Money-Growing: Whetting Shoppers’ Appetite


Shopping centers and property consultants have laid down a set of guidelines for food court operators. “A food court is becoming a compulsory feature for every modern shopping mall, as it helps attract buyers and keep them inside longer. Sometimes, visitors come to a shopping center with a sole purpose to have a snack, but on their way to a restaurant they visit shops,” says Konstantin Andrianov, head of retail real estate at Becar. Commercial Property.

However, while shopping centers are mushrooming across the city, food court operators are still too few. Some analysts fear that resources of existing operators will not suffice to meet requirements of the rapidly growing mall industry.

Rules of Placement

“Practically all retail & entertainment centers comprise food courts. Today, Moscow has over 100 shopping centers. 20 new projects are either under construction or on the drawing board,” says Svetlana Batalova, head of consulting at Praedium.

Andrei Zhamkin, senior commercial real estate analyst at Blackwood, says that food courts are located mostly on top floors of multistoried shopping centers. Underground malls operate food courts on their lowest floors. Escalators leading to the restaurants are often situated in different wings of the building. “This is done to encourage shoppers looking for a snack to walk by as many shops as possible,” the expert explains.

The number of catering outlets and the size of the food court depend on the size of the retail center itself. “One food court operator may occupy 15 to 120sqm in a shopping center, with at least four units operating on the premises,” says Olga Yasko, head of retail real estate market analysis department at Colliers International. The total area of the food court may range from 60 to 500sqm. However, she adds, the total share of space occupied by public catering outlets, usually does not exceed 9.5% of rentable space within a mall, or 12%, including the dining area.

“The food court is divided into two zones that are of approximately equal size: a kitchen and self-service counter, and a dining area with tables. A kitchen zone usually measures not more than 50 to 80sqm, including a counter, which is at least 6 meters long. The optimal size of the dining area is 20 to 40 tables per operator,” says Svetlana Bykova.

Andrei Zhamkin says that each operator occupies 20 to 80sqm depending on the restaurant concept. Olga Yasko adds that the total size of the dining area usually exceeds the total area occupied by operators 1.5 to 2-fold. “Attendance rates vary depending on the size, concept and location of the retail center. As an example one could cite Atrium at Kurskaya [metro station], which operates one of the largest food courts in town. The dining area has 168 tables, with attendance rate estimated at 6,000 per day,” says Andrei Zhamkin.

The number of food court operators depends on the size and attendance of the mall. “For a small retail center measuring 5,000 to 10,000sqm 4 to 5 operators would suffice but the larger is the area, for example, if the area is 15,000 to 20,000sqm, the higher is the number of operators, which may grow up to 10 or over, depending on the characteristics of the project,” says Vladimir Zhuravlyov, head of commercial real estate and investment at NAI Global. One of the largest food courts comprising 13 stores is situated in Mega Tyoply Stan.

Ways to Attract Shoppers

Food court operators are interested in mall locations. “From the standpoint of operators, the appeal of a food court is commensurate with the rate of attendance of the mall. But revenues is not the only goal they pursue by opening their units there; they also seek to publicize their brands. Securing a space in a food court at a prestigious retail center, such as Mega, for example, the operator boosts his brand awareness and reputation and may count on more favorable terms in other, less ambitious projects. In this case, retail chains have an advantage. In the future, their guests at the mall are more likely to visit freestanding stores of the same chain,” says Antonina Lairova, senior analyst at Prime City Properties.

Moreover, says Svetlana Batalova, in terms of average bill and attendance a unit operating in the mall is quite comparable to a freestanding unit elsewhere in the city. But mall units enjoy a number of advantages. “Red tape is reduced to a minimum for the tenant does not have to communicate with all sorts of agencies. The main task is to come to terms with the mall owner,” Batalova explains. In these circumstances, all the operator has to do is to choose a location. “From the standpoint of operators, advantages are the format of mall, sufficient space, proximity to more popular operators, access to communication lines, established or planned organization of customer flows, availability of supply zone, etc.,” Andrei Zhamkin says.

Additionally, they may be offered a separate entrance to the food court zone, lifts or escalators decreasing the distance from the mall entrance to the food court, says Vladimir Zhuravlyov. At the same time, food court operators may face just as many disadvantages. Those are poor location and access, a small parking area, lack of professionalism on the part of mall managers, poor advertising and soaring rental charges, says Svetlana Batalova.

The Money Issue

Food court operators and mall owners have long established a specific financial relationship. “Restaurant operators are anchor tenants. Therefore, they may demand special terms and conditions of tenancy. Famous brands insist on rates, which are considerably lower than the rents other tenants are charged,” says Konstantin Andrianov. “The rent issue is important, of course. The food court is the operator that shapes customer flows and that is why none of the restaurant operators pay high rent,” Svetlana Batalova agrees. Rental rates in food courts of Moscow shopping centers stand at $400 to $1,100 per 1sqm per year, VAT excluded, she says.

Konstantin Andrianov says, the size of rental charges depends on whether the tenant rents the dining area or not. Where he is ready to pay only for the kitchen area the operator may be charged $800 to $1,500 per 1sqm, VAT excl. If the catering company is ready to pay for the dining zone the charges are only $400 to $800 per 1sqm. However, traditionally food court operators are not charged for the dining area. That is why the size of that zone should be thoroughly thought-out, says Olga Yasko. “Insufficient number of tables forces guests to queue up for a seat whereas too many tables is bad for the mall owner,” she says.

Profits made by restaurant chains in the malls are comparable to their earnings from freestanding stores. Vladimir Zhuravlyov says that depending on characteristics and attendance of the mall earnings range from $2,000 to $15,000 per 1sqm per month, or $24,000 to $180,000 per square meter per year.

