28 SEPTEMBER-OCTOBER 2011 FOODSERVICE INDIA EDITION

COVER STORY

Long Way to Go!

Food Courts:

Food courts are a relatively new phenomenon in India which owes its existence largely to the growth of the mall culture in the country and the rising purchasing power of the people. Despite their rising popularity, they need to evolve further, expand into newer areas and overcome many challenges if they are to become a permanent part of the culinary landscape of India.

By Bhavya Misra

Food courts, which started off in the 1980s in the West, have today become an inseparable part of malls, shopping centers, airports, educational institutions and cultural centers abroad. In India, however, they are still at a nascent stage,

though increasingly gaining in popularity. Indeed, many Indians go to a mall not only to shop but 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,

FOODSERVICE INDIA EDITION SEPTEMBER-OCTOBER 2011 29

General Manager of QSR and franchise operations at Old World Hospitality – which operates food courts under the Eatopia brand name – defines food courts as a common dining space offering a choice of multiple food vendors which is generally fast paced and self serviced.

The dynamics of food courts are simple: high volumes, small ticket price, a choice of cuisines, self-service and a fast-paced, animated atmosphere. The food-court phenomenon in India is being driven primarily by a rapid rise in the number of malls all over the country. Malls and food courts have a symbiotic relationship: good food courts help mall managements increase footfalls and revenue, while food courts rely on a steady stream of customers generated by the shopping opportunities at the malls.

Kishore Bhatija, CEO of Inorbit Malls, says: “A food court is a very important element of a mall. Any mall developer needs a proposition which keeps consumers coming back to the property. And food is something that undoubtedly plays a very important role in achieving that target.”

Travel Food Services is a sister concern of Blue Foods Company that operates food courts at the Delhi and Mumbai airports. Its CEO Rajeev Panjwani explains: “When there were no malls, there were no food courts. When there were no

airports, there were no food courts. When there were no modern highways, obviously there were no F&B brands lining our inter-city roads. The concept of food courts is typically driven by infrastructure.”

Food and footfalls are the two essential elements of food courts. These courts make sense at any location where a large number of people congregate and who may want to enjoy a meal. “Typically a food court would do well in shopping areas, mass transit points, schools and colleges, corporate hubs, venues for fairs and exhibitions, tourist sites and cultural centers,” says Kanotra.

CHALLENGES OF RETAILING FROM MALLS

• Availabilityatprimelocations

• Qualityofdevelopment• Lackoforganizedmall

management• Predominanceofsale

model• Highoccupancycosts• Delayinprojectdelivery

Key Takeaway:Apparels,footwearaswellasfood&beveragesaresomeofthepreferredcategoriesformalls.

source: Cushman & Wakefield Research

30 SEPTEMBER-OCTOBER 2011 FOODSERVICE INDIA EDITION

COVER STORY

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.– Rajeev Panjwani,

CEO, Travle Food Services

“Food courts are typically built around quick service and fast turnaround of customer’s order. From an operator’s point of view, foods which can be assembled and served within a maximum of two minutes are best suited for food courts,” Kanotra informs.

“The food court consumer is not very adventurous and sticks to either a branded product or the national or regional cuisine. This trend is fast changing in metros, but in the tier II cities, the youth – which forms the majority of the food court users – are attracted to the brands due to their aspiration values,” he adds.

Food courts have become popular with customers because of the numerous choices they offer in terms of food. All members of a family are sure to find a food offering of their choice. This is the compelling proposition that a multi-brand food court offers to consumers.

Location EquationThe 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

PREFERRED LOCATIONS

Parameters Malls Main Streets Local Markets

Food&Grocery * ** ***

Apparel&Footwear

*** ** *

ConsumerDurables(CDIT)/MobileStores

** *** *

Jewellery&Timewear

** *** *

PharmaRetail * ** ***

Food&Beverages

*** * **

Source: Cushman & Wakefield Research

Note: *** most preferred option

FOODSERVICE INDIA EDITION SEPTEMBER-OCTOBER 2011 31

India’s 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.

by private sector investment, combined with rapid traffic growth and an increasingly sophisticated Indian traveler, make this one of the most exciting opportunities in global retail.”

A report by real-estate consultancy CB Richard Ellis estimates that 6.1 million sq. ft of mall retail space got added in India in the first six months of 2011, with the NCR around Delhi, Mumbai, Bangaluru, Pune and Chennai witnessing most of the retail expansion activity.

Commercial property consultancy Cushman & Wakefield (C&W) says in a report: “Based on the growth of organized retail and entry of new players by 2013-14, there will be a likely requirement of 45 million sq. ft of quality real estate in the top four cities of NCR, Mumbai, Kolkata and Chennai.” Food and beverages are set to emerge as one of the top takeaway categories for malls apart from apparel and footwear, the company says.

Apart from malls and airports, the rapid development of highways under India’s National Highway Development Program is also expected to contribute to the growth of food courts.

