18 Very Important Pieces of Information for Anyone Who Wants to Enter the Food and Restaurant Industry, Specifically.

Studies indicate that the size of the restaurant market in Saudi Arabia is approximately 79 billion SAR, with 11 billion SAR worth of investment opportunities available annually. Below, I will discuss important information about restaurants for those interested in establishing a project in the restaurant sector.

It is evident that the restaurant and café market is expanding and growing, and demand remains extremely high. From my observation in the feasibility studies we conduct, many project founders are eager to enter this field, but the question is… how?

This sector is considered an industry, and every industry has its secrets and rules, which I will discuss from a financial perspective, including how to establish, budget, and measure the performance of your project according to global industry standards.

Although the local market may differ from global averages, it will align with global standards in the face of upcoming competition, which will lead to strong competition and the exit of projects that are unable to keep up with current changes.

In the name of God, we begin.

We will use sales as the main metric in the general rates. When we say that management salaries should be around 10% of sales, this means that a project selling for one million SAR should not exceed 100,000 SAR in management salaries annually.

As mentioned earlier, management salaries should be around 10% of annual sales.

Food cost should be around 25% to 35% of the meal price. Here, we are talking about the cost of goods sold without considering additional expenses such as salaries, rents, and so on.

It is preferable that salaries for non-management staff do not exceed 20% of sales in general.

Regarding bonuses and incentives, they should be around 6% of annual sales, divided based on incentives when achieving targets, and it is preferable to link them to employee performance and branch evaluation.

It is also advisable that incentives do not exceed 20% of salary expenses to avoid disrupting the project's salary structure.

All costs should not exceed 65% of total sales, meaning that the net profit should be 35%.

When selecting the project's space, how do I choose the right area? The space of the project is often measured by sales productivity, especially for restaurants with local demand. Here, we observe that the average productivity per square meter per month is around 1,050 SAR. This number cannot be generalized entirely, but it can be used as a conservative average.

It is important to clarify that numbers will not be clear for the project in its first year due to the lack of previous customers. However, the numbers will become clearer over time, and the project will reach maturity by its fifth year of establishment.

When setting the price for juices, the cost is typically 15% of the selling price.

As for coffee, it ranges between 15% and 20% of its cost. It is observed that restaurants offering coffee and desserts after the main meals achieve excellent additional profits. The price is, of course, different in specialty coffee.

The rent should not exceed 10% of annual sales. Global studies suggest that it should be 6%, but the situation in the local market is still much higher than that.

Packaging costs and other consumables such as napkins and cleaning materials should not exceed 3% of sales, especially for takeout sales, and 1% to 2% for local sales.

These figures are based on market studies and many feasibility studies we have conducted, where break-even points and sensitivity analysis were studied. We advise entrepreneurs to carefully monitor performance metrics.

May God grant success.