After getting your concept and business plans down, it’s time to look for a suitable place to open your shop. While it's common knowledge that location is very important, the most desirable locales usually expensive, and high rental in Singapore can be a crippling factor in making your business profitable. It's also pertinent to bear in mind that Singaporeans, being food lovers, are willing to travel for exciting new cuisines or interpretations of food they cannot find anywhere else and also for ambiance even if a restaurant might be inaccessible. If your business is intending to use delivery platforms, the lack of footfall at your restaurant’s area might not be a major problem as you might be able to make up for it through delivery channels.
Identify your target audience
Other than obvious considerations, such as whether your target audience is office workers to decide on whether you should open in a location like the CBD, look at their age, and spending power as well. For example, local food concepts work better in the heartlands and people generally expect the food to be priced more affordably.
E.g., Generation X generally is more family-oriented and prefers family dining. If your target audience belongs to Generation X then you would require a larger area in your restaurants to accommodate the number of families in the restaurant.
It is important to estimate how much your target audience is willing to spend on a meal so that you know how much you can charge.
2. Physical aspects of your business/shop
Not all properties are suitable for F&B kitchens or certain equipment. You have to be clear about what you are planning to sell and their preparation methods.
Some aspects to consider:
What are the cooking methods used to cook the dishes? (E.g., 3-deck oven to bake bread, combi oven to roast meat, cooking hobs, and etc. )
Would most of your food preparation be done in a central kitchen or on the premises?
Do you require exhaust ducting and plumbing works to be done?
Is the existing power supply adequate for you to operate your kitchen equipment?
If the unit you are considering does not meet most of your kitchen requirements, there might be a considerable cost involved to fit it out accordingly. It is up to you to weigh if that cost is justifiable or if you would rather look for another unit.
Kitchen requirements
All food shops in Singapore (not to be confused with food stalls) must adhere to a minimum food preparation area of 10 SQM (excluding service area) stipulated by SFA. If your F&B business is a small one and you have a central kitchen to manage your food (E.g., Jelly Hearts cheesecake), opting for a smaller space would be sufficient for your business. For small snack items, you can consider renting a kiosk instead of a full-fledged shop. Small shops also work for takeaway and delivery concepts.
Taking over an F&B outlet vs a bare unit
Taking over an F&B outlet can be considered as a safer route as it probably has met the kitchen area criteria, and often comes with kitchen exhaust ducting, gas lines, and grease traps in place.
Whereas, taking over a bare unit requires more work as you/your F&B consultant may have to apply with URA for a change of use to the restaurant”. You can check the approved use for your unit here. Bare units are typically in new buildings, and ducting works for the kitchen exhaust may be required, incurring more cost.
3. Take a look at your neighbors
Nearby businesses might benefit yours through their customers and/or employees. According to 99.Co, opening your F&B business near tuition centers is good as parents tend to sit in a cafe/eatery while waiting for their children's classes to end.
If there are cuisines similar to yours nearby, fret not! Although they are competition, it could also mean that there is a high demand, which is a bonus for your business.
E.g., Tanjong Pagar is known to be the place for Korean food. Despite the saturation, it is still a popular spot because if one shop has too many people waiting in line, customers who are unwilling to wait will switch to neighboring shops.
4. Tenancy Agreement
Things to consider when opening your F&B business in:
Strata Malls
According to The Straits Times, strata malls refer to malls that do not have central management to oversee the tenant mix. Some possible downsides of opening in strata malls may be the lack of variety or a good tenant mix to draw in the crowd. Some strata malls include Bugis Cube, Queensway shopping center, Sun Plaza, City Gate, Sunshine Plaza, The Arcade, etc
Strata malls rarely have anchor tenants
Anchor tenants are shops that attract customers to the mall (E.g., Uniqlo, supermarkets, etc.). The downside of not having anchor tenants is that the businesses in strata malls have to rely on their own creativity and marketing to attract customers, rather than benefiting from customers who are there to patronize anchor tenants.
Also, strata malls have lower foot traffic as compared to commercial malls as they are often family-friendly and have a cheaper rental.Strata malls rent might be cheaper than bigger malls
On the other hand, strata malls are more financially accessible to new F&B businesses. Unlike commercial malls, which are particular about the F&B concepts entering the mall in order to ensure a good tenant mix, strata malls are also more welcoming to new, unproven brands.
E.g., the Queensway Shopping Centre shop rental rate ranges from S$5.29 - S$9.33 Per Square Foot Metre (PSFM). Compare this to 313 Somerset Mall in Singapore, the rental price of shops can range from S$9.39 to S$24.77 PSFM.
Businesses operating within a mall are bound by the mall’s operating times. Some malls will mandate opening daily (even if there is no crowd on the weekend, as is the case for places in the CBD) which means higher manpower costs. Other malls may switch off the central air conditioning by a certain time each night even if you are allowed to continue operating, which poses discomfort to your customers.
Commercial Shopping Malls
GTO (Gross Turnover)
Gross Turnover is a percentage of your monthly revenue charged on top of your rental. According to Mall Spaces Asia, malls typically charge between 15-20% Gross Turnover (GTO) and premium malls with luxury retail products may charge even higher than 20% GTO.If you plan to open your F&B business in a shopping mall, be prepared and budget your operation cost and menu prices accordingly. The mall management will require integration with your POS system to have access to your monthly revenue figures.
How GTO works: E.g., Your total rent costs S$100K. The mall charges 15% GTO, so you will have to pay S$15,000 on top of your rental.Look at the location within the mall
The more foot traffic there is within a particular spot, the more expensive the rental cost would be. Commonly, shops with a bigger frontage or near entrances are more costly.
E.g., the Basement level of shopping malls usually has a higher footfall. A study done by Knight Frank found that rents in basements are higher in Orchard Road malls as their basements are connected to the MRT station and there are underground links connected to other malls.Operating times
Businesses operating within a mall are bound by the mall’s operating times. Some malls will mandate opening daily (even if there is no crowd on the weekend, as is the case for places in the CBD) which means higher manpower costs. Other malls may switch off the central air conditioning by a certain time each night even if you are allowed to continue operating, which poses discomfort to your customers.
5. Look out for upcoming developments
It may be good to take a look at the URA Master Plan to determine if there are upcoming developments in the area. According to Singapore Press Holdings, smaller tenants' rental leases last for three years and they can be renewed after three years. If you are making a decision based on upcoming developments contributing to the footfall at your outlet, but the development is only going to be ready years later, picking that location to open your F&B might not be a wise choice (E.g., Woodlands Economic Hub, etc.).
All in all, when choosing the perfect location for your F&B business, keep your business model, information on the location, and how your neighbors in check so that you can have a rough gauge of the location you have selected. This will affect your cost and profits so you have to ensure that you are making the right choice. Remember, do not rush into settling one. Instead, put in the time and effort to find the perfect one for your F&B business.
Caroline Yap is the editor and intern at iCHEF Singapore. She manages iCHEF Club, a growing community of F&B owners in Singapore – organizing events, an online newsletter, and the F&B Entrepreneur Bootcamp, the only regular workshop on opening a new restaurant in the country. In her spare time, she loves drawing, painting, and creating new visuals. Her love for Korean food runs deep such that you can spot her at any famous Korean Restaurant in Singapore.