Commercial ViabilityFood courts occupy large spaces ranging from 15,000-30,000 sq. ft. With retail rentals skyrocketing, how does their operational dynamics work out? From a commercial viability perspective, three factors are a very important part of the food-court equation: rental costs, labor costs (hiring and sustaining employees) and the throughput of volume. Says Panjwani: “While volumes at airports or malls may be promising, the rentals and labor costs eat into a lot of business generated by a food court.”

A unique characteristic of Indian food courts is that the operators rely too much on the international F&B brands, café concepts and established QSR chains. This approach has its limitations. Adds Panjwani: “There is a critical need for Indian food courts to host a good number of home-grown brands too. It is these domestic brands which,

when placed with anchor brands, fetch incremental business. This incremental business is very important in generating enough revenue for the food court and keeping all the brands out of the red.”

The home-grown food brands are the heart of any food court in India because they help create appeal in the eyes of consumers. “The absence of domestic brands is a challenge that has not been adequately addressed in India yet. This, I think, is because these are early days yet and F&B conceptualization in the industry is still nascent,” says Panjwani

2010 AIRPORT TRAFFIC SUMMARY

ACI Stats Regions

Total Aircraft Movements

% Change Total Passengers

% Change Total Cargo % Change N° of Airports

AFR 2 590 933 4.4 155 979 778 9.5 1 715 838 1.9 154

ASP 11 635 928 5.7 1 294 834 546

11.3 31 856 866 18.5 172

EUR 19 263 177 (0.5) 1 466 758 533

4.3 17 920 309 15.5 454

LAC 7 602 460 7.0 403 676 303 13.2 4 665 694 14.3 263

MEA 1 974 916 7.7 206 622 059 12.0 5 881 214 13.7 53

NAM 31 387 228 (1.4) 1 509 836 075

2.5 28 709 087 13.2 222

ACI 74 454 642 1.1 5 037 707 294

6.6 90 749 008 15.3 1318

Footnote: In Asia-Pacific, India’s traffic grew nearly 15 per cent and China’s nearly 14 per cent, as the region once again increased its global market share.

Passengers: total passengers enplaned and deplaned, passengers in transit counted once.Cargo: loaded and unloaded freight and mail.

Aircraft Movements: landing and take-off of an aircraft.

Source: Airports Council International

32 SEPTEMBER-OCTOBER 2011 FOODSERVICE INDIA EDITION

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 work with the mall owners as well as authorities at the transit locations.” He argues that the commercial viability of a food court, especially that paying high rentals or revenue share, would depend on how proactive were the mall developer and the food-court operator at the conceptualization stage.

Malls are not the only option for a food court in terms of location. Considering the high rentals, many operators are attracted to other alternatives such as educational institutes and corporate parks. Says Amit Burman, Chairman, Lite Bite Foods: “It’s a matter of choice completely and it is about choosing your captive audience.”

Ultimately, everything revolves around turnover and return on investment. An F&B operator may find it easier to run a food court in non-mall locations because of low rentals but the daily revenue may not be very high, leading to a longer gestation period before costs can be recovered. “If an operator invests `35-`50 lakhs to open an outlet at a food court in an educational institution, 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 UpMalls 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.

An F&B operator may find it easier to run a food court in alternative locations because of low rentals, but the daily revenue may not be very high either.

– Amit Burman, Co-Founder,

Lite Bite Foods

FOODSERVICE INDIA EDITION SEPTEMBER-OCTOBER 2011 33

Says Kanotra: “Good food in a mall is as essential as good decor, air-conditioning and music. Unfortunately, mall owners are often over-ambitious on the revenues generated by F&B operators. I think sharing a percentage of revenue is the most logical and fair option because the business generated by a food kiosk is almost always directly proportional to the mall owner’s efficiency in generating footfalls for the mall.”

When the mall phenomenon initially started out in India, there was a large inflow of traffic. But as the number of malls proliferated, the traffic and footfalls became more diffused and variable. This is directly impacting the quality stroke and profitability of food courts in many malls. “The business isn’t the same as it used to be for malls with variable or less traffic. Malls that are doing well are in the right space, have the right amount of traffic and are profitable too. Malls which are not doing well have food courts which are not doing well either,” says Panjwani.

He argues that the quality of the mall has a direct bearing on the quality of the food court. “How a food court unit fares really depends upon how well the shopping center has been conceptualized. Unfortunately, there is no right answer to getting the whole concept right,” Panjwani adds. “What is crucial is the expertise of the property owner in identifying the target market and assessing the through-put of volume and other significant factors. This would help decide the type of F&B outlets to set up in terms of cuisine and concepts.”

All F&B brands must be located at one particular area of the mall, not necessarily to make the food court work but to turn the mall successful too – this is the view of Burman of Lite Bite Foods. “If the multiplex and restaurants and food courts yield maximum sales for a mall, why not locate them all

The phenomenon globally is that footfalls of five weekdays equal the traffic of weekends. At Inorbit, we have gradually been able to move away from this phenomenon and are increasingly seeing almost equal traffic on weekdays.

– Kishore Bhatija, CEO,

Inorbit Malls

together at the ground floor or any other floor?” he questions.

