Feasibilitystudy RestaurantinJeddah

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Feasibility Study for Establishing a Restaurant in Jeddah
Article in American Scientific Research Journal for Engineering, Technology, and Sciences · February 2018
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American Scientific Research Journal for Engineering, Technology, and Sciences (ASRJETS)
ISSN (Print) 2313-4410, ISSN (Online) 2313-4402
© Global Society of Scientific Research and Researchers
http://asrjetsjournal.org/
Feasibility Study for Establishing a Restaurant in Jeddah
Said Ali ElQulitia, Abdoulrahman Gamil Elalemb*
a
Prof., Department of Industrial Engineering, King Abdul Aziz University, Jeddah 21523, Saudi Arabia
b
Brioche Resturamt, board member, Jeddah 23433, Al Kayyal, Saudi Arabia
a
Email: saidalihassan@yahoo.com
b
Email: alalim.aj@gmail.com
Abstract
The primary purpose of this paper is to express an in-depth and comprehensive feasibility study for a gourmet
restaurant in Jeddah since a feasibility study is crucial to the success of any business project. This study targets
to explore the success of establishing a gourmet restaurant in Jeddah and to answer the question whether this
business idea will continue successfully. We propose that the gourmet restaurant will comprise a signature store
made brioche bread, as a novel idea. The business type needed, data regarding the gourmet restaurant industry
and the history and development of brioche bread are basic information required. The feasibility study contains
six categories: business strategy, market feasibility study, technical feasibility study, location and site selection
study, social and an environmental feasibility study, and economic feasibility study. The market study addresses
the requisite information on demand and supply, as well as the detailed information about competitors. The
technical study contains the necessary machinery, production capacity, needed raw material and inputs,
computer system(s) and human resources plans. Accordingly and based on quantitative selection criteria, the
most suitable site was chosen. This study also identifies the impact on society and environment. The economic
feasibility study recognizes the financial resources needed to channelize and operate the business and calculates
all the economic performance indicators for the project.
Keywords: Feasibility Study; Restaurant; Brioche.
1. Introduction
This paper presents a feasibility study for a gourmet restaurant in the heart of Jeddah city. This study will assist
in supporting the viability of the business plan. Additionally, it can identify possible complications ahead of
time thus, eliminating them from occurring by planning for precautions.
------------------------------------------------------------------------
* Corresponding author.
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American Scientific Research Journal for Engineering, Technology, and Sciences (ASRJETS) (2018) Volume 40, No 1, pp 143-167
The paper will also enable the creation and testing of the business structure of the gourmet restaurant. The
gourmet restaurant will serve sandwiches and international cuisine alongside baked store made bread
specifically Brioche. Brioche is a French bread dark with golden crust that contains a high proportion of fat,
primarily butter and egg yolks that gives the bread a soft crumbly and flaky texture. The conceptual idea of the
restaurant alongside the creative cuisine and several marketing ideas allows clarity to the business scheme,
which ultimately with the support of this study will align investors and stakeholders on a detailed plan and the
science behind it.
1.1. Project Idea
The gourmet restaurant with its signature item being the Brioche bread, consists of a dry and a wet kitchen as
well as a bar overlooking the ground floor seating area. It has a spacious seating area divided between two floors
with high seating, coach seating and normal set tables. Our current focus is selling gourmet dishes and drinks, a
market study will determine the eatables where both the demand and supply are calculated based on studying the
common trend in the market. This feasibility study is going to be for Saudi market and the focus market area
will be the western region, targeting Jeddah with a medium business scale.
At the onset, the restaurant will have a soft opening and will be testes on varied menus to determine the final
products prior to its grand opening. Social media networks, for e.g. Snapchat, Instagram, Twitter and Google
etc. are our primary choice for marketing purposes.
1.2. Objectives
The ultimate objective of a feasibility study is to ensure a project is sustainable, technically feasible and
economically justifiable. This is indispensable to determine whether the project is worth the investment and its
risk factors. This paper addresses these main objectives:
1. Description of the sandwich industry, analysis of the current market and assessing future demand and
market potential;
2. Detailed description of competition and targeted customers;
3. Development of a marketing plan;
4. Determine the needed material, labor, transportation and technology;
5. Projection about capital needs and how these needs would be met, what would be the ROI (Return on
Investment);
6. Defining the structure of business and its organizational needs;
7. Development of human resources plan;
8. Determining the social and environmental feasibility of studies;
9. Selecting the suitable site and location.
2. Literature Review
There are numerous successful gourmet restaurants, but understanding of the business proper planning is the key
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to success. For a new gourmet restaurant, a business plan works as the roadmap towards examination of all
aspects of the business and preparing for triumph and profit [3].
2.1. Previous Feasibility Studies
A catering company in Pennsylvania, USA contacted the business consultancy firm named Ground Floor
Partners to conduct a feasibility study for a planned restaurant. The selected location was in an old building in
an historic district undergoing extensive revitalization. The consultancy firm made a feasibility study based on
the detailed plans for the restaurant, the local and regional demographics, traffic patterns, local competition, and
projected financials. The study concluded that the long-term opportunity was prosperous [4].
As part of a feasibility study for a Le Diner Restaurant, a new system was also evaluated. The feasibility study
for the Le Diner Restaurant included operational, technical, economic and schedule feasibility. The purpose of
the study was to decide whether the problems they are currently facing with the system is worth solving. The
operational feasibility study tests the operational range of the new information system. A technical feasibility
study checks the technical requirements of the new proposed system for the restaurant which will eventually
increase employee satisfaction. Economic feasibility analyses the new system costs and incomes and compares
the benefits with the lifetime costs. Schedule feasibility is a collaboration between time and costs. It is the
probability that the project will be completed within the timeframe, thus the restaurant management must
establish a firm timetable for the project [5].
A feasibility study of a new site-down restaurant in Ventura was considered for a project feasibility and food
industry was briefly discussed as it is the most known industry in the world. Ventura is a city in southern
California that has been renewing its image to attract more people to the downtown area. The city is considered
a beach town with many people visiting the beach every spring and summer. Sit-down restaurants typically offer
full menus, which include appetizers, entrees, sides, desserts, and all types of beverages. Such restaurants
usually have a host that greets people as they walk in and set them to their table. They also have well trained
chiefs and waiters. The quality of the waiter’s experience affect customer satisfaction. Also, the restaurant have
different things that differentiate itself from other sit-down restaurants, the experience should become a form of
entertainment for the visitors. The study can assist people planning to open a restaurant in an area with similar
demographics as Ventura [6].
Another research paper analyzed the literature concerning restaurant feasibility study located in China. The
