Rating Manual section 6 part 3: valuation of all property classes

Section 924: food courts

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

1.1 This instruction applies to food courts situated within Regional Shopping Centres or Shopping Centres within Town Centres.

Definition

1.2 Food courts comprise a cluster of outlets/ kiosks selling a variety of food and drink for immediate consumption in a defined area of the Centre. The food outlets are either gathered around a communal seating area or occupy their own designated (and dedicated) seating area nearby.

1.3 This guidance covers the following types of food court:

1.3.1(a) The Centre Management retains paramount control of the kiosks and seating areas. Food operators are invited to trade from the kiosks but the Centre Management is responsible for the clearing, cleaning, repair and maintenance of the common seating area.

1.3.1(b) The Food Court is let to a single tenant by the Centre Management who in turn sub-let the kiosks to Food Operators but the head tenant retains the communal seating area and provides the services to the common area as described in 1.3.1(a) above.

1.3.2 The Centre Management leases kiosks to individual Food Operators. Typically these are situated around a central seating area which is retained, managed and serviced by the Centre Management in much the same way as described in 1.3.1(a) above.

1.3.3 The kiosk and a designated (and dedicated) seating area nearby is leased by the Centre Management to the Food operator. The Food operator is responsible for the clearing, cleaning, repair and maintenance of the Kiosk and seating area. This is now the preferred model of the Shopping Centre Management.

2. List Description & Special Category Code

Bulk Class: Shop List Descriptions: Food Court and Premises; Outlet at Food Court, Kiosk Primary Description: CR SCAT CODE: 104
Suffix: S (Specialist) Food Courts in one assessment falling within the definition outlined in paragraphs 1.3.1(a) and 1.3.1(b) above. G (Generalist) Food Courts falling within paragraph 1.3.2 and 1.3.3 above.

3. Responsible Teams

3.1 Generalist referencers are responsible for the survey and measurement of Food Courts described in 1.3.1(a) to 1.3.3 above.

3.2 Specialist caseworkers are responsible for the valuation of food courts in one assessment (paragraphs 1.3.1(a) and 1.3.1(b)).

3.3 Generalist caseworkers are responsible for the valuation of food courts where the food outlets or kiosks are separately assessed (paragraphs 1.3.2 and 1.3.3 above).

3.4 It is anticipated that each unit will have a named individual responsible for the class. More than one named individual is recommended for succession planning.

3.5 It is also recommended that each Unit should allocate a named co-ordinator, or Lead Valuer, to act as a point of contact within the Unit. This Lead Valuer will be responsible for assisting in the delivery of the Unit’s valuation scheme and also for liaising on value and technical issues with other Lead Valuers across adjoining Units. The Lead Valuer will be responsible for ensuring compliance with this section.

4. Co-Ordination

4.1 The Regional Shopping Centre Class Co-ordination Team (CCT) has overall responsibility for the co-ordination of this class. You can find contact details here Valuation Panel & Class Co-ordination Team Members. The team are responsible for the approach to and the accuracy and consistency of Food Court valuations.

4.2 The Practice Note describes the valuation basis for revaluation and National Specialist Unit (NSU) will provide advice as necessary during the life of the rating lists.

4.3 Caseworkers have a responsibility to:

  • follow the advice given at all times - Practice Notes are mandatory
  • not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team

5.1 There is no specific Legal Framework for food courts but guidance relating to restaurants in general can be found in the Rating Manual Section 6 - Part 3 - Section 875: Restaurants paragraphs 5.1 to 5.8.

6. Survey Requirements

6.1 Inspections should be carried out in accordance with the Valuation Office Agency Code of Practice. Arrangements for inspecting properties (Non-Domestic Rating).

7. Survey Capture

7.1 The way in which food outlets or kiosks are measured will depend upon how the units are let in the market and could vary from Centre to Centre. In the absence of better information it is recommended that such kiosks are measured to Gross Internal Area (GIA) in accordance with the RICS Code of Measuring practice 6th Edition or its replacement. The Seating area should also be measured to GIA. Gross Internal Area (GIA) - Measurement definitions - isurv.

