Food halls have taken the American dining scene by storm over the past decade, emerging first in culinary metropolises like New York City and Chicago before making their way to mid-sized cities and suburban mixed-use developments.
The number of food halls in the U.S. has expanded rapidly, from about 70 in 2015 to about 360 open and an additional 127 under development in 2023, according to a report by Cushman & Wakefield.
Milwaukee welcomed its first food hall in 2018 with the opening of Crossroads Collective on the East Side. Then came 3rd Street Market Hall in January 2022 – after months of pandemic-related delay – at The Avenue development in downtown’s Westown neighborhood, followed by North Avenue Market in September 2022 in a revitalized former Associated Bank branch building on the city’s west side.
Paper Table Food Co., another food hall with a slightly different delivery-focused, “ghost kitchen” model also opened last year in the city’s central business district and – to the detriment of its tenants – has gotten off to a rocky start. As recently reported by the Milwaukee Journal Sentinel and Urban Milwaukee, Paper Table has come under fire with accusations of failing to deliver the operational support it claims to offer vendors, forcing some to leave prior the end of their contract and demanding thousands in payment.
The food hall trend has grown in the face of mounting challenges for entrepreneurs in the restaurant industry, especially in the wake of the COVID-19 pandemic. Ongoing labor shortages and tight profit margins due to rising wages and rent can be significant financial hurdles to opening a traditional brick-and-mortar restaurant. The food hall business model offers restauranteurs a lower-cost, lower-risk option of starting or scaling their business.
Foot traffic is critical
Ken and Tonya Hughes had no previous restaurant industry experience before launching their hot dog concept Dawg City. Inspired by the various styles of hot dogs the couple loved trying while traveling the East Coast, what was initially a fun, far-off idea evolved into a business plan while they were stuck at home during the pandemic.
Two years later in May 2022, the Hughes’s opened their first Dawg City location at 3rd Street Market Hall and “hit the ground running,” said Ken Hughes. Within six months, the business was already gearing up to expand to a second location, at North Avenue Market.
Hughes attributed the advantages of shared utility costs and consistent traffic flow coming into 3rd Street Market Hall to Dawg City’s early success and scalability. Unlike stand-alone restaurants, which drive a lot of their business from diners who are after a specific type of food or experience, food halls draw customers who might not know what they want until something catches their eye.
“So, let’s say it’s a group of 10 and four want pizza and the other six are undecided, so now that food hall has drawn an extra six people there who are potential customers for me,” said Hughes. “Even if we get one out of the six, it increases our foot traffic and our business by bringing everyone to one hub where they can eat a variety of foods.”
On the flip side, relying too heavily on foot traffic to other vendors or the food hall as a whole could have the opposite effect if the food hall isn’t bringing in enough people, especially for a vendor that is still building its customer base and brand.
Such is the case for Dawg City’s location at North Avenue Market, where slower foot traffic is putting a strain on business. For context, the profit Dawg City’s North Avenue location turns in an average week is what it does in a typical day at 3rd Street Market Hall, said Hughes.
“At the same time, we enjoy being (at North Avenue Market), we enjoy being in the neighborhood,” he said. “We’re just right now fighting off the storm to see what’s going to happen with that location.”
Building a following
North Avenue Market has encountered its fair share of hurdles in its first year of operations as it works to appeal to a wide range of customers while establishing its place within the local community. Among those challenges are retaining staff and generating foot traffic, according to Chris Harris Morse, founder of North Avenue Market.
Morse owns four of the seven businesses currently operating at the market: 4 Corners Café, BTW (short for Burgers, Tots and Wings), a bar on the main level and Mosler’s Vault lower-level speakeasy, both in partnership with Milwaukee-based Bittercube. In addition to Dawg City, the market houses two other independently owned vendors: Plant Joy and Pupuseria Los Angeles.
“There are times when foot traffic can be a challenge, especially when you’re in a neighborhood like we are verses being downtown, where you have 30 hotels surrounding you and all kinds of other events and you’re a component of that and you’ve got a lot more people going through,” said Harris Morse. “We’re trying to look at the different things we can do to get exposure.”
To that end, the venue earlier this year renovated its lower level into a space for private and community events including live music performances, comedy shows and seminars on financial literacy and female empowerment. Oftentimes, these events are how people learn about North Avenue Market for the first time. Now, the key is to build upon that momentum, said Harris Morse.
Leveling up
For some operators, the food hall model offers a stepping stone to the next iteration of growth. Take Mr. Dye’s Pies, for instance, which is now in its 13th year of business and in January moved into one of the four incubator-style hawker stalls at 3rd Street Market Hall.
The Milwaukee-based pie maker previously operated out of a shared commercial kitchen space located on the city’s far west side and did the lion’s share of its retailing at farmers markets, sometimes as many as 10 in one week. That’s how the business found success in building a loyal following of customers from across Wisconsin and beyond, but from an operational standpoint, it wasn’t an easy way of doing things.
“You gotta have folks who can talk to customers, be professional, somebody that can set up the tent, somebody with a driver’s license, somebody that will bring your money back – that helps. When you add it all up it’s hard,” said owner Johnathan Dye.
Opening a retail space has allowed the business to shift away from farmers markets and let customers come to them. And so far, they have. One loyal customer recently drove from as far as Kentucky, just for Mr. Dye’s Pies. Others make the trek from the Quad Cities, Chicago and Madison. Thanks to the market hall’s draw, Mr. Dye’s has also reached a variety of new customers, many of whom are tourists or visitors from out of state.
Dye said the next step for his business will be to eventually expand into a stand-alone brick-and-mortar location. The food hall operation is a good launching point towards that.
“The idea is that you come in with minimal investment and then you can showcase your product and test drive it, and then if you like it and it’s working for you, then you re-up into your next move,” said Kurt Fogle, who co-owns Dairyland Old-Fashioned Frozen Custard & Hamburgers and runs 3rd Street Market Hall’s hawker stall program with Brent Fogle, Katie Fogle and Joe McCormick.
For Milwaukee-based Scratch Ice Cream, a small corner spot at Crossroads Collective as its first retail location helped lay the groundwork for a total now of four scoop shops in the Milwaukee area, including its newest location in West Allis.
“Within the first few years of business you don’t have a ton of working capital, so this opportunity gave us a chance to have a retail location but not have to do a complete build-out and spend a bunch of money,” said Ryan Povlick, partner and founder of Scratch Ice Cream.
By the time its Crossroads Collective location opened in 2018, Scratch had built a burgeoning wholesale business. Establishing a physical, consumer-facing presence boosted brand exposure with area restaurants and grocery stores.
Last year, Scratch expanded its retail footprint with its first stand-alone brick-and-mortar location, in Brookfield. Thanks to its food hall location and mobile trailer at Zócalo Food Park, the business was ready to take the leap, said Povlick.
“It for sure gave us an idea of what to do,” he said. “Prior to this company, I didn’t have any food service experience so to get that experience on a smaller scale definitely helped. It was a pretty easy transition moving from one to the other.”