literature analyzed the different aspects of starting up a restaurant business, which include market area,
consumer spending pattern, competition analysis, site evaluation and financial statement. Thorough
investigation the market area was identified, for the consumer-spending pattern. The survey result shows some
aspects of the customer profile of the market area of the restaurant. The competitive analysis was conducted for
45 restaurants through observational research and five specific competitors were identified and studied. Through
observation of the site analysis was conducted and a site was chosen. In addition, a pro forma financial analysis
was conducted to determine the financial future of the restaurant [7].
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A document was created by the government of Pakistan under the Ministry of Industries and Production. The
purpose of this document is to facilitate potential investors in Fast Food Restaurant for the small and medium
enterprise authority by providing them with a general understanding of the business. The pre-feasibility study is
important to facilitate potential entrepreneurs. The study included a project brief, plan for a successful
restaurant, required machinery and equipment, Land and building requirements, Human resources requirements,
financial analysis and key assumptions. Fast food was defined as food which is prepared and served quickly at
outlets and is a multi-billion dollar industry which continues to grow rapidly all over the world. A fast food
restaurant is a restaurant characterized by both food and service, food is supplied quickly and minimal service is
provided. Most fast food restaurants are part of a franchise operation that are shipped for overseas [8].
Another feasibility study about a restaurant includes a scope, a simple methodology, market potential,
recommended considerations and size, first year revenue, economic and demographic, supply analysis and
requirements for success. The restaurant is planned to be in the Peacock & Lewis clubhouse development team
by the Village of North Palm Beach, USA. North Palm Beach has an adequate population base, substantial
disposable income and a noticeable lack of food and beverage spending. Thus, it is an economic environment
that would support a new restaurant to be established. The study provides recommendations regarding the size
of the components of the restaurant facilities, financial aspects for a five-year period, collect and analyze
economic and demographic data and providing comparison data to related restaurant and operations [9].
2.2. Gourmet Food and Brioche
The proposed project will be a gourmet restaurant. The term gourmet is associated with good quality beverages
and foods. Gourmet Restaurants are usually of high prices because of the high care, authenticity, quality and
expenses that are incurred during preparing the meal and the restaurant experience as a whole. In the food or
restaurant industry, the term gourmet is used for "specialty" and "premium" restaurant. The retail of gourmet
products has been promoted from the hourglass market phenomenon i.e. when the consumer demand for a
product is strong at either the high end or the low end and weak in the middle. Historically, high-end products
like luxury chocolate had a thinly defined position. The target audience was affluent consumers who were able
to afford high end products. Currently, gourmet products are becoming mainstream because most consumers are
better educated and have larger global exposure. This exposure to a finer palette in foods and drinks in cafes and
restaurants cause most consumers to choose better. In addition, markets are advertising gourmet foods and
drinks as more affordable luxuries that may be enjoyed more frequently. Even in times of turbulence in the
economy, gourmet foods have shown to deal well because consumers are using these small indulgences as
comfort food [4].
The gourmet restaurant plan is to target baking homemade brioche bread that can be examined by researching
the history of this unique French bread. The past of Brioche (a sweet and buttery French bread) is vast and filled
with noteworthy encounters. While modern restaurants only use Brioche buns in burgers, there is a record of
Brioche being enjoyed for hundreds of years as a Viennoiserie. A Viennoiserie is a mix between pastry and
bread made with a yeast dough kneaded with butter, eggs, and milk. For centuries, the French, from their royalty
to philosophers, have enjoyed Brioche as a delicacy. Brioche was first created by the Norman Vikings, who
146
brought their own breed of cows to northern France. The Normandy cow’s milk is known for its creamier butter,
and in order to save it from becoming spoilt Brioche was invented, as its creation needed higher quantities of
butter and eggs than normal bread. Initially, Brioche was eaten by peasants who churned butter, butter being a
byproduct of dairy farming; and was mostly consumed by dairy farmers.
The transition in the status of Brioche happened when the 16th century archbishop commanded prohibition on
consumption of local Normandy butter.
Thereby elevating its status to be associated with wealth and power, making butter and its coveted (an
enormous) consumption by the elite class, and the ensuing Brioche and its popularity. Brioche, is the precursor
to the Pain Benit (blessed bread), which was distributed at religious gatherings [5].
3. Market Study
Market research, which includes social and opinion based research, is the systematic gathering and
interpretation of information about individuals or organizations using statistical and analytical methods of
applied social sciences to gain support in decision-making.
Market study is one of the key factors used in maintaining a competitive edge over competitors, and is essential
towards identifying qualitative techniques such as focus groups, in-depth interviews, and ethnography, as well
as quantitative techniques such as customer surveys, and analysis of secondary data [10].
In this segment, the demand and supply are identified based on the population of Jeddah. After that, the gap is
calculated in order to determine the product mix and the production capacity of the restaurant.
Demand is an economic principle that describes a consumer's desire and willingness to pay a price for specific
goods or services. Some basic factors affecting the demand side are remarkable growth in population, huge
number of pilgrims visit the country every year, and growing health awareness [11]. Last known population of
Makkah region is about 8,338,321 (year 2016) 8,550,114 in 2017 [12]. The population growth rate is
2.54%/year, and then Jeddah’s population in 2017 would be 4,287,163.
The population of Jeddah is breaking-down based on the demographics of Makkah region, we multiplied the
total population of Jeddah with the willing percentage column (We assumed that the demographics of Jeddah is
equal to Makkah region).
A survey has been submitted to a similar Restaurant with 241 responses, questions were include: age, gender,
occupation, currency of approaching a similar restaurant, currency of approaching a specific restaurant,
attraction factors to a specific restaurant, meals taken at similar restaurants, important factors for preferring a
specific restaurant, money spent at a restaurant, and accompanying persons to the restaurant. Figure 1 presents
responses for some of these questions.
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Figure 1: Responses of customers for the questionnaire.
From Figure 1 and the results of the questionnaire, we can conclude:
• Customers come to the restaurants are mostly of ages from 20 to 59 years old,
• No preference according to gender, employees represent the most percentage of customers,
• The majority come to the restaurant every 2 weeks,
• Visitors come for the three meals but majority come for dinner, and
• The majority of customers spend about 100-300 SAR per visit.
Table 1 presents the response from another survey about the percentage willing to eat in similar restaurants
according to the age percentages; the percentage is multiplied by the population size of each segment visits to
come up with the anticipated market size/week. The anticipated market size is counted as one quarter of the total
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population of the region that is considered as an encouraging factor.
Table 1: Number of people willing to eat in similar restaurants.
Age Population Size Willing % Number of People