8. Valuation Approach Valuation Considerations

8.1 Background

Food courts are often a feature of shopping centres. They comprise a group of food outlets offering a variety of food and drink for consumption either in a communal or designated seating area nearby.

Food courts are an essential means of

  • Getting shoppers into the Shopping Centre

  • Enhancing their shopping experience and

  • Keeping shoppers in the centre for as long as possible

The key to a successful food court is the variety of food offer and the general layout of the food court. Main anchors are often located to draw shoppers through the food court. More recently there has been a move away from the single assessment traditional food court operations, and these are becoming fewer in number.

8.2 Valuation

The valuation will be approached in one of two different ways.

8.2.1. Food kiosks and seating area in paramount control of the landlord (paragraphs 1.3.1(a) and 1.3.1(b)). The valuation will be based on a percentage of turnover, net of VAT as at AVD. The percentage adopted should be in accordance with the table in Practice Note 1.

8.2.2. Food kiosks in the paramount control of the food operator where the Centre Management or landlord retains control of a common seating area (paragraph 1.3.2). The individual occupiers are likely to hold individual tenancy agreements for the kiosks. Such agreements often include the following features:-

i.Times for opening and closing are stated. (This is not unusual in a shopping centre).

ii.The kiosk is let at a rent to reflect the communal seating area and the clearing, cleaning, repair and maintenance of this area and the furniture by the landlord.

iii.The tenant’s fit out and the installation of catering equipment to suit their specific requirements, subject to the approval, in terms of signage, fit out and layout, of the centre management.

iv.Crockery, cutlery, condiments etc are provided by the food operator and style branded.

The value of the communal seating area is reflected in the rental value of the kiosks. Communal seating area should not therefore be separately assessed or added to any Residual Mall Assessment.

8.2.3. Food kiosks and a designated seating area in the paramount control of the food operator (paragraph 1.3.3). The individual occupiers are likely to hold individual tenancy agreements for the kiosks. Such agreements often include the following features:-

i.Times for opening and closing are stated. (This is not unusual in a shopping centre).

ii.The kiosk and designated seating area is let at a rent which includes the whole demise in the occupation of the individual food operator.

iii.The tenant’s fit out and the installation of catering equipment to suit their specific requirements, subject to the approval, in terms of signage, fit out and layout, of the centre management.

iv.Crockery, cutlery, condiments etc are provided by the food operator and style branded.

8.2.4 Food outlets or kiosks which are individually assessed (paragraphs 7.2.2 and 7.2.3) will be valued with reference to the tone of rental value as at the AVD. Form VO 6003 should be issued to obtain this rental information on each unit. If the letting agreement makes provision for the rent to be set with regard to turnover or if there is a turnover ‘top up’ Form VO6066 should be issued.

8.3 Rental Adjustment and Analysis

8.3.1 In order that the Centre Management or Landlord are able to establish the right tenant mix in order to offer sufficient variety of food and drink to generate customer interest, it is unlikely that deals will show consistency in analysis. For this reason it is anticipated there will be a wide range of values and a range of turnover provisions.

8.3.2 Shell Rents

It is important to establish whether rents are for an unfitted shell or a fitted unit. The terms of the letting agreement should be established in every case, preferably by obtaining a copy of the letting agreement. The rent passing needs to be uplifted to reflect the degree of rateable fitting that the tenant is responsible for.

8.3.3 Treatment of communal seating area

In order for the rents to be maximised on the individual kiosks there has to be some element of seating available. Where the kiosks share a communal seating area the value of this area will be reflected in the value attributed to each kiosk. Communal seating area should not therefore be separately assessed or added to any Residual Mall Assessment.

8.3.4 Adjustments for services

In order to make adjustments to the rent passing for services provided by the landlord in respect of communal seating areas it is important to obtain full details of precisely what services are provided by the landlord. Care must be exercised to ensure that these are not covered by a separate service charge payable by the tenants of the kiosks which may lead to double counting.

8.3.5 Turnover rents

Careful attention needs to be paid to turnover rents. As the landlord is looking to achieve a variety of tenants offering a range of food options the range of turnover rents is likely to vary and it is anticipated there could be a considerable range of turnover provisions agreed.