Not everyone agrees with this, however. Says Bhatija of Inorbit Malls: “I would disagree on clustering all food brands on the same floor in a mall. I believe we do need some amount of food option for shoppers at each floor of the shopping center. A consumer who feels tired might like to pick up a snack or sip a cup of coffee on the ground floor, or any other floor. We do not want to create fatigue among mall visitors by driving them to one fixed floor or area each time they are in an urgency to feed themselves.”

According to him, food courts contribute 5-6 percent of the total sales of a mall on an average. “Food drives volumes at a shopping center,” he adds. “The percentage contribution to total sales by food courts appears small because the value of the ticket is low. If we compare the sales contribution of food courts with high-ticket categories such as fashion or accessories where the minimum average ticket price is `1,000, it would be an unfair comparison.”

The costs that the malls impose on F&B operators vary from vendor to vendor. While many malls have moved to a minimum guarantee plus revenue share model with most of the other outlets, with food courts the mall managements are still selective. Some F&B brands have a fixed rental agreement while others follow a system of revenue share with a minimum guarantee.

“This is purely because not all F&B brands in a food court have a sound background in terms of transparency of operations, standardization of procedures, etc. While renowned brands can be trusted for their transparency and revenue generation competencies, it might not be the same with local brands,” Bhatija says.

34 SEPTEMBER-OCTOBER 2011 FOODSERVICE INDIA EDITION

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Brand MonotonyThe absence of an adequate number of home-grown F&B brands in India makes it harder for food courts to distinguish themselves from each other and carve out a unique identity for themselves in the minds of the consumer. Most malls in the country are concentrated in less than a dozen cities and metros. The result: almost all of them host the same international brands and offer almost the same fare.

Another issue facing food courts in the country is the acute dearth of independent food court management companies, unlike in the West, whose

expertise lies in developing and franchising F&B brands. True, there exist a handful of Indian and International food-court operators in India, such as the Blue Foods company – which owns food courts such as the Spoon and Food Talk – SSP Travel Associates, Travel Food Services and Buddy Hospitality, it is early yet to expect them to scale up to cater to a significant chunk of demand arising from the rapidly proliferating shopping centers.

The question that faces malls is whether to run the food court operations on its own or to outsource to specialists. Says Panjwani: “If a shopping center 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

A food-court consumer is not very adventurous and sticks to either branded products or the national or regional cuisine. In tier II cities, however, the youth are attracted by brands due to their aspiration values.

– Sandeep Kanotra, GM, QSR &

Franchise Operations, Old

World Hospitality

FOODSERVICE INDIA EDITION SEPTEMBER-OCTOBER 2011 35

SNAPSHOT: OLD WORLD HOSPITALITY FOOD COURTS

Footfallonweekdays:2000+

Footfallonweekends:3000+

Averageticketspriceonweekdays: `120+

Averageticketpriceonweekends: `150+

Numberofbrandsoperated: 5 within Eatopia + Tikka Town (2 numbers)

Numberofcovers: 110 at Eatopia

Averagesizeofthefoodcourt: 6,000 sq. ft inside / 9000 sq ft inclusive of outdoor space

Expansionplans: Intends opening some more outlets by the end of 2012

mall owners themselves and not necessarily be outsourced. “At the end of the day, it is the mall owner’s expertise and experience which is being applied in the shopping center. When we started out, we also did not have much expertise of running mall food business effectively. We recognized this and went on to hire specialists into the management with experience of managing food courts,” says Bhatija.

He adds that his marketing and operations team has been playing a significant role in ensuring that the food court traffic on weekdays is at par with that on weekends. The company also organizes

promotions with retailers on weekdays. One such event at its malls, called Tuesday Special, is conducted in partnership with 20 retailers to offer special discounts to shoppers on that day.

Says Bhatija: “Typically, the phenomenon globally is that footfalls of five weekdays at a mall are equal to the traffic of the weekends. However, we at Inorbit have gradually been able to move away from this and are increasingly seeing almost equal traffic on weekdays at our food courts.”

Slowly, the importance of a well-managed food court has begun to dawn on mall owners. Says Kanotra: “The trends of the past five years have shown that the mall owners are absolutely convinced that a well-managed food court with a balanced offering is a footfall-driver in itself. New properties are now wooing top food brands for their food court much more aggressively.”

Some of the most efficient food courts in India today include names such as Inorbit and Forum Mall (Bangaluru), Ambience Mall and the DLF Promenade (Delhi) as well as Express Avenue and Infiniti mall (Mumbai).

It cannot be denied that the Indian F&B business has a lot of evolution ahead of it, despite the strides made in the last ten years. It is important for the home-grown and international F&B brands to evolve in sync with the Indian market which is growing in terms of shopping centers, airports and highways that are being built all over the country, as well as the rising purchasing power of customers.

The food court sector in on the cusp of formidable growth. Only those food courts will survive which are able to distinguish themselves in the market, customise their offerings and present a unique proposition to the Indian customer. ••