How can profit be gained in Turkish Restaurant Business Sector?

Retail

Many restaurants you know or you do not know are waiting to be sold in fact! Please pardon me for blurting out like that, I think you should know that many restaurants we enjoy visiting have difficulty in even meeting the operational expenses most of the time.

Great foods, interior designs renewed for hundred thousands of dollars, beautiful waitresses… Everything looks ok, right?

However, there is a fact known by every restaurant manager / investor: Rents and personnel expenses are really extremely high in Turkey. A good restaurant is required to be opened at a location where pedestrian traffic is heavy which naturally mean the increasing of rents. Trainings provided for the staff employed and personnel wages are included in serious expense items.

Rental expenses may amount to 30-35% of total sales for many restaurants during the first years until the normal level of performance is reached and the personnel expenses may amount to 20-25%. The options that lie before such business enterprises where fixed expenses are high as such are limited: Either the same price policy shall be pursued by compromising on menu quality or it shall be attempted to increase the turnovers and open new branches by maintaining high prices.

When gross profitabilities are considered, it is unfortunately apparent that a rate below 65-70% does not earn much when other expenses are considered in terms of net-net.

It is extremely difficult for business enterprises with an annual turnover of 1-1,5 million $ the EBITDA of which does not reach 15% within 5 years to make money and even carry on with their activities.

Another distinctive factor is the key money and the license fees. It is required to sacrifice an amount of 200-500 thousand $ for very valuable locations. Of course, to top it all, it is required to perform an investment of 1-1,5 million $ for an restaurant of 500-600 m2 approximately to build a restaurant of required quality.

When you want to introduce a foreign brand, things get even more difficult as payments such as royalties, initial franchise fees, marketing fees, international marketing found contributions bring even more pressure on business enterprises where it must be remembered that an expense rate of 5-7% of the turnover is in question.

To sum it all, if you want to make money in restaurant business, a wonderful concept and an exquisite product are not enough. First of all, you have to win on papers. Therefore, creative solutions that will minimize expenses such as annual rent, personnel, head office expenses, etc. are required.

I don’t know you will either establish a venue with an area of 10-15 m2 such as Pizza Vegas, gain the deep knowledge required to produce your own meat, bread and sauce such as mm&g’s or introduce a taste such as Taco Bell which does not exist in Turkey. But whatever path you choose, please do not forget that consumption is no longer a requirement but an experience and you need courage as much as experience and creative ideas and projects as much as financial resources.

Please, feel free to comment or share your thoughts.