A High Street Food Solution?

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Retail vacancies on the high street and in town centres are well documented. Such vacancies can provide opportunities for innovative food operators who can tailor their business model around the A1 user of such retail units without necessitating planning permission for A3 use.

The sale and preparation of hot food usually falls under either use class A3 “restaurants and cafes” or A5 “hot food take-aways” where this is the primary activity. By way of contrast, retail units will have permission for A1 use, the use class reserved for “shops, retail warehouses, hairdressers, undertakers, travel and ticket agencies, post offices, dry cleaners and internet cafes, the retail sale of goods other than hot food, the sale of sandwiches or cold food for consumption off the premises”. On the face of it, the A1 use class is not suitable for the sale of hot food for consumption on the premises. How then, are operators such as Pret, Canteen, Subway and Itsu trading from A1 premises?

The benefits of operating under A1 use are numerous. Most retail units fall under A1 user, so there is no need to apply to the local authority for change of use. Such planning applications can be time and cost intensive and may ultimately be rejected, or permitted with onerous conditions (such as the requirement of technical equipment or restricted opening hours). Additionally, many A1 sites are taken without the payment of a premium to landlords, unlike properties benefiting from A3 use. The capital injection can therefore be lower for operators whose business model is based on the A1 lease. If an operator can successfully open under an existing A1 user, they can exploit high footfall areas with half the hassle.

Traditional restaurants are not suitable for the A1 format. However, there is some room for food operators to manoeuvre within A1 user. Food can be sold from A1 premises if the primary use of the premises is of a retail nature, but ancillary uses are permitted and here the confusion lies. Primary cooking cannot take place on site but hot dishes can be prepared off site and held at a set temperature or reheated, a model which Eat, Pret and other lunchtime favourites are taking advantage of. The emphasis is on limited seating which is suited to the “grab and go” lunch model, sandwich shops in particular can benefit. However, the expansion of non-traditional sandwich shops operating from A1 sites shows that there is a grey area which can be exploited commercially. We are seeing an increase in brands modifying their offering to fit the A1 mould, reworking their menus so primary cooking is not required.

But when are you crossing the line to A3? How many tables and chairs are acceptable and how much hot food can you introduce? It is a matter of fact and degree and navigating the fault lines between A1 v A3 uses requires care. Local planning authorities are acutely aware of this grey area, therefore, care needs to be taken to ensure a viable business model is not put at risk due to regulatory planning blind spots. High street chains have struggled to get the balance right and some councils do not look favourably to those flouting the rules. Caffe Nero has recently experienced a backlash from local businesses and councils after opening several branches in towns where the units were designed as A1 retail use. Subsequent applications for A3 use through retrospective planning appeals followed.

Given the woes of the high street, operators able to tailor their models to fit into the A1 mould will have an abundance of sites to choose from without the initial problems associated with applying for change of use to A3 and inconsistent approaches by councils. This is an attractive option, but planning inconsistencies and differing approaches by councils can be a threat to this model. However, recessionary times are known to encourage entrepreneurial activity and it is no surprise that innovative operators are taking advantage of these blurred lines. With high streets suffering and the growth of online shopping, local authorities should perhaps be flexible in allowing food operators to grow within the A1 model. Failing that, clear guidelines are required so that food operators are provided with certainty without the fear of repercussions from local councils.