Thursday, June 22, 2017

The Growth of Food Trucks

Food Truck Fest in Troy, NY (Photo: Townsquare Media)
Here at LOA we are paying close attention to food trends as this category continues to grow its share of overall consumer spending. Consumer dining habits are rapidly shifting as more and more spending is happening on meals outside the home than on buying groceries and eating in, according to the most recent expenditure data (Bureau of Economic Analysis, Q1 2016). In recent months, we’ve covered the new categorization of food services, and delved deeper into food hubs and food halls, but now it’s time to take a closer look at food trucks.

Food trucks are establishments primarily engaged in preparing and serving meals from a mobile truck. Food is normally prepared, stored and cooked on the truck and the truck may or may not use the same location every day. Today, there are over 4,000 food trucks across the nation. According to IBISWorld, a market research firm, from 2011 to 2016 industry revenue grew at an annual rate of 7.9% and in 2016 reached over $1.2 billion – and that’s why we’re paying attention to this industry.

NYC Food Truck (Photo: Sacha Fernandez)
Like full service restaurants and other eating places, food trucks can primarily be found in densely populated cities and regions. According to a Zagat survey from 2012, the most concentrated cities include New York (11.1% of industry establishments), Boston, Washington, DC, Miami, Houston, Austin, TX, Cleveland, Chicago, Portland, OR, and Los Angeles. The West and Mid-Atlantic are the most important regions for this industry, accounting for an estimated 25.2% and 23.3% of food trucks in 2016, respectively. As its popularity grows in Florida, the Southeast is also anticipated to account for a greater substantial share of food truck establishments.

Food trucks, however, were never this popular in the past. Early on in its inception, food trucks predominantly existed to serve the budget-strapped working class citizen searching for a cheap lunch deal. Trucks would be parked by construction sites and a hefty meal would cost no more than $6-8. Food trucks were also widely acknowledged by entrepreneurs as the quickest and most affordable way to break into the food business with low set-up, operating and licensing costs.

Today, the tables have turned. Food trucks are increasingly being used as promotional and marketing tools for established chefs, hotels, and restaurant brands. Bigger companies and national chains are using food trucks to service private events and music festivals just to get their name out there. Brian Pekarcik and Rick Stern, co-owners of Spoon and BRGR restaurants in Pittsburgh, launched a BRGR truck for that very reason. “As brand recognition, it's a great advertising piece,” they explained. “And we expect that it will drive customers to our restaurants.”

Food Trucks on  parking lot in San Francisco, CA (Photo: Quinn Dombrowski)
And meals are not as cheap anymore because the trendy, young professional seeking new and gourmet food has now become a major customer segment in densely populated cities.  These changes are also reflected in successful sales locations for food trucks. In 2015, only 15% of food truck sales were made at industrial/ construction work sites versus 18% at venues and events, according to Mobile-Cuisine.Com.

Cities, however, are still trying to navigate this burgeoning industry. Some are implementing programs and policies in support of these small food businesses, while others are taking a protectionist approach by heavily regulating and hindering the growth of food truck operators for fear that they may take away sales of brick-and mortar restaurants and eateries. Others also blame mobile food trucks for congesting sidewalks and streets and diminishing the urban quality of life.

Food trucks outside restaurant in Cleveland, OH (Photo:E Little)
In Chicago, IL, for example, food trucks are being held back by regulations that prohibit them from setting up shop within 200 feet of a bricks and mortar restaurant or from parking in any one location for more than two hours. Bricks and mortar restaurants are often, if not always, located near the retail core of downtowns and near entertainment and leisure destinations where a considerable amount of foot traffic is already established. By disallowing food trucks from setting up in those areas, they may be pushed to peripheries of downtowns or less attractive streets where there isn’t a sufficient threshold of customers to break even. Also, in Chicago, where parking ratios are lower, food trucks would be hard pressed to find desirable parking spots quickly – resulting in lost critical sales hours. These restrictions and more have stifled the industry’s growth in Chicago at a 1:100 ratio of food truck to restaurants.

Food truck on Leather Lane, London UK (Photo: duncan c)
This defensive position, however, may be unfounded because the Bureau of Labour Statistics has found that counties that have experienced higher growth in mobile-food services have also had quicker growth in their restaurant and catering businesses. For example, in Seattle, the number of restaurants and surrounding King County has grown by 16% since 2010 in spite of a thriving food-truck scene. In Travis County, Texas, which includes Austin, the restaurant count has jumped 18% even as food trucks have increased more than six-fold. In fact, in Houston TX, restaurants have experienced increased business generated by food trucks parking nearby and drawing more people to the restaurants’ neighborhoods. Restaurant owners themselves have reportedly asked the Houston City Council to ease existing laws that make it difficult for food trucks to operate.

In other cities, parking laws and other ordinances are evolving to catch up with the industry’s transformation and although there is no one-size-fits-all solution, here are some best practices from around the country if you’re looking to take a supportive approach leaned towards fair ordinances that allow food truck vendors to flourish.

