Recent years have witnessed a wide spread in the trend of young men and women to open cafe projects that fill our streets and cities, motivated by enthusiasm for independence, and the desire to join entrepreneurs, some of whom have achieved great success. With the culture of “open and imitate”, forgetting that among some dozens of projects of this type, a few succeed that came with innovative ideas, while the rest are drowning in debts after their luster fades, and they end up declaring their projects bankrupt.
The wave of cafe closures began to increase on a weekly basis, incurring great losses for its young patrons, what some described as the price of “cafe obsession” or “fashion and it has ended”, while others saw it as a normal situation for any “gift” entered into by those who understand it and those who do not understand it, indicating that it is a trade in which he loses. Those who cannot withstand, stressing that blind imitation has a painful end, while others blamed several parties, especially leadership and municipalities, for not putting in place regulations to curb this obsession.
The Ministry of Commerce and Investment revealed to Al-Watan that the total number of commercial records issued for (coffee shop) activity during the past five years amounted to 15,653 records, with an annual growth rate of 27.56% annually, while the commercial records of coffee shop activity during the past five years recorded an increase rate. 237.7%.
10% success rate
Muhammad Al-Humaizi, a specialist in restaurants and cafes, who is trained in the field of food stressed that “the cafes sector is one of the most important and most widespread sectors, and that its success or not is determined by the owner of the project through proper planning and the pursuit of reducing risks and the actual study of the market.”
While Dr. Khaled Al-Ahmari (a doctoral researcher in cost accounting and supply chains and interested in e-commerce, and a lecturer at Imam Muhammad bin Saud Islamic University) revealed that the success rate of small projects in general does not exceed 10%, unfortunately, according to many studies and statistics, and said that “cafes are no exception, Rather, the probability of success may reach a lower percentage for several reasons, most notably entering this market without understanding the real challenges associated with this activity.”
Muhammad Al-Mughaisib, head of the Restaurants Committee, formerly a member of the Chamber of Commerce’s tourism, advisor on investment, restaurant development, franchising and strategic expansion, explains: Cafes are divided into 4 types, including:
1 Kiosks on the roads.
2- Cafes inside confined spaces such as airports, hospitals, universities, and others.
3- The small cafe, which often depends on the take-away sale, and the tables do not exceed 5.
4- The cafe is equipped for the sessions and its area is large.
He added, “The first and second types are feasible because they are by nature small, and it is difficult to saturate them, so they maintain their market share, and they are completely suitable for the target group. As for the third type, it faces two difficulties that must be overcome in order to achieve success. The first is the high prices that prevent the The continuity of the customer, as well as the saturation of the market is very, for the street that is sufficient for one cafe, you will find 5 cafes.
As for the fourth type, it cannot succeed due to a defect in the business model, as operating costs are high, its absorptive capacity is limited, and the customer’s bill is very low.”
Al-Humayzi, Al-Ahmari, and Al-Mughaisib agreed to describe the rush to open cafes as an unjustified obsession.
Al-Ahmari opposed bragging about secondary things such as interior decoration, indicating that there is a real need for cafes, stressing that their rate is still less than the global average, which should be commensurate with the population. Rather, it is for the sake of meeting with friends, or going out with the family, but because of the obsession with ostentation, the cost of a cup of coffee has become so high that many cannot afford it.” He stressed the need for it to correct its situation and move from the idea of being high-end real estate to simple hospitality councils, which Al-Mughaisib agreed with. Holding the Ministry of Municipal and Rural Affairs responsible.
Al-Humaizi denied the saying that “cafes are a temporary fashion that will fade after a period of time,” stressing that, however, cafes will undoubtedly be subject to closure and loss. It will not stop, but cafes need to comply with this behavior to succeed.”
Al-Humayzi and Al-Ahmari revealed that the Saudi market still needs a larger number of cafes, as the Kingdom is one of the countries with the least number of cafes in relation to the population, taking into account the need to correct its distribution.
And Raed Habibi, who is interested in money and business and founder of commercial projects, stated that “the market needs what meets the customer’s need, and there is competition for who will win to meet that need,” adding that what does not meet the need is a plus.