20 to 29 171,627 45% 78,012
30 to 44 427,724 36% 153,981
45 to 59 260,884 17% 43,481
Total 275,474
From the survey, we know that people willing to eat sandwiches 1 time every two weeks, then the number of
customers per year = 275,474 x 26 = 7,162,324. Some basic factors affecting the supply side are high income
rate, willing to eat outside.
A considerable number of restaurants were visited and the number of customers are identified. Then alternative
goods were checked by comparing menu items in different restaurants and evaluating the similarities and
differences. In addition, we compare the degree of commercial activity and consumer behavior by checking the
environment and interiors, and how the customer reacts to it in comparison to other restaurants in the industry as
shown in table 2. The commercial activity factor is measured relative to Sandwich Gallery which is considered
with factor a, all other restaurants are compared to it. A restaurant with factor of 2 means that its commercial
activity is twice that of Sandwich Gallery.
Table 2: Commercial activity factor.
Name Commercial Activity

Factor
Sandwich Gallery 1
Casper & Gampinies 2
Breking bread 1.6
Toasted 1.4
Others 14
Total 20
From the secondary information, we know that the average daily customers of Sandwich Gallery (one of the
similar brands) is SAR is 400 customer / day. Then the total amount of supply = 400 x 365 x 20 = 2,920,000
customer per year.
A market gap is defined as an unfulfilled consumer need or a group of potential customers who are not yet
149
purchasing any goods or services [13]. The bright side to having a gap in the market is that it allows
opportunities for companies to have great expansion in their customer base by three ways: increasing awareness,
creating targeted offers and advertising campaigns to reach the untapped market. From the anticipated market
size and the supply side, it is clear that here is a business opportunity to open a new restaurant. The fact that no
one of the similar restaurant closed any in the recent period in Jeddah much supported the idea in a great extent.
The anticipated capacity is estimated by considering some of the similar brands and by consulting with
respective expertise as given in Table 3. Figure 2 shows some products of the restaurant [14].
Food industry is considered one of the largest industries in Saudi Arabia, and especially in Jeddah food is
considered an entertainment destination as well as a necessity for living. The market is huge yet the average
quality vs. price in the market is low. Majority of the food retailers and service providers does not provide
superb authentic experiences. Either too low in class or too high in price [15].
Table 3: Anticipated capacity and the product mix.
Price
Capacity /
Type Item % Unit
Year
SAR
Club Sandwich 15% 8,213 40 Sandwich
Main Dish The Proper Burger 35% 19,163 45 Sandwich
Smoked Beef Brisket Sandwich 50% 27,375 66 Sandwich
Brioché Bruschetta 25% 13,688 20 Plate
Appetizers
Fusion Quinoa Salad 25% 13,688 30 Plate
Dessert Pistachio Cheesecake 50% 27,375 40 Plate
Soft Drinks 90% 49,275 5 Piece
Drinks
Cup of Coffee 10% 5,475 10 Cup
People in Jeddah are willing and able to consume food and use it as a joy. But, sandwiches aren’t considered a
gourmet or fancy food anywhere in Jeddah except the sandwich gallery.
The general idea of a sandwich falls into either ill executed Panini’s (a sandwich made with Italian bread,
usually toasted) or very cheap cafeteria sandwich. Usually, it is not considered a real meal.
As per the latest few years, trend leaned into better quality food, and local food makers who are either directly
involved owners or wannabe chefs. The introduction of master Arabia Arabian chef contributed into increased
value of an Arab chef.
Therefore, the market needs better quality food, Better variety, local ownership and an idea based food that does
not cost much. In addition, many will compare it to Riyadh, Dubai or even Europe and the states.
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Figure 2: Some products of the restaurant
4. Technical feasibility study

