Is the food court dead for franchises?

Ange Kondos, managing director of Leasewise, shares his thoughts about today’s retail and leasing scene.

Q: What's the biggest issue right now for franchisors?

A: “The biggest issues for franchisors in retail is to consider that retail has been largely flat, almost regressive, in recent years so occupancy costs or rents have risen by 4 or 5 per cent annually and this is always cut from the bottom line.

“The other problem is there is a saturation of retail therefore franchisors are taking the most detailed and considered position to ensure the long term viability and return of investment for their franchisees.”

Q: What's the trend right now in shopping centres?

A: “Traditional food courts are dying; they are dated in presentation and have to compete with more contemporary ELP (Entertainment Leisure Precincts) that have a better ambience, more relevant offers and the price point is the same.

“All major landlords are revamping their food courts which will now be called food galleries. The ambience variety and quality will be addressed so that they become relevant, this also means a big haircut on rents – $160,000 to $250,000 for food court sites in current format just isn’t viable.”

Q: Franchisors have introduced low-cost franchise models to avoid high rents – how have landlords responded?

A: “Landlords will embrace any form of modification from franchisors as long as there is demand for sites. There is an oversupply of retail space therefore any modification and discipline from a franchisor model to see it through the next five years and beyond is what is required.”