BEST PRACTICE: Austin, TX – Simple and non-prescriptive Food Truck Ordinance
In the City’s Zoning Ordinance, mobile food establishments, or food trucks, are permitted in all commercial and industrial zoning districts and are minimally restricted from operating between the hours of 3:00 am and 6:00 am. The distance restriction on operating a food truck near a restaurant is also very minimal at 20 feet, versus the 200 feet in Chicago.  
In more residential neighborhoods, the City allows for neighborhood association areas to reasonably request further restrictions on the operations of food trucks to avoid noise and litter nuisances in predominantly more residential areas.
And that really is the end of the restrictions on food truck operations in the City.

BEST PRACTICE: Cincinnati, OH – Streamlined permitting process
Austin , TX and Cincinnati, OH are two cities that have streamlined and centralized their food truck permitting processes. This strategy lowers time and cost on the part of small business owners hoping to license their food trucks and start operating. Austin’s permitting web page has detachable forms and blank spots for the necessary signatures, with instructions regarding who to contact to obtain those signatures. On the same page, it also specifies the actual schematics of the truck components required for food preparation and handling safety, and best of all, nowhere does it suggest to refer to a subsection of the zoning code or statute not included in the document. Simplifying and making the process clear is crucial to encouraging food truck vendors.
Meanwhile in Ohio, the Cincinnati Department of Health is the only agency responsible for the city’s permitting process, application process, and payments associated with the city’s mobile food vending. Half the time, food truck vendors are required to submit applications to four or five different agencies and this process can become confusing for applicants.

Food Truck Thursday in Washington DC (Photo: Ted Eytan)
BEST PRACTICE: Washington DC – Mobile Roadway Vending Zones
Farragut Square, Washington DC, is now a vibrant outdoor food court since the city implemented Mobile Roadway Vending zones, or MRVs, in 2013 allowing trucks to vend for four continuous hours without breaking parking laws. The city rolled out eight MRVs that year, including ones at Farragut Square, Franklin Square, L’Enfant Plaza and Metro Center. 95 parking spots were made available in the MRVs and are handed out via a monthly lottery. These food trucks sell food at lunch hour to the thousands of workers in each district.

Food truck on private lot in Brooklyn NY (Photo: Jason Lam)
BEST PRACTICE: Portland, Oregon – Vacant Lots for food truck clusters
After a study in 2008 by researchers at Portland State University that concluded food carts benefited residents, the city began encouraging the use of vacant land for food-truck clusters or “pods”. The No-Vacancy guide explores temporary use of vacant space (including food truck vending!) and its applicability in the Central Eastside Industrial District. The guide shows property owners and food truck vendors how to navigate permitting and zoning processes in these scenarios.

Establish a pilot program!
If your downtown is still getting its feet wet in the food truck business, try implementing a pilot program to make informed decisions on what regulations to adopt in the future. Pilot programs are meant to test the waters and can very easily bring to light the issues that are unique to your community.  A small pilot program will also minimize any unintended impacts while still gleaning insight on what works and what doesn’t locally.

The City of Cambridge, whom we are currently consulting with on a citywide retail market strategy, launched a pilot program in 2011 that allowed permitted mobile food trucks to park in spots adjacent to riverfront parks. An initiative of the Community Development Department, the program was used to determine whether a future, permanent program should be implemented.  In the pilot, food truck vendors had to apply to participate in the program and spaces were leased on a week-by-week basis for a per-day fee.

By the end of the pilot, the City learned that the designated vending spots did not work for trucks. The City has selected low pedestrian traffic areas or times because it had wanted to activate these spaces, however it backfired on vendors who found they could not make their businesses financially viable in those areas. The City also learned quickly that a cluster of trucks needed to be marketed versus just one at each spot. Marketing and communicating to the customers that there were more than a single food option was found to be more effective.

With all the lessons learned, the City of Cambridge hopes to re-launch a new food truck program with policy improvements that were suggested by food truck operators.

Let us know if your city has an effective food truck program too!


Institute for Justice’s Food-Truck Freedom Report:

Urban Vitality Group and City of Portland’s Food Cartology Report:

The Future of Physical Retail in the Age of Online

Mike Berne, Principal of MJB Consulting, is a friend and frequent collaborator. We are pleased to share his insights on the Amazon purchase of Whole Foods. While some have come out against this merger he argues that perhaps there is less to be concerned about than we think. In September,MJB and LOA will be leading an ICSC sponsored pre-conference workshop at the IDA Annual Conference in Winnipeg.  




Still digesting this acquisition, trying to get my head around it.  

My first impression is that everyone is overreacting, as per usual.  It might have been different if they had acquired Kroger or Albertsons, but at 460 stores, Whole Foods is still a niche player in the grand scheme of things — yes, it is very prominent in the uber-educated markets where media elites tend to live (partly explaining the overreaction in the press and among analysts), but there is little overlap with “Flyover Country” between the WF shopper and the Kroger/Walmart/Aldi shopper, and businesses on the scale of Amazon need both, frankly.  