4.1. Process Description
A description of the process flow is necessary to identify the production steps and hence the needed machinery.
The first phase of the production program is assembling and weighing, then mixing the production ingredients.
The factors that will influence the weighing and mixing of the ingredients include friction, dough temperature
and water temperature. During the second phase, the ingredients are mixed and the yeast cells are distributed
evenly in the dough. The methodology of mixing the ingredients in the restaurant is known as continuous
mixing methodology. The methodology will require conventional equipment that will prepare a liquid sponge by
using coil tanks that are refrigerated and accordingly there will be no individual sponges in the mixture. The
fermentation of the dough will take place in the third phase, and the fermentation process will accelerate the
leavening of the dough. The temperature of the mixture will be equalized through punching, and this will be the
fourth stage of the production program. The mixture will be molded in the fifth stage, and then the dough will be
placed in the oven.
The products will be used as the main ingredient in all the sandwiches. The daily amount of dough at the
restaurant will rely on the restaurant’s marketing strategies and market requirements. All the needed machinery
for the restaurant depend on the identified process of the dough making. The next section will describe all the
technical details of the production lines and identify the area, labor, and layout.
4.2. Selection of Machinery
The machinery are selected by comparing products from many suppliers and choose the best according to
quality, prices, and services [16], see Table 4. Table 5 presents the capital expenditures for the restaurant.
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Table 4: Selection of Machinery.
Equipment Unit Cost (SAR)

Dough Mixer 36,000
Proofer 12,000
Rational 5 senses white efficiency Oven 126,000
Coffee Maker 2 outlets semi-automatic 30,000
Refrigerator 71,000
Fraser 25,000
Blender 5,325
Sous Vide Machine 4,100
Fusion chef pearl professional sous vide immersion circulator 220V 3,745
Induction heater 2,984
Mixer 2,900
Total 319,054
Item Description Quantity Unit Cost (SAR) Total

Construction Cost - 700,000 700,000
AC 1 100,000 100,000
Electrical Items 200 450 90,000
Cooking Kitchen Equipment 1 47,500 47,500
Server 1 44,850 44,850
Lighting 1 30,000 30,000
Plumbing 1 20,000 20,000
CCTV + Network + Sound System 1 20,000 20,000
Hot Cobain 20 1 15,000 15,000
Kitchen Equipment 1 15,000 15,000
Fan 2 7,500 15,000
Espresso Machine 1 9,000 9,000
Electrical Switches, Plates and scokets 1 7,380 7,380
Apple ipad 4 1,750 7,000
Fire safety system 1 6,000 6,000
Shilves, Trolly and ice machine 1 5,000 5,000
Fridge and washing Machine 1 3,674 3,674
TV set 1 3,229 3,229
LED-SWITCH 1 3,000 3,000
Digital scale and bread molds 1 3,000 3,000
Electric Sockets 2 1,275 2,550
Phone 1 1,500 1,500
Mini Bus 1 50,000 50,000
Car 1 30,000 30,000
Total 1,228,683
1. Dough Mixer, Figure 3:
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Power: 1 Kw – 12 A 380V.
Capacity: 22 KG per load.
Labor: 1 (computer programmer).
Area: 50 cm x 70 cm
Price: 24,000 SAR
Figure 3: Dough Mixer.
2. Proofer, Figure 4:
Power: 10 A 380V.
Capacity: 38 KG per Load
Labor: 1
Area: 60 x 60 cm
Price: 12,000 SAR
Figure 4: Proofer.
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3. Rational 5 senses white efficiency Oven, Figure 5:
Power: 69 A 380 V
Capacity: 10 GN1/1 per load
Labor: 1, (computer programmer).
Water inlet required Min 1.5 barrel.
Water drainage outlet required
Labor =: 1
Area: 60 * 60 * 180 cm
Price: 126,000 SAR
Figure 5: Rational 5 senses white efficiency Oven.
4. Coffee Maker 2 outlets semi-automatic, Figure 6:
Power Required 220V 20 Amp
Yield: 30 gm per second per nozzle
Water inlet: 1 par min
Water Drainage outlet required
Labor needed: 1
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Area: 90 cm x 40 cm
Price: 30,000 SAR
Figure 6: Coffee Maker 2 outlets semi-automatic
5. Other Equipment
Table 6 presets other equipment with quantities and prices.
Table 6: Other equipment and prices.
Item Description Quantity Unit Cost (SAR) Total (SAR)

Large Refrigerator 3 20,000 60,000
Table 7 represents the variable costs of raw material.
4.3. Raw Material
Table 7: Variable costs of raw material.
Order Name Ingredient Quantity (g) Unit Cost Cost of

Ingredient
Brioché bread 55 0.01 0.55
Fresh mozzarella 30 0.10 3.00
Brioché Mohammarah 25 0.02 0.50
Mint pesto 10 0.03 0.30
Bruschetta Chopped olives 12 0.03 0.36
Parmesan cheese 7 0.05 0.35
Balsamic cream 6 0.05 0.30
Quinoa Cooked quinoa 20 0.02 0.40
Green apple 200 0.01 2.00
155
Salad Green bell pepper 170 0.01 1.70

