Fast Food Is Growing While Cafes Slip. Landlords Should Read the Fine Print.

The phrase F&B market hides businesses having quite different years.

Singapore's food and beverage services sales fell 1.9 per cent year on year in July. Within that total, fast food grew 4.6 per cent while cafes fell 6.4 per cent and food courts and other eating places fell 6.6 per cent. Restaurants slipped 0.3 per cent. The figures were reported on 7 September in The Business Times' coverage of the latest sales release.

That is a useful warning against judging a prospective tenant by the broad popularity of eating out. It is also nowhere near enough information to conclude that a fast-food operator is automatically a better tenant than a cafe.

Category sales move for several reasons: prices, the number of outlets, or the performance of the existing businesses. The headline tells you nothing about how much profit any individual operator made.

A cafe with regular neighbourhood customers and manageable occupancy costs can be quite resilient in a weak category. A fast-food outlet can have poor unit economics inside a growing one.

Ask for the operator's own numbers

The lease decision needs information about the actual business. What is the average spend? How much trade comes from repeat customers? Which hours generate the contribution that pays the fixed bills?

For an existing outlet, reliable trading records are worth far more than the size of its social media following. For a new concept, the assumptions should be specific enough to argue with.

Fast service places demands on ordering, preparation and collection. A concept can lose its entire advantage if the unit creates bottlenecks at peak times.

A cafe usually needs customers to stay longer, which changes seat productivity and raises the value of comfortable space. That works when menu pricing and repeat demand support it. It gets difficult when an expensive fit-out is paired with an unrealistic turnover assumption.

The landlord's job is not to run the restaurant

It is still sensible to understand how the tenant expects to make the lease work. A business that fails quickly leaves the owner with vacancy, arrears and a unit needing attention.

When reviewing rent, look at the tenant's payment record, the condition of the premises and the realistic alternatives. A slightly higher headline rent from an unproven replacement can produce less income once downtime and costs are counted.

The reverse holds too. A weak category is not a reason to cut rent for a business that is trading strongly. The property and the operator have to be assessed together.

July's numbers suggest consumers are being selective about where they spend. Landlords should be equally selective about the evidence they use to choose tenants. A category trend is a good opening question. The operator's own numbers should carry the conversation.