OrderMate is the trusted partner every venue need. Since 2001, OrderMate has dedicated themselves to delivering unparalled performance and reliability to a range of hospitality business. The industry knowledge, expertise and years of research have resulted in a point-of-sale (POS) solution that is intuitive and effortless, setting businesses up for success right from the start.
As restrictions are easing and venues are re-opening across the nation, hospitality businesses will soon be moving from a ‘recovery’ phase to a ‘growth’ stage. Therefore, it is essential to prepare for what’s next in the evolving dining scene.
To help you prepare for the future of your business, OrderMate has compiled a list of valuable resources and insights so that you can Pivot, Promote & Progress.
The team at OrderMate and HungryHungry have put together a list of resources on how to best implement a digital ordering platform for pick-up, delivery or contactless table ordering.
No matter what circumstances you are in, the team at OrderMate can help you to manage your operations seamlessly and allowing you to make smarter business decisions. They not only understand POS, but also how hospitality business runs and its potential to succeed.
Historically, there has been a lot of tension between tenant and landlord that serves no-one, despite each side thinking it’s protecting itself from the other.
But what this dynamic really maintains is financial vulnerability.
This tension often starts at the lease negotiation stage, ending far too often with a tenant closing or running out on their lease. Often, both scenarios could be avoided, but no one seems keen to question the status quo or take responsibility for doing things differently.
The relationship between tenant and landlord is like any other relationship in your life, it has a ‘vibe’ or an ‘energy’ that can and will impact you both in one way or another. I learnt the hard way not to ignore this – when we were still early in our hospitality journey, I tended to go into dealings thinking personal attitudes didn’t matter, we’d all ‘do the right thing’ by each other for the greater good of business.
When we were about to sign the lease on a third venue in the CBD, we made a few significant errors in judgement that went against our business model at the time and signed a lease with an agent with whom the dealings were not overly positive. That mistake cost us that restaurant and about half a million dollars.
How? We ignored the fact that communication was very difficult, and the agent elusive, one we didn’t see eye to eye with on several issues during negotations and fit out. Yet we persevered, determined to continue the deal regardless, ignoring the red flags that were coming up.
Long story short, in the end the location was not right for us, and restaurant underperformed from the beginning. Eventually, we faced the painful decision to close shop – not even making it to its second anniversary.
The process of exiting the lease and leaving the building was one of the most stressful things we experienced! Looking back, it’s clear the tone was set for our relationship with the landlord from the start and when crunch time came, there was NO support there whatsoever. Despite the landlord not fulfilling their side of the lease either, they behaved like we were the enemy.
We closed that restaurant and they lost capital investments and wore the re-lease costs.
So what can change?
We need to aim for collaboration and transparency if we have a hope of creating more long-term business and financial success for landlords and F&B business owners. Mutually prosperous relationships are the golden egg!
Starting at the start of the relationship is key – develop a new way of relating to each other based on believing we can contribute to each others’ success if we change the way we see hospitality beginnings and what role we all play in the journey.
Landlords see their role as largely hands off and have traditionally assessed a tenants’ concept, branding, menu, and viewed an assets & liability statement during the application stage. Meanwhile, the tenants’ business and financial capabilities and industry experience remain unassessed, considered overreach that will leave them liable should the business go pear-shaped – as if qualifying is akin to approving, and thereby landing the responsibility of tenant success/failure on the landlord.
Essentially, landlords rely in good faith on the incoming tenants’ ability to achieve the required turnover and meet their rental commitments, only to find out that the tenants’ business fundamentals are missing, and the business management skills leave much to be desired.
In an industry with no real structure or accountability any cowboy can blaze in on a horse and have a go, if they have the money. No one cares if they know how to do it, let alone do it properly, not even the business owners themselves as far as my experience tells me!!
Yet it’s a critical truth that these abilities are the main decider between success and failure for a majority of hospitality business.
So this indifference to qualification calls for a perspective shift from both sides, and generally a new awareness of casual qualification as a pivotal point in leasing/hospitality relationship. This point is aimed at both sides – operator and landlord. Being capable and qualified is undervalued by both sides.
Further along in the journey, if a tenant reveals a downturn significant enough to request rent concessions, it’s only then acceptable to perform an informal audit on their financials, business skills and marketing practices – the very ones that were hot potatoes to be avoided earlier!
Landlords are 100% financially vulnerable when leasing to operators but keeping a ‘their business is none of my business’ mindset.
Where does that leave landlords? Their financial investment is in the wind, they have a shop full of equipment that is now theirs to resolve, and they have to start to the tenancy process all over again – most likely to a similar result if they same process plays out.
