OPERATORS GO SMALLER AS OMICRON BITES PROFIT
Rising trend finds F&B investors preferring to downsize in different locations instead of focusing on larger restaurants, according to JLL
Food and beverage (F&B) operators in Hong Kong are switching to smaller outlets amid a difficult operating environment, with some of the more resilient ones focusing on takeaway orders.
By concentrating efforts on delivery, some tech-savvy operators are also looking to minimise the impact of the social distancing rules on their business.
Singapore-based Flash Coffee has opened nine stores, including five grab-and-go outlets, some as small as 215 sq ft, in Hong Kong, in the past five months.
“A substantial part of our sales come from technology,” said Jonathan Tsao, managing director for Hong Kong at Flash Coffee. Since its launch in 2020, the chain has grown to 250 outlets across Singapore, Indonesia, Thailand, Taiwan, Hong Kong, South Korea and Japan.
Hong Kong restaurants have been struggling to stay afloat since the government imposed its strictest social distancing measures in early January to curb rising coronavirus infections fuelled by the Omicron variant.
Dine-in is restricted from 6pm, seating is limited to two to a table and entry is only allowed for residents who have had at least one dose of a Covid-19 vaccine.
Yesterday, McDonald’s said it would temporarily close 38 outlets, while some 90 branches will only open until 6pm. It came after Cafe de Coral, which operates 163 fast food outlets and 42 Super Super Congee and Noodles stores, suspended most of its dine-in service to focus on providing takeaway from March 1.
In response to the city’s tough social distancing measures, Flash Coffee launched a delivery app last week, which allows customers to order, customise and pay for their coffee online. They can collect it in-store or have it delivered.
Tsao believed the chain’s business model of limited headcount – one to two for each outlet to maintain an adequate service level – and smaller shop size would prove resilient in the current Covid-19 environment.
He said while Flash Coffee was not entitled to the rent deferrals of at least three months proposed by Financial Secretary Paul Chan Mo-po last month, some “landlords were supporting us in these difficult times”.
Still, Flash Coffee, which is backed by Rocket Internet and technology investment platform White Star Capital, is keen to open 50 stores in Hong Kong by the end of this year.
“We do not know how long the fifth wave [of Covid-19] will last, but we are extremely bullish and want to invest in Hong Kong as soon as the city is safe,” Tsao said.
Market observers, too, said they had noticed a trend among F&B investors for smaller spaces.
Previously, F&B tenants, especially from overseas, sought space in the 5,000 sq ft to 10,000 sq ft range, but now most feel that 1,000 sq ft to 2,000 sq ft is sufficient, according to Michelle Chiu, director of retail for F&B and lifestyle at JLL.
“Instead of opening one big restaurant, F&B operators now prefer to open many smaller outlets in different locations,” she said.
Chiu said last year she helped an F&B client who ran a 7,000 sq ft restaurant to find space for three outlets of about 2,000 sq ft each. The smaller ones were easier to manage and were performing according to the client’s expectations, she added.
Hongkongers are used to ordering takeaways since the city imposed the first social distancing curbs in 2020, according to Martin Wong, director of research and consultancy for Greater China at Knight Frank.
“Smaller spaces for restaurants can help reduce rental expenses,” Wong said.