That said, the purchase of Whole Foods makes sense given that there is quite a bit more overlap between Whole Foods and Amazon Prime.  The acquisition of 460 brick-and-mortar stores essentially provides Amazon with 460 new fulfillment centers that they did not have to build themselves and that sit much closer to the dense cities where their Prime members are concentrated.  In other words, these 460 fulfillment centers help to solve the so-called “last-mile” problem and can theoretically improve their margins on food delivery. 

Many of the articles appearing in the last few days manifest little to no doubt that Amazon will be able to conquer the grocery space in short order but the reality is that Amazon (and others) have been trying to do this for years now, and has mostly failed at it.  The market share for online grocery in this country is still negligible and it is not at all clear that Americans will ever follow the U.K. example.  (Yes, there is Fresh Direct, but that is an anomaly, focused as it is on the extremely dense NYC metro).  

These articles also make scant reference to the fact that Amazon has yet to establish a money-making business model for e-commerce more generally.  Over the course of two decades, the company has generated profit of roughly $5.7B — over two decades!  By comparison, Walmart generated profit of some $14M last year alone!  This is primarily because the cost of shipping and returns remains a killer, even at Amazon’s scale!  Buried within all of the hyperbole is the inconvenient truth that pure play e-commerce is simply not sustainable, and that it is only by diversifying into bricks-and-mortar that Amazon and other smaller e-tailers will be able to thrive in the long term.

So yes, free shipping and returns are great, drones are cool, and cashier-less grocery stores would be wonderful.  But as they say, segments on 60 Minutes don’t pay the bills. And I wonder how much patience investors would have had in Amazon if the company had not happened upon the much more highly-profitable cloud computing business.  

In sum, then, if this acquisition helps Amazon to lower its supply-chain costs and thereby derive some profit from selling groceries, then yeah, it will be a winner for them.  But I think the company is past the point where merely growing (taking) market share will do the trick.  It is time for results.

Authored by Mike Berne, MJB Consulting

Friday, June 16, 2017

International General Merchandise Brands Growing Here

Store: MUJI
Originally From: Japan
Years in Business: 35
Stores in US: NY, CA
Site Requirements/ SF: 3,600-4,000 SF
Store Type/ Concept:  Sells a wide variety of household and consumer goods. It is distinguished by its design minimalism as a physical store and in its products. MUJI sells more than 7,000 products ranging from stationery and clothing, to food items and major kitchen appliances and home ware. MUJI products have a limited color range and are displayed on shelves with minimal packaging.
Price Point: Low to moderate
Target Customer: Consumers are younger, aged 20-35. Lifestyles are minimalist and environmentally-conscientious
Expansion Plans: Opened its first US store in 2007 in NYC SoHo. Since then, it has expanded to one other state California. MUJI intends to nearly double the number of its international stores over the next few years. More specifically, the target for U.S. is 100 stores by 2020 and 500 in the longer term.


Store: Flying Tiger 
Originally From: Copenhagen, Denmark
Years in Business: 22
Stores in US: New York (Flatiron neighborhood)
Site Requirements/ SF: 5,000 SF; preference for location near other designer home furnishing brands such as ABC Carpet, Design Within Reach etc.
Store Type/Concept: The store's mission is to make high design accessible to everyone, "the dollar store of Danish Design". Each store is filled with 'quirky products' that are mostly designed in-house. The merchandise ranges from gifts to food and office supplies. The store aims to offer a less serious shopping experience than other general merchandise stores like Target or Muji. 
Price Point: Low (90% of Flying Tiger’s products are less than $15)
Target Customer: Young, trendy professionals and families - customers have a flair for design
Expansion Plans: Unknown - expansion in the US from 1 to 4 stores strictly in NYC in the last 2 years




Store: Miniso
Originally From: Japan/ China
Years in Business: 6
Stores in US: CA Old Pasadena Business District (first store in the US opened in April 2017)
Site Requirements/ SF: 3,000 SF
Store Type/ Concept:  A single Miniso store offers some 10,000 products across the various categories including housewares, beauty products, inexpensive jewelry, and electronic accessories
Price Point: Low (Average price per item is $5)
Target Customer: Wide range of consumers but most popular with 18-35 age group
Expansion Plans: Company has aggressive growth plans for the U.S. involving first California and Texas, with a focus on major metro areas such as Los Angeles, San Francisco and Dallas. Aims to open roughly 25 U.S. stores this year with the ultimate aim of having about 50 stores in total by end of 2018

Friday, June 9, 2017

Managing Homelessness Downtown

Our recent experience working with downtowns in the state of New York and in North Carolina this past year has brought to our attention a spike in stakeholder concerns over homelessness downtown. The homeless population is often referred to as the people who “lack a fixed, regular, and adequate nighttime residence". In downtowns, the homeless are often seen occupying public or private places that are not designed to be regular sleeping accommodation including parking lots and garages, storefront stoops, transit stations, vacant buildings/ lots etc. In addition to this group, there are also the homeless who live in substandard buildings that lack sanitation, cooking facilities or heat, who are often disregarded.