Red bell pepper 170 0.01 1.70
Yellow bell pepper 170 0.01 1.70
Mango 100 0.02 2.00
Lime 163 0.02 3.26
Coriander 10 0.01 0.10
Sugar 40 0.01 0.40
Salt 8 0.01 0.08
Chilli powder 12 0.02 0.24
Pineapple 150 0.01 1.50
Quinoa 10 0.05 0.50
Water 2000 - 1.00
Dijon mustard 50 0.04 2.00
Hellmans mayo 530 0.01 5.30
Mustard seeds 50 0.03 1.50
Salt 20 0.01 0.20
Black pepper corn 9 0.05 0.45
Club Brioché bread 120 0.01 1.20
Club sandwich Sauce 30 0.01 0.30
Sandwich Iceberg lettuce 40 0.02 0.80
White chicken breast 50 0.02 1.00
White cheddar 10 0.04 0.40
Pasterami 10 0.10 1.00
Turkey murtadella 10 0.07 0.70
Tomato 10 0.01 0.10
Buger sauce 45 0.02 0.90
The Proper Minced beef 250 0.06 15.00
Burger Caramellised onion 40 0.01 0.40
Tomato 50 0.01 0.50
Lolobondo lettuce 25 0.04 1.00
Smoked Beef
Smoked brisket 150 0.06 9.00
Brisket
Coleslaw 30 0.01 0.30
Sandwich
Bbq sauce 20 0.01 0.20
Philadelphia cheese 50 0.04 2.00
Bottled egg 200 0.01 2.00
Pistachio
Flour 10 0.01 0.10
Cheesecake
Corn starch 10 0.01 0.10
Vanilla paste 10 0.10 1.00
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Sugar 300 0.01 3.00

Yogurt 100 0.01 1.00
Cooking cream 350 0.02 7.00
Lemon 15 0.01 0.15
Cheese cake 270 0.02 5.40
Pistachio paste 10 0.40 4.00
Butter 20 0.02 0.40
Orange blossom water 20 0.01 0.20
Cheese cake sauce 10 0.12 1.20
Pistachio cream 30 0.06 1.80
Cheese cake biscuit 20 0.01 0.20
Raspberry 5 0.08 0.40
Pistachio 15 0.06 0.90
Raw Coffee 7 0.40 2.80
Cup of Coffee
Water 0.1 - 0.20
4.4. Enterprise Resource Planning (ERP)
Utilization of business management software aided by tools such as QuickBooks (for accounting purposes) for
the creation of Touch Bistro (the Points Of sales “POS” solution for the restaurant) specifically designed to
support, collect store and manage data and needs of the restaurant industry. QuickBooks is a popular online
accounting software which helps you in getting accounting information organized, saving time and simplifying
your day-to-day activities. You can find your sales, purchases, expenses, and customer & vendor profiles online
all in one place. The Quickbook accounting software online lets you easily track the incoming and outgoing
funds in your business [17]. This application provides table, outdoor catering/takeaway support, custom
restaurant layouts, menus, bill splitting, sales reports, unlimited order and cash register printers.
TouchBistro is an iPad-based point of sale (POS) solution for restaurants of all types. Specifically designed to
meet the unique needs of the restaurant industry, TouchBistro comes complete with food service specific
features and advanced management capabilities. For fine dining and traditional restaurants, staff have the ability
to bring the POS system to each table, to allow patrons to check out. The mobile functionality of the POS allows
staff to bring a register directly to patrons instead of requiring them to leave their table to pay bills or place
orders. TouchBistro software can manage split-checks and parties of various sizes. Receipts can be printed, if
desired, or signed on screen and emailed. Detailed sales reports within the system can help provide management
with insight into which items are selling the best. To help cope with rushes, the POS can be removed from the
counter, and move with your staff down the line. Touch Bistro is sufficiently equipped with food service
specific features and advanced management capabilities, suited for an inimitable experience starting from
service staff’s capability to POS system printed receipts which can be signed on screen and also emailed [18].
157
4.5. Human Resources
Human resources comprises workforce of an organization, business sector, or economy and is the human
capital, on which an industry or business depends heavily to augment its goals, and missions. The business in its
nascent years needed high skill workers on the lines of chefs, architects and engineers for its proper set up and
thereafter graduated to hire long term employees; to be followed by hiring of workers dependent on the
production capacity, availability of machinery, nature of the products and the overall project. Business
expansion would also yield in the future jobs in the fields of separate packaging, administration and account
departments. Table 8 represents the needed human resources and salary expenses. Saudi Arabian Ministry of
Labor and Social Development’s guidelines and Saudization measures (nationalization program by the Saudi
Arabian government) are considered when determining the human resources positions and the salary scales (in
line with the business practices).
Table 8: HR and Salary Expenses
Designation No. Monthly Salary (SAR) Yearly Salary (SAR)
CEO 1 14,950 179,400

