UAE-based restaurant consultants, Restaurant Secrets Inc. break down the costs of opening three types of restaurants in Dubai within profitable budgets.
Restaurant investors can expect to spend an average Capex of $500,000 upwards for a full service restaurant, a minimum of $100,000 for a dark kitchen model, and $250,000 onwards for a hole in the wall, focused concept.
“How much money will I need to open a restaurant in Dubai?” is the most frequently asked question Dubai-based F&B firm Restaurant Secrets Inc. (RSI) receives, followed by the costs of a business plan and how to secure a great location.
The costs involved in opening a restaurant of course depend on the type, size and location of a project, and since the pandemic began, costs have shifted and so have commercials and profit channels of the F&B business.
“Looking at three main types of restaurants that are most relevant and in demand since the pandemic started, we share our insights based off hundreds of restaurants that RSI has helped set up in the UAE, right from feasibility studies to full execution,” says Gabrielle F. Mather, CEO & Founder, Restaurant Secrets Inc.
Model 1: the FSR – full-service restaurant
This is the most popular type of F&B business, modeled on a full experience of dining, service and delivery. This model needs the most resources to open and requires the most efforts in operations, financial control and location sourcing.
The average rents for a prime location from Downtown Dubai to Jumeirah can cost anywhere between USD 70 to $275 per square foot. With an average lease space of 1,500 to up 5,000 square feet needed to execute the full dining and delivery experience, the annual leases of such units could be anywhere between USD 70,000 to more than $1,000,000.
Design and build averages between $150 to up to $600 per square foot. The bigger the unit, the higher its operating cost is based on labour, maintenance, utilities, and seats needed to turnover rent.
Big units also have an advantage, in that they can turnover more seats, and F&B is all about the average spend of person versus how many people are served daily. Building a strong concept, great product, maintaining industry standards in operational control are all important to see profitable returns, however, FSRs are ultimately less scale-able, with branches based on prime locations in different target market locations.
The average Capex is $500,000 onwards for a prime location, Instagramable interiors, great product and overall an excellent brand with marketing and staff budgets included.
Model 2: the dark kitchen, delivery unit
This is currently the fastest growing sector in F&B with many dark kitchens offering affordable rental prices, with the average size of a dark kitchen being 19-21 square metres.
To rent a space with no equipment, costs range from $2,000 to 2,200 per month, while with kitchen equipment costs start at $4,700 onwards, depending on who you rent from and what area you are based in. In order to ensure profitability, the location would need to fall within a strong delivery radius that’s highly populated.
If an outlet needs to purchase kitchen equipment the costs can range as low as $30,000 to up to $100,000 depending on what is required. Two of the benefits of creating a dark kitchen model is that you can run multiple brands out of one kitchen, and no service staff are required.
The most affordable Capex for a dark kitchen starts at $100,000.
Model 3: the hole in the wall, focused concept
With an average size of 1,000 square foot, the hole in the wall restaurant model has become very popular since the pandemic began. These types of venues thrive on word of mouth and intrigue of its quirky or simple roots. A small, focused menu is required and any cuisine can be used with correct price and portion planning.
Rents can be as low as $30 per square foot depending on location, and costs for staffing and interior design will be minimum due to low space.
In order to be successful, the hole in the wall venue needs a viable residential and commercial mix along with an excellent delivery plan. This model is very scale-able and can be considered for expansion, as well as franchising.
The average Capex of $250,000 onwards is required for a viable location, great product and packaging, online presence, as well as overall excellent brand with marketing and staff budgets included.