenoncourts in many malls. “The business isn’t the same percent of the total sales of a mall on an it used to be for malls with variable or less traffic. “Food drives volumes at a shopping center,” he adds. globally is thatMalls that are doing well are in the right space, “The percentage contribution to total sales by food footfalls of fivehave the right amount of traffic and are profitable courts appears small because the value of the ticket weekdays equaltoo. Malls which are not doing well have food courts is low. If we compare the sales contribution of food the traffic ofwhich are not doing well either,” says Panjwani. courts with high-ticket categories such as fashion or weekends. At He argues that the quality of the mall has a direct accessories where the minimum average ticket price Inorbit, we havebearing on the quality of the food court. “How a is `1,000, it would be an unfair comparison.”food court unit fares really depends upon how well The costs that the malls impose on F&B gradually beenthe shopping center has been conceptualized. operators vary from vendor to vendor. While many able to moveUnfortunately, there is no right answer to getting malls have moved to a minimum guarantee plus away from thisthe whole concept right,” Panjwani adds. “What revenue share model with most of the other outlets, phenomenonis crucial is the expertise of the property owner in with food courts the mall managements are still and areidentifying the target market and assessing the selective. Some F&B brands have a fixed rentalthrough-put of volume and other significant factors. agreement while others follow a system of revenue increasinglyThis would help decide the type of F&B outlets to share with a minimum guarantee. seeing almostset up in terms of cuisine and concepts.” “This is purely because not all F&B brands in equal traffic on All F&B brands must be located at one particular a food court have a sound background in terms weekdays.area of the mall, not necessarily to make the food of transparency of operations, standardizationcourt work but to turn the mall successful too – this of procedures, etc. While renowned brands can – Kishore Bhatija,is the view of Burman of Lite Bite Foods. “If the be trusted for their transparency and revenue CEO,multiplex and restaurants and food courts yield generation competencies, it might not be the same Inorbit Mallsmaximum sales for a mall, why not locate them all with local brands,” Bhatija says. FOODSERVICE INDIA EDITION SEPTEMBER-OCTOBER 2011 33
  7. 7. COVER STORY A food-courtconsumeris not veryadventurousand sticks toeither brandedproducts orthe nationalor regionalcuisine. Intier II cities,however, theyouth areattracted by Brand Monotony The absence of an adequate number of home- expertise lies in developing and franchising F&B brands. True, there exist a handful of Indian andbrands due to grown F&B brands in India makes it harder for food International food-court operators in India, suchtheir aspiration courts to distinguish themselves from each other as the Blue Foods company – which owns foodvalues. and carve out a unique identity for themselves courts such as the Spoon and Food Talk – SSP in the minds of the consumer. Most malls in the Travel Associates, Travel Food Services and Buddy country are concentrated in less than a dozen cities Hospitality, it is early yet to expect them to scale up– Sandeep Kanotra, and metros. The result: almost all of them host the to cater to a significant chunk of demand arising GM, QSR & same international brands and offer almost the from the rapidly proliferating shopping centers. Franchise same fare. The question that faces malls is whether to run Operations, Old Another issue facing food courts in the country the food court operations on its own or to outsource World Hospitality is the acute dearth of independent food court to specialists. Says Panjwani: “If a shopping center management companies, unlike in the West, whose has a very strong proposition as a mall, it may have the leverage to bring in 10 different brands on its own to the food court. However, if there’s an independent food court operator managing its food court, he may or may not be able to bring in all the different brands. So there is a pro and con to both the situations – to outsource food court operations or to run it on one’s own. There is no straight answer to this.” Kanotra on the other hand suggests that outsourcing food court operations to an independent foodservice management company is the best option for a mall. However, the mall owners have to make sure they are a partner in the management team. “Food business is best left to professionals who understand the concept, the market and the unique needs of the customers. Food vendors sell a highly perishable product. They require special support from the authorities who manage the mall premises. A developer generally will not be able to empathize with them,” he says. Bhatija has a different opinion. He believes food court management should be done by the 34 SEPTEMBER-OCTOBER 2011 FOODSERVICE INDIA EDITION
  8. 8. mall owners themselves and not necessarilybe outsourced. “At the end of the day, it is themall owner’s expertise and experience which isbeing applied in the shopping center. When westarted out, we also did not have much expertiseof running mall food business effectively. Werecognized this and went on to hire specialists intothe management with experience of managing foodcourts,” says Bhatija. He adds that his marketing and operations teamhas been playing a significant role in ensuring thatthe food court traffic on weekdays is at par withthat on weekends. The company also organizes SNAPSHOT: OLD WORLD HOSPITALITY FOOD COURTS Footfall on weekdays: 2000+ Footfall on weekends: 3000+ Average tickets price on weekdays: `120+ Average ticket price on weekends: `150+ Number of brands operated: 5 within Eatopia + Tikka Town (2 numbers) Number of covers: 110 at Eatopia Average size of the food court: 6,000 sq. ft inside / 9000 sq ft inclusive ofpromotions with retailers on weekdays. One such Some of the most efficient food courts in India outdoor spaceevent at its malls, called Tuesday Special, is today include names such as Inorbit and Forum Mallconducted in partnership with 20 retailers to offer (Bangaluru), Ambience Mall and the DLF Promenade Expansion plans:special discounts to shoppers on that day. (Delhi) as well as Express Avenue and Infiniti mall Intends opening some Says Bhatija: “Typically, the phenomenon globally (Mumbai). more outlets by the endis that footfalls of five weekdays at a mall are equal It cannot be denied that the Indian F&B business of 2012to the traffic of the weekends. However, we at has a lot of evolution ahead of it, despite the stridesInorbit have gradually been able to move away from made in the last ten years. It is important for thethis and are increasingly seeing almost equal traffic home-grown and international F&B brands to evolveon weekdays at our food courts.” in sync with the Indian market which is growing in Slowly, the importance of a well-managed terms of shopping centers, airports and highwaysfood court has begun to dawn on mall owners. that are being built all over the country, as well as theSays Kanotra: “The trends of the past five years rising purchasing power of customers.have shown that the mall owners are absolutely The food court sector in on the cusp of formidableconvinced that a well-managed food court with a growth. Only those food courts will survive whichbalanced offering is a footfall-driver in itself. New are able to distinguish themselves in the market,properties are now wooing top food brands for their customise their offerings and present a uniquefood court much more aggressively.” proposition to the Indian customer. •• FOODSERVICE INDIA EDITION SEPTEMBER-OCTOBER 2011 35