Ensuring that your restaurant start-up is a commercial success requires the same elements of business planning as any other commercial entity. However, choosing a location that has the footfall required to meet financial plans and models requires special attention.
Dubai is an emirate with a plethora of “mini cities” comprising its geographic makeup. With over 200 nationalities making up the population, picking an area for a restaurant depends on the target audience you are trying to service.
From our knowledge of the city’s food and beverage sector, we consider the following three areas “hotspots” for new restaurant openings – Business Bay, JBR Dubai Marina, and Jumeirah Beach Road.
You could add the Dubai Mall and Mall of the Emirates into the list since these have tremendous footfall. However, the mall lease rates could be prohibitive to independent restaurants that we have focused on in this article.
Costs to consider when opening a restaurant
• Staff training
• Capital costs
• Staff visas
• Opening stock
• Sponsor fees
• Accounting software
• Occupational health cards
• Equipment testing
• EPOS system
• Fire fighting test certificate
• Working capital
• Restaurant consultant
We have avoided detailed pricing for the individual elements outlined as they can vary depending on licensing authority, lease value, and suppliers utilised. However, the average cost of opening a small, independent, restaurant ranges from AED500,000 to AED1.25mn depending on the size of the restaurant and lease costs. This is based on restaurant space ranging from 500sqm to 1,200sqm. Capital costs, rent, and working capital comprise 78 percent of total money outflow.
• If you have an area in mind for your food establishment, make sure that you do your research first by looking at footfall and demographics to ensure there is the target audience to service.
• Do prepare a business plan with full financial forecasts before committing any expenditure.
• Do ensure you have your restaurant food offering and menu established before you make any equipment purchases. We have seen businesses that purchase kitchen equipment before the food offerings have been decided upon which leads to huge amounts of capital being wasted.
• Do cost out your menu fully so that you can establish a pricing policy that covers your fixed overheads. Menu cards should be prepared with the exact ingredients and costing.
• Do engage a specialised restaurant accountant to assist with your financial forecasting and monthly reporting.
• Prepare a detailed marketing plan and utilise delivery channel providers, such as Deliveroo and Zomato. These online platforms could add an extra 40 percent on your sales each month.
• Do prepare a fully comprehensive competitor analysis in order to understand their pricing and product offerings.
• Do prepare a full milestone analysis as part of a fully rounded project management plan.
• Do check the permissions and NOC’s required from your landlord.
• Do check the power requirements of your restaurant equipment and ensure the restaurant unit you choose can support these.
• Don’t choose the first unit a real estate broker offers you. Many landlords will only offer a couple of month’s grace period on the rent and delays obtaining permissions could eat into your working capital.
• Don’t over estimate your first year’s sales. Be realistic with your financial forecasting to avoid under capitalising your restaurant venture.
• Don’t try to open a restaurant on your own if you do not have any restaurant experience. The majority of restaurant ventures that fail in Dubai are down to owners trying to do everything themselves with no previous knowledge of the F&B sector or Dubai.
• Don’t overprice your menu offerings. With so much choice for the consumer in Dubai, getting your pricing right is fundamental to business success.
About author: Dillon Daryanani, Commercial Director, Restaurant Consultancy Division, UAE Business Solutions.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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