Landlords Hunger for Food Hall Leases
Unlike mall food courts, food halls don’t just accommodate traffic; they drive it—and not just in malls but also at mixed-use, office, multifamily, and other non-retail properties. Like the mall food court, the food hall is a mix of retail eateries sharing space within a larger facility. The difference is that food halls offer not just fast food and shared seating, but a curated, high-end “foodie” experience supplied by local farmers, artisanal vendors, gourmet chefs, restaurateurs, cooking supplies sellers, etc. And they present distinct leasing challenges as well. Typical food court and restaurant leases won’t work with food hall tenants.
The first thing the owner must consider is how to structure its food hall leasing operation. There are two basic approaches:
Direct leasing. Under this model, you manage the food hall and lease the units to the vendors. The advantage is that you retain maximum control over vendor selection and day-to-day management. The downside is that you need the experience, resources, and business savvy to perform these functions effectively.
Indirect leasing. The alternative approach is to hire a food hall management company to operate the food hall and curate the vendor mix (similar to how hotels hire a single company to coordinate the operation of multiple in-house restaurants within a facility). Under this model, your likely role is to approve—rather than draft and negotiate—the vendor leases.
Instead of leasing, you can license space to food hall vendors. The difference: A license gives the licensee a temporary, non-exclusive and revocable privilege to go on your premises for a certain purpose without conveying any title or interest in the property. By contrast, a lease conveys exclusive possession of the property for a specific period of time in return for rent payments. Leases provide for more stability, whereas licenses offer flexibility since they’re relatively easy and cheap to revoke.
For the key leasing challenges you’ll face if you’re thinking of venturing into food halls, as well as model lease language you can ask your attorney to adapt for your leases, see “The 12 Dos & Don'ts of Food Hall Leasing,” available to subscribers here.