Executive Chef 1 9,750 117,000
Assistant Manager 2 3,900 46,800
Sous Chef 2 3,127 37,527
Accountant 1 2,500 30,000
Driver 1 2,182 26,182
Purchasing Officer 1 1,964 23,564
Cleaner 2 1,897 22,764
Bartender 1 1,527 18,328
Commis 5 1,527 18,327
Waiter 5 1,527 18,327
Total 22 44,852 538,219
5. Site Selection
An integral part of the project initiation plan is the site selection. It determines financial viability, risk potential
and the sustainability of the project. In order to select an appropriate, site a detailed assessment of the project
needs is required when evaluating site options. Many factors affect the site selection decision making process
such as environmental and technical factors. The restaurant has been designed with the application of industrial
planning and engineering aspects, taking into consideration architectural and engineering criteria suitable for the
conditions prevailing in the Kingdom of Saudi Arabia, in accordance with local and international standards and
regulations.
158
5.1. Site Layout
The site layout will include kitchen space, storage rooms for raw materials and finished products, parking space,
fire water tank, canteen, mosque, guardroom, septic tank, pump room and an electricity room. Table 9 and
Figure 7 illustrate a summary of the space requirement for the restaurant and the proposed layout. The space for
each area is decided based on the needed area for kitchen operations and the seating area is based on the
expected average number of client visits.
Table 9: Restaurant Layout.
Description Requirement (m2)
Cleaning/Washing area 6
Storage/Receiving area 10
Service area 10
Food preparation area 15
Meal Cooking area 15
Dining area 120
Toilet area 14
Office 4
Figure 7: Restaurant Layout.
5.2. Site Selection
The specific requirements of kitchen, storage of food and foodstuff require different designs pertaining to
corresponding buildings, taking into consideration the following factors:
• Knowing the concept and business;
159
• Customer’s characteristics;
• Minimum required size;
• Access and parking;
• Building amenities;
• Budget.
Site assessment will consider three candidate sites in Jeddah depending on the market scan and foot count of the
area:
Site A: Jeddah – Tahlia Street:
Tahlia Street is a central shopping destination in midtown of Jeddah, comprising upscale department stores as
well as many restaurants.
As it is a shopping destination, rentals are higher than average, Figure 8.
Table 13
- New shop - Rent = SAR 1,600 per square meter per year.
- Near to hotel, resturnats and coffee shops area.
Motives
- 2 floors
Total Area (m2) 219
Infrastructure services:
1. Road services,
2. Water services,
3. Janitorial services,
4. Sewage services.
Figure 8: Site A.
Site B: Jeddah – Prince Sultan Street:
Prince Sultan Street is a commercial location in the northern area of Jeddah. It contains office buildings,
shopping boutiques and restaurants. As it is a commercial location, rentals are higher than average, Figure 9.
160
Table 14
- Rent = SAR 1,378 per square meter per year.

- On main street.
Motives
- 2 floors
Total Area (m2) 450
1. Road Services,
2. Electricity Services,
3. Water Services,
4. Janitorial Services,
5. Sewage services.
Figure 9: Site B.
Site C: Jeddah - Al Kayyal Street
Al Kayyal Street is a residential area within midtown Jeddah. It contains large residential houses and many
boutique shops and restaurants, Figure 10.
Table 15
- Rent shop for extended periods starting from SAR 1600 per square meter per year.
- Near to Schools, resturnats and business area.
Motives - New shop
- 2 floors
Total Area (m2) 200
1. Road Services,
161
2. Electricity Services,
3. Water Services,
4. Janitorial Services,
5. Sewage services.
Figure 10: Site C.
Weighted Scoring Method
A weighted scoring method is a tool that provides a systematic process for selecting alternatives based on many
criteria. To use this model, first decide what criteria are important and then decide the relative importance of
these criteria. This will give the weight column shown in Table 10. Note that the weights should total 100%.
You then assign a score from 0–10 to each criterion for each alternative. After assigning the weights and scores
for each alternative, calculate the weighted score by multiplying the weight for each criterion by its score and
adding the resulting values [19]. In this case, site C has the highest weighted score.
Table 10: Weighted Score Method for Site assessment.
Score
# Criteria Weight Site A Site B Site C
1 Capital Cost 9 6 3 8
2 Infrastructure 7 5 4 7
3 Availability of Utilities 7 4 6 7
4 Urban Environment 9 7 6 8
5 Aesthetic Environment 9 7 6 8
6 Accessibility and Parking 9 7 8 7
7 Town Planning 8 6 6 8
8 Public Presence 9 6 8 7
9 Size and Room for Growth 6 5 5 6
10 Site-Related Costs 4 3 2 4
11 Climatic Conditions 8 7 5 8
12 Near to the commercial area 8 8 7 8
13 Near to the residential area 7 7 6 7
Weighted Score 100 78 72 93
162
6. Social and Environmental Feasibility Study
Most of the population in Jeddah is mainly a middle class population characterized with high socio-economic
characteristics among others. Some positive social impact of the project are the following: creating new job
opportunities, introducing the market to new local chiefs, creating a local based restaurant that is not an
international franchise and exported products and offering a new restaurant for neighbours and those customers
roaming the region. Other indirect benefits include encouraging the acceptance of local chiefs rather than the
need to recruit overseas talent. Creating a positive social impact analysis increasingly reduces the risk of the
project and strengthens general social support.
An environmental feasibility study considers both human and environmental health factors, it is a comparative
process that determines all potential solutions to health factors. The goal is to find the operational option,
preferably one that permanently eliminates or lessens contamination or health risks. Based on the industry of
food services, our impact will be on air, water and materials. The impact into the air will be coming from the
cooking steam that will be minor as the restaurant is co3nsiderably small in size, we will mountain an elevated
chimney to prevent smoke from flying in the air inhaled by pedestrians.
While the impact on water will be through the water waste, as a lot of water waste is included in the cooking and
cleaning of restaurants. As a cautionary measurement, we planned to buy a washing machine to reduce the water
waste. Materials will be recycled such as access food and plastic and glass products. Additionally, some efforts
will be made by putting some instructions on our bags and walls on how to save the environment and how to
minimize hazard that may come from ignorance of instructions and give our customers awareness how to keep
the environment clean. Also from our social media, we will give our customers some information for how to
keep the environment clean.
The gourmet restaurant will not distress any sever environmental impact such as the following: Climate change,
Environmental degradation, Environmental health, Environmental issues with energy, Environmental issues
with war, Overpopulation, Pollution, Cutting and moving trees, Toxicants and Waste. The restaurant will try to
limit its environmental footprint by working with a recycling organization to pick up the food waste and plastic
materials on a semi-daily basis; it is one of the values to be earth friendly.
7. Economic Feasibility Study
The purpose of the economic feasibility assessment is to determine the economic benefits of the proposed
project.
Net profit margin is the ratio of net profits to revenues for a company or business segment typically expressed as
a percentage. Net profit margins show how much of each dollar collected by a company as revenue translates
into profit. Total revenue or total sales includes all the money a company earned from its operations during the
period and is typically the first number listed on the income statement.
Net income represents the amount of revenue left over after all expenses have been paid for the period. This is
163
always located at the bottom of the income statement hence the nickname “the bottom line.”
Net margin = net profit / revenue.
Return on equity (ROE), sometimes called "return on net worth” is a measure of profitability that calculates how
many dollars of profit a company generates with each dollar of shareholders' equity.
ROE = Net Income / Shareholders' Equity.
Return on Asset (ROA) is a measure of percentage of profit that a company earns in relation to its overall assets.
ROA = Net Income / Total assets [20].
Table 11 presents the profitability margins for the years 2018, 2019 and 2020.
Table 11: Profitability margins.
Profitability Margins 31-Dec-18 31-Dec-19 31-Dec-20