A failed tenant impacts more than just the business owner – landlords, equipment financiers and the tenant are all locked together in a chain of success. If the business fails – no one gets paid. If it fails hard and fast and they do walk away, no one gets paid, and the landlord gets lumped with the cost of a make good.
Reality is, landlords do not have an endless pit of money to throw at new tenants; and new tenants cannot afford to fail more than once, twice if they have more money than sense, and the days from jumping from landlord to landlord in the hope of one business being successful are long gone.
My advice – find the right tenant and qualify them, not just conceptually to see if they fit into the long term leasing strategy. Qualify them to operate as a hospitality owner that has the specific industry skills and knowledge required to be successful.
If we flip the script and do these checks at the start of the relationship – the ground is immeasurably more solid for everyone involved. If there aregaps in the business skills of the tenant – it’s also in their own best interests to know before they start operating; and it’s not the dead end one might think – there are a number of ways to educate yourself these days that don’t take years.
I’d love for a new perspective to take hold – one that sees both the landlord and the tenant as vital links in a chain of success. A collaborative approach to tenanting spaces that includes active participation in the assessment and application process on behalf of the landlords. This process is also 100% in the benefit of the operator – most are unaware of just how under qualified they are, with no standard to compare their preparedness against, and no barrier of entry to stop them from moving forward when they shouldn’t.
Most landlords have at some point experienced the financial burden of an underperforming tenant, but now it’s time to accept that a more involved approach by the both parties in assessing their suitability can make all the difference to everyones’ bottom line.
So really there is no room anymore for ‘us versus them’, there is only two parties that need each other in order succeed, like a chain needs its links to be interwoven to fulfill its purpose. And a chain is only as strong as its weakest link.
As the saying goes – nothing changes, if nothing changes.
Both types of locations offer a variety of benefits or disadvantages depending on the type of venue and the concept in question.
A shopping centre will deliver a measurable number of people to their space, and their greater patronage is underpinned by major retailers, known as anchor tenants, such as Coles, Woolworths or Aldi. In some cases it may be all three, and usually a K Mart, Big W or Target are a part of the attraction.
Shopping centres also provide benefits like ease of parking, public transport hubs and a variety of retailers and retail products to attract a repeat customer with diverse shopping needs. Though the convenience of having a wide range of customers guaranteed in one destination comes at a price, the privilege comes at a higher gross rental.
More recently, shopping centres have been updating their food and beverage spaces allows them to really define their precincts. A good example being food courts predominately housing franchised based businesses. While there are many franchised cafes spaced throughout the centres, the explosion of coffee speciality retailers has opened this market up and you would now be hard pressed to find a shopping centre without a coffee roaster in it.
This expansion into food & beverage entertainment precincts has given shopping centres the ability to attract independent operators, those who previously would never have entertained the idea of having their brand represented in a shopping centre environment. Most centres will now seek inspiration from independent operators located in strip locations and try and bring them into the centres as a way of providing new retail concepts to their customers and also to get one up on their competition.
Strip locations offer different benefits and are generally more flexible in how you can enter and operate in this type of location. Strip shop locations offer food and beverage operators a chance to build their own identity by being part of the fabric of a local community. They give the operator the freedom to adapt their menus and their operations at will, with minimal interference from the landlord. By not having the stringent lease requirements that a shopping centres does, businesses are able to enter the market via a lower cost of entry and lower ongoing fixed cost.
In a strip location you have the freedom to deliver your own marketing strategy at your cost, and you can control when and how the marketing is delivered – whereas shopping centres will have a monthly marketing fee payable by each tenant. Strip locations on average will have a lower gross rental as these marketing fees aren’t included in the lease, the outgoings are cheaper and the per square metre lease rates are far less.
Strip Location or Shopping Centre – how do I choose?
The first important piece of the puzzle is understanding your target market and the size of your budget. Doing your due diligence, i.e. completing your business and financial plans, is vital as the result of this process will give you both those answers. The information will help you define the criteria for your site selection and will dictate whether your site is best suited to a shopping centre or strip location.
While there are cross over markets that will frequent both shopping centres and strip locations, you need to focus on the habits of your core target market to define whether you are best looking at a shopping centre or strip location.
When to Choose a Strip Location
If your core target market is the local community, early adopters or a younger demographic then you will be more suited to strip location. You will find that these customers are looking for alternatives to the mainstream shopping centre, they prefer destinations they can discover and call their own, something they feel a part of. This type of market is usually extremely loyal.
Whilst these customers will frequent shopping centres when necessary, they are less likely to go to a shopping centre specifically to seek out a food & beverage experiences. However this is the exact customer shopping centres actually desire, so they chase the retailers that can provide this kind experience in their centres.