Trend

Seeing the rising concern over homelessness in our own projects led us to dig a little deeper into the trends happening elsewhere. As it turns out, homelessness is indeed spiking in cities all across the country, and particularly in downtowns. In San Diego, for example, tent cities have begun proliferating downtown near freeway on-ramps and commercial districts and homeless service centers. On a recent trip to Seattle, WA, I witnessed the same trend occurring under the on-ramp to I-90 by the CenturyLink Field and Chinatown District.

A myriad of factors contribute to the rising homeless population downtown but many leaders are increasingly placing blame on criminal justice reforms, which have downgraded some felonies to misdemeanors and therefore keeping some people out of prison or drug treatment and instead leaving them on the streets.

The more popular reason for the rise in homelessness downtown, however, remains the increasing cost of rents and disappearance of residential hotels. As more people look to live in convenient and vibrant downtowns across the nation, the high demand for downtown apartments and houses is slowly driving prices up for all housing stock. Meanwhile, homeless advocates are also pointing to the significant loss of single-room occupancy units, or SROs, as a key factor in the homelessness crisis. Many SRO units that still remain are unfortunately uninviting and unaffordable.

Why do homeless people gather downtown?

While those who can afford to live in downtowns are moving to these areas for comfort, convenience, and entertainment, homeless individuals on the other hand are coming in droves because downtown is often the best place to seek day service centers, social service centers, and basic amenities such as bathrooms and water fountains.  Downtown is also the place where homeless folks can get a meal, a shower or a shelter bed – resources that often cannot be found elsewhere.

During a stakeholder interview for our work in Middletown (NY), Director of the Thrall Library, Matt Pfisterer informed us that the homeless population there was particularly active around the library because they needed bathroom access in the day when they were not in shelters. Later in the afternoon, he reports, the homeless crowd migrates towards the soup kitchens and other downtown homeless service centers as they start to compete for safe and comfortable night time lodging. The Thrall Library, as do many other libraries across the nation, does its best to accommodate this group by ensuring bathrooms are monitored and maintained constantly throughout the day by staff and personnel to ensure that all library users can continue to use the bathrooms hassle-free.

Issues

Bathroom lines and litter are hardly issues when it comes to dealing with homelessness downtown. Many cities are facing harder problems such as drug use in public, rise in reported theft, and overall, a perceived lack of safety amongst residents and visitors. This overall unwelcoming atmosphere is not only discouraging some from living and investing in downtown, but also discouraging customers from shopping and visiting downtown. In our experience, we have heard from business owners and property owners that homelessness downtown has negatively impacted foot traffic and in turn, sales. In some cases, the homeless population has been driven to spend nights on storefront stoops and use back alleys as latrines, giving store employees additional work in the morning when they return to open and operate businesses.

Lower patronage downtown has even resulted in businesses closing in Portland, OR. A dance studio in downtown Portland, OR experienced dwindling class attendance from out-of-towners who felt scared walking to and from parking lots and dance class in the evenings as a result of the spike in the homeless population there.

Management Solutions

Whether perceived or real, this lack of safety experienced downtown can be managed by downtown organizations. The first step in managing homelessness downtown is counting, keeping track, and being aware of the current situation. After all, you cannot manage what you don’t know.  By keeping count of your homeless population, you will be able to determine the actual size and scope of the issue and at the same time identify hot spots with high concentrations of homeless folks and their peak visiting times during the day.

A common way to count the population is to use the ‘point-in-time’ method. This method requires that the count take place on one day every year across the city or downtown and therefore provides a Point-In-Time snapshot of the homeless population. This can be conducted by public or private sector volunteers including, of course, the downtown organization. This information can then even be registered with the US Department of Housing and Urban Development to become a part of a nationwide database for understanding homelessness across the country and will be required to be considered for federal funding to combat homelessness.

The limitation with this method, however, is that volunteers counting are only limited to what they can see by eye. In essence, they count the number of homeless people seen in cars, and on foot and if there are those who are hidden in tents, an assumption is made that there are two people per tent and may therefore be undercounting. Keeping a consistent counting method throughout the months and years is crucial for comparing data over time accurately and as long as this limitation is recognized, downtown organizations will be able to make informed decisions.

Downtown San Diego Partnership takes counting a step further by organizing a monthly survey instead of an annual one. Homeless outreach workers with the Downtown Partnership cover 275 city blocks between midnight and 5 a.m. on the last Thursday of every month and they have been counting since 2012. This has enabled them to see changes year-on-year and the data has helped the Partnership determine what actions need to be taken to manage the spike in homelessness and also to determine factors that may be affecting the numbers.

Taking Action

There are a number of actions that can be taken by downtowns to manage their homeless populations depending on size and scope.

First, developing a Vulnerability Index has been critical to many downtowns and cities in order for them to identify and prioritize the homeless population on the streets that should qualify for housing. A Vulnerability Index typically measures length of homelessness and mortality risk and is a practical application—a person-to-person survey—that is “revolutionizing the speed at which … chronically homeless population is placed into permanent housing”.