Net Income Margin 14% 23% 27%
Return on Equity 0.44 0.62 0.50
Return on Assets 26% 27% 30%
Payback Period (PBP) is the length of time required for an investment to recover its initial outlay in terms of
profits or savings. It is calculated by dividing the cost of the investment by the annual net cash flow to determine
the expected payback period of years. Uneven cash flows occur when the annual cash flows are not the same
amount each year.
PBP = Year before cash being positive + (Last negative cash flow / Cash flow to firm at that year).
The net present value (NPV) or net present worth (NPW) is a measurement of the profitability of an undertaking
that is calculated by subtracting the present values (PV) of cash outflows (including initial cost) from the present
values of cash inflows over a period of time.
Internal rate of return (IRR) is a metric used in capital budgeting measuring the profitability of potential
investments. Internal rate of return is a discount rate that makes the net present value of all cash flows from a
particular project equal to zero. IRR must be > Bank interest rate by a significant number. IRR is calculated by
excel using the formula: XIRR (PV,Date).
The profitability index is an index that attempts to identify the relationship between the costs and benefits of a
proposed project [21]. Table 12 presents the economic feasibility measures for the project.
164
Table 12: Economic feasibility measures.
Economic Feasibility
Measure Unit Value

Payback Period Years 1.7
Discounted Payback Period Years 1.8
Net Present Value SAR 28,454,392
IRR % 26%
Profitability Index X 11.8x
8. Conclusions
After the execution of market, technical, site selection, environmental, social and economic feasibility studies, it
is concluded that the thorough project description supported by all parts of a complete feasibility study
encourages the incorporation of a gourmet restaurant. The market analysis has been implemented, and demand
and supply have been estimated which favored the project. Products, quality, prices and anticipated production
capacities are determined.
The needed machinery, equipment, raw material, human resources and site layout with all associated costs are
determined in the technical feasibility study part. Three suitable sites are chosen, criteria for selection are
identified and the weighted score method is used to select the best place. The project will concentrate upon its
inception in Jeddah, initially on one branch in Rawdah district and based on profitability, will continue to open
new branches on other locations.
Some positive social impacts of the project are the following: creating new job opportunities, introducing the
market to new local chiefs, creating a local based restaurant that is not an international franchise and exported
products and offering a new restaurant for neighbours and those customers roaming the region. Other indirect
benefits include encouraging the acceptance of local chiefs rather than the need to recruit overseas talent.
Creating a positive social impact analysis increasingly reduces the risk of the project and strengthens general
social support. With respect to the environmental feasibility, the gourmet restaurant will not distress any sever
environmental impacts. The gourmet restaurant will not distress any sever environmental impact the restaurant
will perform all the necessary cautionary measurement with respect to possible minor impacts on air, water and
materials. Firm instructions and awareness will be given to both employees and to customers how to keep the
environment clean. Lastly, a comprehensive financial model and economic performance indicators are
developed to calculate the economic feasibility of the restaurant. All the economic indicators: Payback Period,
Discounted Payback Period, Net Present Value, Internal Rate of Return and Profitability Index confirm that the
idea of the new project is highly recommended. Thus, as a conclusion, the business model projected through this
feasibility study, promises incredible potential for its sustenance, moreover a gourmet restaurant catering high-
end food and beverages can also become a beacon of profitability to the Saudi Arabian economy.
165
9. Recommendations
The following points summarize the basic recommendations from the present study:
1. To pursue for the investment project as all the sections of the feasibility study encourage establishment
of the project.
2. Conduct a study on home and online delivery for more exposure.
3. Conduct a thorough study for expansion on other locations in Jeddah and other cities of Saudi Arabia.
4. Open new branches outside Saudi Arabia such as Dubai and other Arab Gulf countries.
5. Add new main dishes according to the customer preferences that will maximize profits.
References
[1]. Saudi Arabia’s Vision, January 2018, Access Date January 18 2018, from: http://vision2030.gov.sa/en
[2]. General Authority for Statistics homepage. https://www.stats.gov.sa/ar/5308 , [Nov. 12, 2017].
[3]. Kim, Jihoon. (2013). Business Plan for a Korean Fine-dining restaurant in Las Vegas, University of
Nevada, Las Vegas. Access Date January 1 2018, from
https://digitalscholarship.unlv.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=3045&context=t
hesesdissertations
[4]. Ground Floor Partners. (2018). Restaurant/Bar (Feasibility Study). Access Date January 15 2018, from
https://groundfloorpartners.com/restaurantbar-feasibility-study/
[5]. Essays, UK. (November 2013). Feasibility Study On Le Diner Restaurant Computer Science Essay.
Access Date January 15 2018, from https://www.ukessays.com/essays/computer-science/feasibility-
study-on-le-diner-restaurant-computer-science-essay.php?cref=1
[6]. Wassil, John. (2011). The feasibility of a new sit-down restaurant in Ventura. Access Date January 15
2018, from http://digitalcommons.calpoly.edu/cgi/viewcontent.cgi?article=1074&context=agbsp
[7]. Hui Guo, Hui. (2006). A Feasibility Study for a Quick-Service Restaurant in Chengdu, China. Access
date January 1 2018, from http://www2.uwstout.edu/content/lib/thesis/2006/2006guoh.pdf.
[8]. Government of Pakistan (2016). Pre-Feasibility Study (Fast Food Restaurant). Access Date January 1
2018, from http://www.commerce.gov.pk/wp-content/uploads/2017/05/Fast-Food-Restaurant.pdf
[9]. Private Club Associates. (2016). RESTAURANT FEASIBLITY STUDY. Access Date January 1 2018,
from https://www.village-npb.org/DocumentCenter/View/1669
[10]. Wonderflow BV, Comparison of traditional market research techniques VS consumer feedback
analysis, Amsterdam, December 10th 2015,https://www.wonderflow.co/wp-
content/uploads/2016/02/test.pdf
[11]. Richard V. Eastin and Gary L. Arbogast, Demand and Supply Analysis: Introduction, University of
Southern California (USA). Accessed at:
https://www.cfainstitute.org/programs/cfaprogram/courseofstudy/Documents/prerequisite_economics_
material%20-%20demand_and_supply_analysis.pdf
[12]. City populations worldwide.” Internet: http://population.city/saudi-arabia/jeddah/ , [Nov. 12, 2017].
[13]. M. Kleinaltenkamp, et al., Fundamentals of Business-to-Business Marketing, Springer Texts in
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Business and Economics, Springer International Publishing, Switzerland, 2015.DOI 10.1007/978-3-

