Special Report | June 2012 | By Carolyn Surh

The Next Wave of Food Courts?

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Food courts in China offer more variety in food and experience than in the U.S.
A Chinese location of Singapore-based Food Republic.
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However, even within a city, locations across the municipality must be customized to the hyper-local customer climate. Within the central business districts, as the downtown, business-oriented areas are known, Western restaurants can enjoy relative success because of the high percentage of international customers. However, in the upcoming ICC complex, a ritzy mixed-use development still under construction, the food offerings will likely cater primarily to local tastes, despite its location in a foreigner-heavy area of central Shanghai.

High-end, luxurious food courts are also showing up in those tier-one cities, where salaries tend to be higher. Increasingly, these food-court openings are in locations linked to office high-rises, which provide a stable of potential customers at lunch and dinner.

In such locations, however, food courts have to compete with office canteens, which offer lower-priced meals often subsidized or paid for entirely by employers. While the canteen meals tend to be lower quality, the savings they offer are significant. This is especially important in China, where the average household savings rate is 31 percent, according to Credit Suisse.

Réel Kitchen houses 11 full-service restaurants, along with 24 quick-service eateries and 11 snack stalls, and boasts more than 66,700 square feet of dining space.

In fact, younger, white-collar workers are one of the primary demographics at Chinese food courts. These workers earn a higher-than-average salary, which can accommodate higher prices. Average spend per food court customer in China is RMB 20–25 (around $3–$4), which can be expensive considering annual per capita income is approximately $4,428 per year, according to the World Bank. Average spend in U.S. food courts, comparatively, is around $5–$6, but American per capita income is more than 10 times that of China at $47,153.

In China, payment is commonly tendered through a card system, in which customers load value onto a card via cash or bankcard that can be used at the various restaurants within the food court. This system limits “transgressions,” Ong says, as payment-card kiosk locations are limited and therefore narrow the number of people exposed to cash exchanges. Leftover funds on a payment card can easily be turned in at the same kiosks for cash.

While young office workers are a mainstay at food courts, young families are also increasingly making visits, Ong says. The one-child policy in China means more disposable income for China’s growing middle class, whose spending potential has attracted the attention of international companies across the globe.

Those families visiting food courts don’t just have culinary variety to choose from, they also have a variety of experiences and formats. Within multi-use developments, food courts are increasingly part of a wider mix of food offerings housed in a single complex, such as full-service restaurants and grocery stores generally found in shopping-mall basements. Shanghai IFC, a high-end mixed-use development, boasts upscale full-service restaurants, such as Morton’s The Steakhouse and a Michelin-starred Cantonese restaurant on its upper floors; casual-dining restaurants on mid-level floors; and a food court and grocery store in the basement.

Size and scale make food courts in China distinctive. After all, a medium-sized city in China such as Qingdao is still home to more than 8.5 million people, and larger cities like Shanghai and Beijing have populations of more than 19 million.

And, after proving themselves in cities that big, food-court concepts become confident they can survive in other markets, including the U.S. Successful chain operators with locations in China are starting to approach the U.S. market. Ajisen Ramen, a popular Japanese ramen noodle chain with 600 worldwide locations and a mainstay in China shopping malls, has already opened six locations in the U.S.

Asian dessert-like drinks such as tapioca pearl milk tea, or “bubble” milk tea, as it’s commonly called, arrived in the U.S. well over a decade ago, although its penetration has been limited to areas with significant Asian populations.