In some cities, non profits are stepping forward to create diverse housing stocks for the formerly homeless and low-income residents. Mixed-income permanent supportive housing is becoming a popular strategy to house the homeless population in larger cities such as DC and NYC.Often these buildings also feature community spaces such as rooftop terraces, gardens, lounges, gyms and laundry rooms that help the residents get out and engage with neighbors – a holistic environment for recovery from homelessness or any other dire situation.

While providing housing stock may be a longer term strategy, other short to medium-term strategies are also in place in many downtowns across the country. Libraries, as mentioned earlier, are becoming top community spaces that support the homeless population. The DC public library, for example, now provides an innovative outreach program for the homeless since its first hire of a Health and Human Services Coordinator. A Knight Foundation grant in 2015 enabled DC Public library to create an online interface of health and human services data  and train librarians in homelessness outreach so that when homeless folks come up to a librarian, he/she is able to direct them to the right service providers and give the correct referrals. This is a simple yet essential tool for supporting homeless folks and getting them back on track.

In other instances, business improvement districts have partnered with existing homeless-serving organizations to carry out supportive programs. In Los Angeles, CA, Downtown Center Business Improvement District  funds homeless outreach teams to contact, interview and assist homeless people living in the west side of downtown. Over $255,000 has been funneled from the BID to two social services agencies in order to hire staff to do this outreach work. PATH, or People Assisting the Homeless, is one of the organizations that provides services, including street outreach, shelter and housing construction. Chrysalis, a skid row program, then provides job preparation and temporary work experience, and also has been tasked with picking up litter in areas heavily-trafficked by homeless folks. In the first year of funding from the BID, outreach workers completed 196 assessments, and placed 36 people in permanent housing and enrolled 56 in PATH’s housing services.
Downtown San Diego Partnership, on the other hand, has set up a Clean and Safe Program and DowntownDC BID partnered with the city government and 20 local service providers in order to facilitate various efforts to end homelessness. This includes a partnership with Pathways to Housing DC that has deployed a 4-person, clinically-based outreach team that provides street-level intervention to move individuals beyond homelessness to independence. In addition, DowntownDC BID’s Safety/ Hospitality and Maintenance employees have 12 specially-trained members, known as the Homeless Outreach Service Team (HOST), who work closely with the Pathways to Housing DC Team and are trained to recognize and engage individuals with mental and addiction challenges. The smallest yet most impactful effort made by DowntownDC BID, however, remains the brown bag discussions that help educate the public on homelessness and raise awareness.

Installing public bathrooms is another potential strategy that might mitigate instances of public urination/ defecation. Although not all instances of this offence is carried out by the homeless, the compassionate approach rather than law enforcement approach has been widely praised by residents of the city of Denver, CO, where a pilot program of mobile public restrooms was established last year. These mobile facilities cost $12,000 per month to lease and are cleaned nightly and rotated regularly to different locations. Public bathrooms are basic amenities that should be made available to all users of downtown.
Given that vacant lots are often targeted for homeless camps to set up, downtown organizations may mitigate the situation by requiring or ensuring that private property owners have reliable property management companies in place to monitor compliance with zoning codes.

Finally, as downtown organizations plan ahead the annual schedule of events, they might start thinking about organizing events in partnership with homeless groups and shelters to accelerate and coordinate the move-in process. These processes normally take 60 days to happen but can be expedited in a single all-day event that serves as both outreach to homeless folks and also one that raises awareness amongst the general public.

Take a Comprehensive Approach

Overall, it is important to acknowledge that ignoring the homeless population downtown will not make it go away. A comprehensive approach must be taken by downtowns, in partnership with city, state or even federal agencies, and nonprofits and local community groups. Addressing the full range of issues faced by the homeless including housing/shelter, employment services, meals, and rehabilitation is crucial to managing the problem. It is also important to remember to count and measure the scale and scope of the issue first before taking any mitigating steps. This ensures that the response or strategies implemented directly serve those in need rather than simply blanket the problem.


Wednesday, May 31, 2017

Planning a downtown street fair? Five ways to avoid undermining retail sales for local businesses

It is not uncommon to hear merchants complain about the singular annual event or street fair. These activities are common among many downtown organizations trying to promote visitation, and to be fair, thoughtful downtown events are important to successful revitalization efforts. But if you ask some business owners, they may not be having the intended effect. Consider the case of the local barber shop whose regular customers avoid the area during downtown events. Or a flower shop that can no longer make deliveries because the street is closed. How do you avoid some of these common errors? And how do you execute a great event that helps local businesses?  I've rounded up a few examples of common mistakes and potential solutions. Is your organization doing any of these things?
The challenge - the main corridor of the festival is packed with
people but the sidewalk side where the business entrances are is empty. 