8.3.6 Analysis of the rents should be in accordance with Rating Manual - Section 4: Part 1: Practice Note 1 2017 Rental Adjustment. There are unlikely to be any clean rents.

8.4 Valuation

8.4.1 Where the kiosks are let under individual tenancy agreements a rental valuation will be appropriate based on whatever evidence can be drawn from the actual food court lettings and other lettings in the shopping centre. Care should be taken to establish all relevant facts in each case.

8.4.2 Variety of food offer is key to a successful food court. Rents increasingly appear to reflect the Centre Manager’s desire to appeal to all tastes and to balance the offer. Consequently some rents may appear low in comparison with the others.

8.4.3 Overall approach

An overall approach to the valuation is considered appropriate. Where a seating area is in the demise of the operator of the kiosk, this should also be valued together with the kiosk. It will not normally be appropriate to zone these food outlets.

8.4.4. Key Rents

All properties where a key rent has been identified must be inspected. R2017 Key Rent Inspections.

9. Valuation Support

The following sources are available to Referencers and Valuers dealing with the maintenance and defence of shopping centres.

  • Rating support application (RSA)

  • Survaid

  • National Specialist Unit

Practice note: 2017: Food Courts

1. Market Appraisal

1.1 Food Courts have long been a component part of major shopping centres. Initially they were perceived as an added attraction to a centre which encouraged shoppers to spend more time in the centre. Around 10 years or so ago a number of food courts were replaced with more valuable retail space, but latterly they have had a revival, with new food courts incorporated in new Westfield centres at Stratford and White City and the creation of a new food court in the Merry Hill Centre.

1.2 Now Regional Shopping Centres Managers no longer consider the food courts to be an ‘add on’ but a core part of their overall offer to their customers. Today their aim is to “focus on delivering new food and beverage names to pioneer new trends and experiences…. constantly refreshing existing offer with new and exciting operators”. Source: Intu Properties.

2. Changes From the Last Practice Note

There was no practice note for 2010.

3. Ratepayer Discussions

No discussions have taken place.

4. Valuation Scheme

Landlord in paramount control of the kiosks and seating area.

4.1 Food courts where the Centre Management or landlord is in paramount control of the kiosks and seating area. Rating Manual Section - Section 920B : Food Courts paragraphs 1.3.1(a) and 1.3.1(b).

4.2 The valuation will be based on a percentage of turnover, net of VAT as at AVD. The percentage adopted should be in accordance with the table below:

Adopted Turnover net of VAT % as RV
Up to £1.5 M 7.0%
£1.5M to £2.0 M 8.0%
£2.0 M to £3.5 M 9.0%
£3.5 M to 5.0 M 9.5%
£5.0 M and above 10.0%

Landlord retains control of the seating area only

4.3 Food courts where the Centre Management leases kiosks to individual Food Operators but retains control of the common seating area. Rating Manual Section 6 - Part 3 - Section 920B : Food Courts paragraph 1.3.2.

4.4 Food outlets or kiosks which are individually assessed (Rating Manual Section 6 - Part 3 - Section 920B : Food Courts paragraphs 7.2.2 and 7.2.3) will be valued with reference to the tone of rental value as at the AVD. Food outlets in Shopping Centres will be valued with reference to the tone of rental value as at AVD. This may be agreed as a base rent or as a percentage of the food operator’s turnover or as a base rent with a turnover ‘top up’.

4.5 An overall approach to the valuation is considered appropriate. It will not normally be appropriate to zone these food outlets.

4.6 As the value of the communal seating area is reflected in the rental value of the kiosks, there is no residual value left and the communal seating area and should not therefore be separately assessed or value added in respect of it to any residual value of the Shopping Centre.

Food Operator in paramount control of the kiosks and seating area

4.7 The kiosk and a designated (and dedicated) seating area nearby are leased by the Centre Management to the food operator. The food operator is responsible for the clearing, cleaning, repair and maintenance of the Kiosk and seating area.

4.8 An overall approach to the valuation is considered appropriate. It will not normally be correct to zone these food outlets. Where a seating area is in the demise of the operator of the kiosk, this should also be valued together with the kiosk. It is recommended that the seating areas are also valued overall but using a factor reflective of market practice specific to the location.