319-12463-6_2
[14]. Schrader, I. (2015). Brioche: The Powerful History of a Buttery Pastry. Access Date January 1 2018,
from: https://breadthroughhistory.com/2015/05/25/brioche-the-powerful-history-of-a-buttery-pastry/
[15]. Market Research. (2018). Gourmet Food Market Research Reports & Industry Analysis. Access Date
January 1, 2018, from: https://www.marketresearch.com/Food-Beverage-c84/Food-c167/Gourmet-
Food-c487/
[16]. Iseland Catering Equipment Co. website. Visited on 12 January 2018. https://usedrational.co.uk/
[17]. QuickBooks – US Edition software, saifee Computers webpage, visited on 5 January 2018.
http://www.saifeecomputers.com/
[18]. TouchBistro Restaurant POS Software, Software Advice webpage, visited on 2 January 2018.
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[19]. Mike Pycraft, et al., Operations Management, Pearson Education, South Africa Edition, 2000.
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167
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Feasibility Study for Establishing a Restaurant in Jeddah

Said Ali Hassan

Productivity View project

STRATEGIC DECISION SUPPORT SYSTEM View project

The user has requested enhancement of the downloaded file.

Feasibility Study for Establishing a Restaurant in Jeddah

Said Ali ElQulitia, Abdoulrahman Gamil Elalemb*

Keywords: Feasibility Study; Restaurant; Brioche.

1.1. Project Idea

2.1. Previous Feasibility Studies

2.2. Gourmet Food and Brioche

Figure 1: Responses of customers for the questionnaire.

From Figure 1 and the results of the questionnaire, we can conclude:

population of the region that is considered as an encouraging factor.

Table 1: Number of people willing to eat in similar restaurants.

Age Population Size Willing % Number of People

Table 2: Commercial activity factor.

Name Commercial Activity

Table 3: Anticipated capacity and the product mix.

Figure 2: Some products of the restaurant

4. Technical feasibility study

4.2. Selection of Machinery

Table 4: Selection of Machinery.

Equipment Unit Cost (SAR)

Item Description Quantity Unit Cost (SAR) Total

1. Dough Mixer, Figure 3:

Capacity: 22 KG per load.

Labor: 1 (computer programmer).

Price: 24,000 SAR

Figure 3: Dough Mixer.

Capacity: 38 KG per Load

Price: 12,000 SAR

3. Rational 5 senses white efficiency Oven, Figure 5:

Capacity: 10 GN1/1 per load

Labor: 1, (computer programmer).

Water inlet required Min 1.5 barrel.

Water drainage outlet required

Price: 126,000 SAR

Figure 5: Rational 5 senses white efficiency Oven.

4. Coffee Maker 2 outlets semi-automatic, Figure 6:

Power Required 220V 20 Amp

Yield: 30 gm per second per nozzle

Water inlet: 1 par min

Water Drainage outlet required

Price: 30,000 SAR

Figure 6: Coffee Maker 2 outlets semi-automatic

Table 6 presets other equipment with quantities and prices.

Table 6: Other equipment and prices.

Item Description Quantity Unit Cost (SAR) Total (SAR)

Table 7 represents the variable costs of raw material.

4.3. Raw Material

Table 7: Variable costs of raw material.

Order Name Ingredient Quantity (g) Unit Cost Cost of

Salad Green bell pepper 170 0.01 1.70

Sugar 300 0.01 3.00

4.4. Enterprise Resource Planning (ERP)

4.5. Human Resources

Table 8: HR and Salary Expenses