The Complete Guide to Growing Your Restaurant Franchise in Saudi Arabia

The worldwide restaurant franchising industry is booming with thousands of opportunities for business owners. The concept applies to Saudi restaurants, too, given that you have done the math and scaled business in the right way.

Seeing the upward demand curve, we wanted to talk about restaurant franchises in Saudi Arabia from an introductory perspective. As much as franchising is widespread, and there’s no reason for you, as a business owner, to hold on to skepticism, there are many ways to succeed. 

According to online reports, Saudi Arabia adopted a franchise law not too long ago. According to the new policies, foreign business owners can operate restaurant franchises in Saudi Arabia. These new laws support foreign nationals who are looking to expand their restaurant business empire in the Kingdom. 

The good news is that the new policies are also applicable to local business owners who haven’t delved into the franchising model yet. 

Later in this post, we will talk about popular restaurant franchises in Saudi Arabia. For now, let’s see how you could get started with a restaurant franchise in Saudi Arabia on your own.

A Starter Guide On Restaurant Franchise in Saudi Arabia

For the franchiser and the franchisee, the concept of business revolves around a two-way street. While franchisers enjoy the luxury of expanding their business, the franchisee gets to increase their profit share by saving some on the side. 

Franchisers give licenses to different franchisees to officially use the restaurant’s trademark. There might be additional policies related to breakeven point, profit retention, and daily turnover depending on the franchiser. However, the basic idea is the same – i.e., a restaurant franchise in Saudi Arabia operates through a mutual understanding among both parties.

Consider these tips if you are a franchisee looking to sign a contract with a restaurant franchiser in Saudi Arabia. Feel free to improvise because many of these ideas are flexible in nature. The restaurant franchise in Saudi Arabia that you are about to acquire may operate on a different level. Therefore, don’t hesitate to be creative to implement fresh ideas that’ll help you down the road. 

•  Evaluation of Business Model

As a potential restaurant franchise owner in Saudi Arabia, you need to see which franchise owners are open to business. Similarly, franchisers cannot simply announce their business’s availability and get everyone and anyone on board. 

Restaurant franchises in Saudi Arabia need to roll out a franchise license to make everything official. This license is given to the franchisee to officially allow them to use your restaurant’s brand name without involving any complications. 

Sometimes, the franchisee doesn’t perform well. It might be because of the location of the restaurant franchise in Saudi Arabia, cost factor, staff training level and advertisement on the franchisee’s part. Other than that, there is always a risk factor concerning the dilution of Brand Names for franchisers. 

The best way, as a franchisor, is to evaluate the cost structure of the expected cash flow for the first five years of the new franchise. Meanwhile, franchisees need to come up with a sound business proposition that covers the cost from the following aspects:

1. Equipment required
2. Initial setup cost and personal expenses
3. Restaurant’s infrastructure development (if/any)
4. Type of technology to be used in the restaurant
5. Human resource management
6. Advertisement and marketing plan

Under normal circumstances, franchisers sometimes provide the initial capital to replenish the inventory, print material, and other things for franchisees to get started. See which options are available and act accordingly. 

• Process Replication

As an owner of a restaurant franchise in Saudi Arabia, if the concept of your business is replicable, go for further expansion. It might be due to the tremendous popularity of your restaurant’s brand name or overall customer loyalty. Still, scalability sometimes comes off as low-hanging fruit – ready to be picked up. 

On the other hand, the franchisees need to make sure that if they are looking to own a restaurant franchise in Saudi Arabia, the replication process shouldn’t be too hard. The core components are:

1. Franchisor’s tracking and sales reporting
2. The process for stock and inventory replenishment
3. Vendor management
4. Staff training
5. Payouts and commission management
6. Supply chain management

 

• Issues Concerning Trademark and Logo Use

Anyone who owns a restaurant franchise in Saudi Arabia will tell you that franchising the business means giving someone the right to use the business name, trademark, and logo. Specific policies around trademark and logo use exclusivity have to be certain to prevent anything terrible from happening. 

Ensure that your brand name and logo are registered with the Saudi Food Business authorities. Doing so also helps to protect the intellectual property of the franchise owner. On the other hand, franchisees need to sign a contract with clauses regarding the fair and reasonable use of the restaurant business’s logo and trademark. 

• Cost Estimates

Both parties, i.e., the franchiser and the franchisee, need to agree on the cost estimation of setting up the new business branch. Many restaurants invest in erecting the franchise by setting up the franchise, furnishing it, paying for the first 3 months’ rent, and vice versa. 

However, that may not be the case in every scenario. If the franchiser is looking to split up expenses, the franchisee party needs to make sure that these expenses cover the following aspects of cost estimation:

• Interior decoration
• Furniture setup cost
• Electronic fitting (if required)
• Signage and branding expenses inside and outside the restaurant franchise in Saudi Arabia
• Location and the initial rent

Moreover, the cost estimation factor regarding restaurant franchises in Saudi Arabia also sprawls over other overhead expenses. For instance, if we were to talk about the different license costs, the franchisee may need to pay for an additional liquor license in Saudi Arabia, local municipal licenses, GST and VAT registration, etc. 

• Local Municipal Licenses
• Liquor Licenses*

• Advertising and Ongoing Marketing Dilemmas

Whether the matter is about a restaurant franchise in Saudi Arabia or some other food business in a different world, the franchiser can support the franchisee in marketing strategy. This, of course, isn’t a policy, but if the original plan includes expense sharing, then both parties can benefit in the long run.

The franchiser and the franchisee need to understand the marketing operations and the capital required to execute the marketing strategy for the restaurant franchise in Saudi Arabia. It is important to have a clear brand guideline for franchisees, especially, which they can follow.

These days, marketing is like a two-pronged fork. There’s an online and real-life marketing strategy that franchisors and franchisees need to account for. Both aspects of restaurant marketing in Saudi Arabia have their own benefits. In many cases, online marketing is more rewarding because of the insane outreach factor. 

As long as marketing policies are concerned, they should highlight different tasks for which the franchiser and the franchisee are accountable. Some of the important areas to cover in marketing policies among both parties are listed below:

• Listing on restaurant review websites
• Logo and trademark use
• Brand-specific items’ marketing
• Social media presence
• Expenses and policies concerning specific online vs. real-life marketing strategies
• Restaurant menu design 

• Customer Support | Who’s Responsible For It?

This is an important question regarding different aspects of restaurant franchises in Saudi Arabia. As a franchise owner, it is your responsibility to spell out support for the customers. In return, the franchiser can facilitate you with operations, development of the infrastructure, and training staff, but the customer support responsibility falls on the restaurant franchise owner. 

The main contract needs to have clauses concerning marketing, customer support, and other factors to avoid any confusion. 

At The End of The Day…

If you are looking to own a restaurant franchise in Saudi Arabia, you need to consider an essential thing. Replicating the success level – and that too- of a popular restaurant in Saudi Arabia or any other part of the world is challenging. 

These challenges may pose a threat at different levels, but consistency in terms of basic policy implementation needs to be followed on both sides. Target restaurant customers, guest experience, branding, furnishing and other replicability factors need to be kept uniform to keep things going on in motion. You need to understand that the franchiser and the franchisee share their fair share of risks.

Having said that, have you owned a restaurant franchise in Saudi Arabia or currently own a restaurant franchise in Saudi Arabia? If so, feel free to talk about the common challenges in the comments section below. 

We look forward to hearing from you.