Privileged Few

Although food courts bring good profits and the number of restaurant zones grows across the city Moscow still has hardly more than a dozen of such operators. “Today, there are over 20 brands of caf?s and fast-food restaurants but in certain cases several brands are run by a single operator. Such state of affairs offers a choice from the number of operators claiming space in professional shopping centers,” says Olga Yasko. Most food courts are operated by same pools of restaurant chains, Antonina Lairova adds,

“As a rule, all modern retail centers have a practically identical set of food court operators. The largest brands – Kroshka-Kartoshka, Rostiks, McDonald’s, Coffee House, Sbarro and others are to be found in most food courts. A unique operator could make a food court popular with certain groups of consumers. But so far that competitive advantage is ignored by developers,” says Lairova.

The market leaders are McDonald’s and Rostiks, according to the experts. “The Rostiks chain has the widest presence, with units in approximately 30 shopping centers, such as Okhotny Ryad, GUM, Atrium, and others. Another chain of fast-food restaurants, McDonald’s, runs its units in approximately 15 retail centers,” Vladimir Zhuravlyov says.

“The very first operator that comes to mind when a food court is mentioned is, of course, McDonald’s. That chain of fast-food catering outlets is an anchor for all other brands,” Andrei Zhamkin insists. The world’s leading fast-food chain has even developed a special set of requirements, which does not always suit mall developers. For example, McDonald’s is ready to pay only 50% of the average rental rate and demands a long-term tenancy. However, XL, Auchan, Mega, Zvyozdochka, Kaluzhsky, Druzhba and many others have accepted those terms.

Rosinter Restaurants, Moscow’s largest restaurant operator, runs its stores in shopping malls under three famous brands – Rostiks, Il Patio and Planeta Sushi (32, 9 and 6 units respectively), Andrei Zhamkin says. “Rosinter is also an anchor-tenant. What is special about that company is that it offers three different establishments operating under popular and recognizable brands,” the expert says. Rosinter’s units operate on the premises of Grand City, Ramstore, Moskovsky, Waymart, Tvoi Dom, Liga, Zolotoi Vavilon and other malls. Rosinter also owns brands Moka Lokka, Santa Fe, T.G.I. Friday, American Bar & Grill, 1-2-3 Kafe, Benikhana, Caf? des Artistes, but those restaurants have not established their presence in food courts yet.

Yet another leader is the increasingly popular Kroshka-Kartoshka (baked potatoes with salad fillings). “Kroshka-Kartoshka’s well-known baked potato is a worthy rival to Rostiks’ chicken legs, with nearly 30 units operating in restaurant zones of the city’s major shopping centers Crocus City, XL, Stolitsa, Gorod, L-153, Europark, etc.,” says Andrei Zhamkin.

Teremok chain, serving pancakes with fillings, has become popular because of its original concept and low prices. Teremok, “known for its pancakes, porridges and soups” runs 14 units in Okhotny Ryad, L-153, Europark, RIO, Atrium, Gorod, etc., Zhamkin says.

The franchise restaurant chain Sbarro, its positions somewhat weakened in recent years, remains the leading Italian cuisine operator in Moscow food courts. Sbarro’s stores are open at nearly 25 retail centers, including Atrium, Auchan, GUM, Novoarbatsky, Kaluzhsky, Marktkauf and others. “As regards the desserts segment, worthy of mentioning is Mia Dolce Julia ice-cream chain, operating in Mega Tyoply Stan, Okhotny Ryad and Atrium,” Zhamkin adds.

“In truth, there are few operators in Moscow, hardly more than 15, but for the today’s volume of food courts that’s enough. As a rule, a food court cannot provide space for more than 10 to 12 operators, whereas major players seek spaces at as many shopping centers as possible. That segment is notable for lack of openness and tense competition, which creates obstacles for new operators. Besides, given the specifics of operations and low profits in the first years of operations only major operators are able to retain leading positions in Moscow malls,” Vladimir Zhuravlyov notes.

Disputable Issue

The majority of experts agree that Moscow has too many food courts and too few operators. “The claim that there is a shortage of food court operators is untrue. The rapid growth of the fast-food market over the past years resulted in emergence of new concepts by operators already active on the market, and arrival of new operators,” holds Olga Yasko.

Svetlana Batalova says: “I do not think there are too many food courts. There are enough operators for everyone.” With competition between retailers growing food courts are bringing higher profits and mall owners are beginning to increase rents for operators. But it is the increase in rates that wards off newcomers, which may result in an artificial shortage.”

Other experts believe that very soon that shortage will be felt. “Moscow follows the West, adopting international experience in organization of retail centers, in particular, in food court operations. According to various estimates, Moscow has only 15 to 30% of operators required. Those are well-known companies,” says Andrei Zhamkin. In his opinion, the Moscow market is also short of professional services for selection and development of food courts in shopping centers under construction, which results in misuse and mismanagement of retail space.

That is the key difference between Moscow projects and Western malls, holds Vladimir Zhuravlyov. “The main difference between Moscow retail centers and malls abroad is the considerably restricted number of food court operators, whereas the number of operators active in that segment in the Western is much higher,” the expert says. As shopping centers grow in size with entertainment facilities expanding he anticipates further development of food court concepts and an increase in number of fast-food zones. “If forecasts prove true and retail areas grow by 30% each year, the market will need more food court operators,” he adds.

“If the established tendencies shaping the new culture of consumption in Russia are preserved, the popularity of food courts in this country will grow. The number of people ready to dine out will grow,” says Olga Yasko.

Foreign operators could offer assistance to their Russian colleagues. “In the next 3 or 4 years the market will see arrival of several international operators, whose presence will boost competition and contribute to re-positioning of some of domestic brands,” says Antonina Lairova.