A better solution - don't block storefronts. Use existing downtown open space
between two retail streets for the market. This way, the events
serve as a link between shopping areas and helps to extend the average customer length of stay. 
A better solution - if you've got a single loaded retail corridor,
place the farmers market stands across the street to
create a double loaded corridor.  This enhances the density of
downtown offerings and encourages cross-shopping. 
A better solution - Don't block access to the sidewalk and local
businesses. Notice the gaps between the vendor stalls that allow for ease of
access between the sidewalk and the main thoroughfare. 
The challenge: Make sure to site your market where the downtown action is.
You want to ensure your market is in close proximity to
your downtown businesses, otherwise the opportunities for
synergy and shared customers are lost. 



Thursday, May 11, 2017

A Response to APA17: The dangers of calling it a Modern Food Hall

One of the more popular sessions at the National Planning Conference last week was one titled “Modern Food Halls: Redevelopment Aid or Trend?” The panel discussion was led by Nicolia Robinson of Cooper Carry, an architecture, design and planning firm based in Atlanta, Georgia. Joined by her colleagues Sarah Jane Bonn and Daniel Sweeney, Nicolia led the discussion around one of the most talked-about trends in cities across the country. She opened the floor with a brief presentation on what the drivers of food halls were and attempted to distinguish them from what many of us recognize as food courts and markets.

Food Trends
In 2015, there were only 70 food halls across the nation. Last year, the panel cited that that number had risen quickly to 130, and by the end of 2017, we are expected to see more than 200 food halls across America.

This rapid growth in food halls, like restaurants, can be attributed to the rising trend of eating out amongst consumers. In an earlier post, we wrote about the fundamental and cross-generational shifts that have led to restaurant industry sales surpassing grocery sales for the first time in history. For food halls, the large proportion of millennials eating out more frequently is particularly driving its rapid growth and popularity.

On top of this, the panel claims that food halls are also meeting the needs of consumers who are seeking more “sophisticated and authentic flavors and experiences while dining out”. This has been echoed in recent media reports that claim consumers are “demanding more variety, better quality food while also seeming fatigued with the conventions and time investment of a multi-course, full-service meal” at traditional restaurants.

Defining Modern Food Halls

So what exactly is this food hall we’re all talking about? While the panel from Cooper Carry attempted to distinguish food halls from the traditional food court and market by delineating specific traits for each of these places, the lines began to blurry as they continued to dive deeper into case studies and examples. Before we begin to dissect the discussion around the definition of food halls, here are the characteristics the panelists attached to Food Courts, Markets and the newest hybrid, Food Halls:

Food Court
Market
Food Hall - Marries best of both food court and markets
Mostly national brands
Mostly local brands; mom and pop stalls
Both local and national brands (mostly local)
Fast food to fast casual
Ingredient-focused, produce-heavy stalls
Curated mix of tenants
Convenience

Plenty of gathering space (communal aspect)
Few retail options
Mostly Retail
Balanced retail and food


And here are the different ‘Scales and Types of Food Halls’ that have been observed by the panel:

Micro
Neighborhood
Destination
<10,000sf
10,000-30,000sf
30,000sf
Located in mixed use development, usually in difficult spaces to lease out to other operators



Food Halls
According to the panel, there are some key elements that make a food hall a food hall. First, there is often a heavily curated experience. The trouble with the ‘curated experience’ however has been that it is often targeted toward younger consumers that are more educated and have higher disposable incomes. After all, this is the demographic group choosing to live in urban, dense areas or in transit-oriented neighborhoods where these food halls are often located – key element number two.

Although this was not directly addressed by the panelists, several planners present in the room were rightfully wary of the implications of the food hall’s curated experience. Prices of meals at food halls, as one audience member noted, are often high compared to other available dining options. The noisiness and bustle of food halls also largely appeal to younger adults without children or elderly companions.

Panelists also noted that another key element is the detailed attention often paid to branding food halls as modern amenities and advertising them on social media. This seems troubling as it necessarily excludes certain groups of users from food halls, for example traditional older customers or non- English-speaking customers.

Finally, food halls are supposed to have a variety of authentic tenants. Although this was not clearly explained in the session, I would hazard a guess that this was in reference to locally-owned businesses with new food concepts.

There appear to be a number of problems or inconsistencies with the food hall as defined at the session. In fact, when the floor opened for discussion, many in the audience jumped at the opportunity to ask about the foreseeable economic and social impacts of food halls that was not addressed in the presentation. Issues raised by audience members included insufficient parking and seating space for large crowds, and finally, the elephant in the room – who are food halls for?

In response to crowded spaces, Daniel Sweeney quipped that while seating can be hard to find in these popular food halls, this can in fact be beneficial to vendors. The busyness of the food hall creates a vibrant atmosphere for visitors and makes the food hall appear to thrive.
 
However, when must the line be drawn before the crowds begin to cause discomfort for regular patrons, forcing them to find alternative options and potentially resulting in drop of sales for vendors?