The clearest example of this is the introduction of coffee specialty retailers, now scattered throughout most shopping centres. The second major shift is the emergence of entertainment and dining precincts within centres that have been specifically built to feel like you are not in a traditional shopping centre.
When to Choose a Shopping Centre
If your core target market is families, a middle age to older demographic, a mainstream customer that follow the trends not starts them, then your brand will typically be more suited to a shopping centre.
This is generally why franchises have been successful in shopping centres, their customers know what they are going to get, they are family orientated and they follow products trends not create them – they are a safe choice.
Since the early 2000’s shopping centres have developed strong night-time entertainment precincts that attract families and a younger demographic looking for a fun night out. Nevertheless, this younger customer is a mainstream customer and again, is following trends not setting them.
You simply cannot underestimate what effect the planning and research of your core target market has on making an informed decision regarding what location is best suited to your business. Essentially the site selection process is one of the most important aspects of building or buying a successful café or restaurant.
To make your decision of a shopping centre or a strip location, it’s important to understand some of the key lease terms. I have listed some below, but this is a specialised area and seeking legal advice is advised.
Understanding Lease Options & Obligations
Shopping Centres prefer shorter lease terms than most other private landlords. Lease terms will vary between cafés and restaurants, with restaurants generally given longer terms due to a higher capital investment. On average the lease term will be between five and seven years. The main reason for the shorter lease terms in shopping centres is to allow for the tenancy design and build be kept up to date and maintained to the shopping centre standard.
Strip Landlords are more likely to accept a longer lease as they would like to lock in the property income and do not have the stringent refurbishment requirements that Shopping Centre Landlords do.
Strip Landlords are more likely to accept options on your lease – options are set time extensions on your existing lease if you wish to make the term of the lease longer. Always be aware that you have to exercise the option by a specified date, or the landlord may choose not to accept it.
Refurbishment: this is a Shopping Centre requirement. It will be part of your lease that at the end of your tenure you will be required to refurbish your premises. This can range from minor upgrades to a full refurbishment that will have you closed for a short period of time. Whilst the extent of the refurbishment is negotiable this needs to be factored into your long-term plans and financial position.
Strip Landlords are not likely to have as stringent requirements on a refurbishment during the term of your lease, this clause is generally for Shopping Centre Landlords only.
However in my experience as both an ex-restaurateur and a leasing executive you should be planning to spend money on a refurbishment around the 5-7 year mark, and the size of the refurbishment will depend on wear and tear and brand upgrades. Your customers both internal and external and your staff expect to see you spending money on your business and will reward you with their loyalty.
Permitted Use: As Shopping Centres have a large number of food and beverage tenants, they maintain some level of control as to what items each tenancy is permitted to sell – this will be done through the ‘permitted use’ clause within the lease.
Although the permitted use clause can be somewhat generic at times such as ‘café serving breakfast, lunch and dinner trading as xxxxx’, your menu will be an attachment to the lease which will have the items that you are permitted to sell. You may negotiate or amend the menu items at the beginning and during your lease term however the final approval sits with the landlord. This is often a juggle as they will need to be mindful of fairness between all the food and beverage operators within the centre.
Whilst this may seem onerous and controlling, it’s designed to protect tenants from cannibalising each other’s sales by selling the same items – in effect it’s an umbrella protection.
Strip Landlords take less control over your usage of the venue allowing tenants to make unfettered choices about menus etc with ease. Regardless, you need to be aware of what your permitted use is within your lease at all times.
The lack of interference via the permitted use clause from Strip Landlords isn’t all good news – in this type of site you will be exposed to whatever other types of food and beverage businesses the Landlord signs on. Other landlords in the Strip may have a different agenda to your landlord and that leaves the possibility of having a competitive business being signed on directly next door without any regard to the success of either businesses. Currently in my own neighbourhood there have been 3 new Indian restaurants open in the same street as an existing Indian restaurant – the existing restaurant is an institution and will be hard to compete against, but the newcomers want to try! Not all these similar businesses can survive so physically close to each other – there’s only so much target market to share.
Making Your Decision
The debate between selecting a site in a shopping centre vs a strip location does not have a clear yes or no answer. There are very successful food & beverage businesses in both environments, both franchised and non-franchised.
The question you need to ask is ‘has my business done the appropriate planning to make the most informed decision as to whether the site should be in a shopping centre or strip location?’
The most common traits of successful food and beverage businesses in both shopping centres and strip shops is they know who and where their customer are, they know their numbers and can access them in real time, use best practice operations and exceed their customers’ expectations.
As food and beverage trends continue to evolve and landlords continue to chase the next new thing, retailers need to educate themselves as to what arena they want to play in and what the framework is in each arena.