Al-Mughaisib called for correcting the café market, especially in terms of prices, and setting an upper limit for licenses. He said, “Our consumer behavior is different. In other countries, he travels by walking, and therefore cafés provide him with a rest stop, with prices appropriate to his budget, which causes him to repeat visits.”
He added, “If a person consumes 3 cups a day at a value of 30 riyals, his monthly expenditure will reach 900 riyals and 11,000 riyals annually, which prompted many to replace cafes with private household machines in order to save.”
Al-Humayzi justified the youth’s rush to cafes by saying that this sector is self-loving, while Al-Ahmari saw that the reason for bragging and imitation and the lack of a real guide and celebrities who continued to falsify the facts and made opening a cafe the easiest project. It represents only 20% of the project entity.” Habibi explained that the success of several models tempted others with imitation and a desire to conquer the field.
Limitation of licenses
Al-Mughaisib called on the municipalities to limit the licenses of cafes, similar to transportation and communications, for example. He also held loan donors responsible for the loss of a number of young people in the field for not restricting the donors to the feasibility studies that they took their advice, while Al-Ahmari saw the obligation of new cafe owners to complete training hours in project management, and Al-Humaizi saw Inadequate programs offered for massive demand.
Opportunities and creativity
Al-Homaizi indicated that the opportunities of our youth in this field are great, and their creativity in it is unparalleled, advising them to excel. Al-Ahmari said that “the large majority of workers in cafes are young Saudi men and women, and if we compare this sector with other sectors in the percentage of Saudization, we would find it the best,” justifying the presence of The foreign worker in some cafes because it is the most suitable for their owners in economic terms.
Al-Mughaisib explained that the factors that help the success of any project are the same as the success factors of coffee shops, such as a feasibility study by a specialist, knowledge of the saturation volume, knowledge of the break-even point and how to achieve it, proper management, and the availability of sufficient capital.
Al-Humaizi added that “the correct establishment and quality of operation are two main factors in this,” while Dr. Al-Ahmari attributed this to the real awareness of what is behind the scenes of the café.
Al-Mughaisib attributed the failure factors to imitation and the municipal system that prevents cafes from preparing snacks suitable for coffee, forcing them to buy these products at high prices.
The location of the cafe
Al-Humaizi indicated that there are important points that should be focused on when choosing the location of the café, such as the rental value, which should not exceed 20% of the project head, and the nearby competitor who sees that his proximity is often positive, as he is always supportive, advising to take advantage of them and form good relations with them, and the electrical loads that must be It meets the needs of the café.
Al-Humaizi expected that within a year and a half to two years, at least 50% of these cafes will be closed, and they will be bankrupt due to the lack of a feasibility study, the lack of enough customers to cover the costs of the project, and the cafes exaggerating their prices to make their products more expensive than some famous brands.
Al-Mughaisib described investing in the field of coffee shops as easy and impossible, because the point of breaking even in it is difficult.
He added, “Those who see crowding in cafes imagine that sales are high, but in fact it is shocking because of the high operating costs that had to reach sales slightly above the break-even point, which means that they are crowded at least twice a day.”
“This fact is what made famous cafes 10 years ago close many of their branches,” he added.
Al-Humayzi explained that some cafés helped transform into wonderful cultural places. “Cultural cafés are a kind of change of idea, with the same essence remaining and defects,” he added. Some of them appeared some time ago, but they did not continue and only a few were closed.
Increasing the number of cafes
Al-Humaizi revealed that Vision 2030 aims, through the Quality of Life Program, to raise the number of cafes to 258 cafes per million citizens by 2020, and to 1032 cafes per million citizens by 2030, and also aims to raise the number of restaurants to 2100 restaurants per million citizens by 2020, and to 3000 restaurants per million citizens. citizen by 2030.
Types of coffee shops
* Large cafes with comfortable seating.
* Small cafes.
* Car service cafes “kiosks”.
* Closed cafes «hospitals, airports».
* Specialty cafes.
* Commercial cafes.
coffee shop success factors
– Good service.
– The general atmosphere.
Failure to prepare.
Lack of plans.
Lack of an innovative idea.
– bad management.
– Bad customer service.
– Lack of experience.
Poor product quality.
– the site.