In fact, Chelsea Market here in New York City already suffers this shortfall. As soon as the food hall began to primarily serve tourists and attracted crowds of out-of-towners (over 6 million national and international visitors annually), locals no longer found the shopping environment conducive for daily  needs. Today, many locals intentionally avoid this former neighborhood jaunt. It appears as though food halls run the risk of becoming a visitor attraction rather than a local neighborhood amenity. This very issue raised red flags for me when the panelists started to use Essex Street Market as a case study of a neighborhood food hall.

The Problem with the Food Hall Label


In the past few months, LOA has been working with the New York City Economic Development Corporation (NYCEDC) to create a tenanting and marketing strategy for Essex Street Market as it prepares to relocate to a new facility across Delancey Street. LOA developed a strategic market positioning statement for Essex Market that defined key customer segments before recommending strategies for attracting new tenants and vendors.

Essex Market is, by definition, a public market owned and managed by NYC EDC. It is not a food hall, nor does it aspire to be one. The market is New York City’s oldest public market following Mayor La Guardia’s efforts in the 1930s to clear the city’s streets of pushcarts and build a network of modern indoor public markets. For more than 75 years, Essex Market has been a fixture in Manhattan’s Lower East Side and an important source of affordable products for local shoppers, from Latino and Asian immigrants, to the new millennials who have recently began moving into the neighborhood.

The mission of the market remains to serve the needs of low and moderate income residents in the neighborhood and this can be observed by the mix of tenants at the market. Vendors such as Saxelby Cheese Mongers and Essex Farm Fruits and Vegetable for example accept EBT and offer products at low price points. Even as the market expands in size at its new facility, prepared foods vendors will remain a small percentage of the overall market tenant mix. Ingredients-based purveyors will continue to make up over 70% of the market, including specialty ingredients such as fresh coffee beans, American cheeses and traditional spices.

In addition, NYCEDC and the Essex Market management team, will continue to remain committed to scouting hyper local vendors to fill the remaining spaces at the new facility with preference given to vendor applicants offering farm-related or ingredients-based products. These tenanting strategies are intended to maintain Essex Market’s position as a public market with retail that contributes to the local community’s wellness through fresh, affordable food.

Although the panel had intended on showing the audience a positive example of a publicly-managed neighborhood food hall, they may have taken a leap altogether in labeling Essex Market a food hall. Let’s take a look at the criteria set by the panel for food halls and how Essex Market doesn’t quite meet them:

Food Hall
Essex Market
Both local and national brands (mostly local)
No national brands
Curated mix of tenants
Curated to the extent that EDC is maintaining 70% ingredients-focused, produce-heavy purveyors
Plenty of gathering space (communal aspect)
Yes in the new facility
Balanced retail and food
No - 70% ingredients-based retail

Given that there are already some implications associated with food halls, we need to be careful with the way we use the label. In a previous post on food-based developments, we began to explore some of these negative impacts.

…when food-based developments do not serve the wider community, it stands to run into accusations of causing gentrification and rising property values. In Anaheim, California, where a former fruit packing and distribution center was transformed into a food hall dedicated to local vendors, it has quickly evolved into  a selling feature for new residential developments in the neighborhood. Broookfield Residential for example is hoping to “attract young buyers with units priced between $300,000 and $400,000” in a neighborhood that was once a sleepy town known only for Disneyland. Whether intended or not, the Packing House food hall in Anaheim has led to huge inflow of development into the neighborhood, raising prices of property in the area.

Furthermore, food halls that only serve ready-made meals or chef-made meals are often too upscale for the average customer. While they may help fill gaps in a food desert, prices often prevent lower income bracket groups from accessing these freshly-made and locally-grown foods since most prepared foods are not even eligible for SNAP benefits.”

For all of the benefits food halls claim to have as incubators for small, local businesses and chefs, there are plenty of other players in the industry that are simply abusing the trendy name for profit’s sake. Let's not call it a food hall, if it’s really a market or a food court. 

Wednesday, May 10, 2017

Fake News - Retail is not dead!

This past weekend we had the privilege of attending the National Planning Conference at the Javits Center here in New York City. There were over 600 sessions, discussions, and mobile workshops on topics ranging from retail and downtown revitalization to short term rentals and agricultural tourism. A theme that seemed to permeate many of these discussions was one of continued strength and adaptations in brick-and-mortar retail. City officials, architects, market consultants, and planners at various panels resoundingly agreed that retail was not dead in their communities, or in communities they were working for, and that there are still steps to take to support its growth. We've all read the recent reports on large national retailers like Macy's pulling back on storefronts and abandoning suburban shopping malls. However, this calamitous picture being painted in the media of retail's impending doom seems to be clouding the realities on the ground. As Steve Dwoskin, Vice President of Callison RTKL, aptly said in his session on The Reality of Planning for Retail, "It's Fake News".

Retail Trends
There are so many ways that retailers today are adapting to changing consumer trends and habits in order to sustain growth. At the same session, Kate Coburn a partner at HR&A, explained the importance of understanding the changing shopper demographics across the country and using that to retail's advantage. Millennials, as many of us know, currently make up the biggest proportion of the population with over 92 million of them here in the U.S. This group, combined with the growing Generation X-ers, are the shoppers that retailers need to watch and adapt accordingly to. More importantly, there is also a growing Hispanic and Asian population here in America that needs to be accounted for in retail market strategies and downtown retail tenant mix. Not to forget the high rates of urbanization that are also forcing retailers to rethink configurations of properties, store formats, and partnerships.

Here are some ways in which retailers, downtown organizations, and developers are adapting to these dynamic consumer trends:

  1. Reconfiguring properties from single purpose malls to mixed use developments in more urban and transit-served areas
  2. Changing store sizes and formats to fit downtown main streets rather than suburbs
  3. Repositioning and retenanting resulting in many developments shifting reliance on department store anchors to entertainment and dining anchors
  4. Focusing on experiential retail as a result of growing e-commerce competition
  5. Targeting localized tenants that cater to diverse demographics in different localities
  6. Using multimedia strategies and moving from traditional media to social media advertising

Ikea was an example of a retailer that has been seen to adapt to its changing consumer habits. Its original 400,000 SF model has since been shrunk to 100,000 SF stores in order to be able to fit into more urban places. Its aim was to "bring the Ikea home furnishing range and expertise closer to customers" who lived in urbanized areas. Although these smaller formats are not able to carry full product rangescustomers are still able to order from the Ikea online range for collection at dedicated collection points of smaller format stores - similar to Target's fulfillment centers that we wrote about last week. It's important to acknowledge, however, that furniture is one of few retail categories that has fortunately been less vulnerable to e-commerce. Make-up/ cosmetics, services like hairdressers and laundromats, and restaurants are some other categories that continue to thrive despite the growing shift toward online shopping because they all require in-store product experience and demonstrations before consumers are able to make purchases. Likewise, local businesses that offer authentic experiences are becoming most valuable in today's retail climate. 

What cities can do to create a supportive system for all types of retail to thrive

  1. Provide appropriate spaces for retail
    • Cities can often provide tax incentives to landlords and property owners so that they may renovate and provide viable retail spaces. In our work, we 've often seen downtowns struggle with high ground floor vacancy rates and yet long lists of potential tenants. This is often the case because tenants and small businesses do not have the capital to rehabilitate and fix up the vacant spaces in order to make them viable for business
  2. Be strategic about co-tenancies
    • A block-by-block tenanting strategy should be developed by merchants associations or downtown organizations in order to effectively cater to communities living in surrounding neighborhoods and also to increase retail diversity
    • Curating retail mix can only be effective when property owners are involved in the strategizing. However, this often requires that cities provide financial incentives for them to be active in such discussions.
  3. Grow customer base close to retail corridors
    • Provide diverse housing options that meet full range of household incomes needed to support a variety of retail
    • Encourage flexible spaces of employment (office and manufacturing) near retail corridors that encourage strong daytime worker populations with a range of income and interests
  4. Right-size parking and vehicular areas
    • With the increasing use of shared car services like Uber and Lyft, and with retail moving to urban places, parking requirements no longer hold the same weight as they did. Retailers in urban areas are instead seeing the need for drop-off areas more so than large swathes of parking. Some downtowns are even revisiting parking requirements for retail uses given the changing environment.
Ways to support small businesses through zoning
More specifically, zoning can be an effective tool in supporting the growth of retailers and small businesses. A panel discussion opened by Arista Strungys, Firm Principal at Camiros, Ltd, dived into some tried and tested zoning modifications and tools that have lowered barriers to entry for businesses. The session cautioned municipalities about out-of-date use structures that were often the biggest barriers to small businesses thriving downtown. According to the panel, building flexibility into zoning and land use ordinances is key to supporting small businesses, including retail. This flexibility can be achieved by establishing a generic use approach rather than specific use approach and also tailoring uses to different districts. The former encourages readability of the ordinance by eliminating pages and pages of descriptions that outline every specific use allowed. Instead of listing retail categories such as 'Clothing Stores' or 'Book Stores', the ordinance simply says 'Retail Goods Establishments' to build in flexibility for allowed uses. Tailoring uses to districts, on the other hand, is best represented in a 'Uses Matrix' like the one below. This approach also encourages readability of the ordinance and eliminates the cumulative structure of traditional ordinances.
Eastern Neighborhoods Zoning Guide - Sample Use Matrix

Finally, monitoring new types of uses is also key to being flexible for businesses. Robert Azar, Deputy Director of the Department of Planning and Development for the City of Providence, Rhode Island showed how his City was encouraging small businesses by introducing newer use types in the ordinance including Residential-Commercial/ Residential-Professional uses that encourages live-work spaces downtown. By doing so, the City is using these new permitted types as a calling card for itself - inviting newer types of businesses downtown such as micro craft breweries and specialty food producers and retailers.

For all the news articles and media bombardment of brick-and-mortar retail declining, there is also a strong movement at local levels to grow retail in dense, urban areas through a myriad of financial and regulatory tools. If your town or city is also doing something innovative to adapt to the changing retail trends and consumer habits, let us know! Get in touch at info@larisaortizassociates.com