The number of restaurants in the UAE keeps on growing at a tremendous rate every year. On average, according to the Business Registration & Licensing (BRL) data, at least 1,000 restaurants are opened every year since 2016. Statistics in 2019 show that at least two restaurants and one coffee shop open every day in Dubai.
Food is a thriving industry in the Middle East and is home to some of the most delicious culinary delights from every corner of the world. Indeed, the delicacies served in Dubai, and other Emirates do attract thousands of tourists every year. In Dubai, you get the opportunity to savour Mexican tacos, American burgers, Sicilian pizzas, Valencian paella and Indian Biryani and any other delicacy you can think of. If you are thinking of starting a restaurant in the Middle East, then you must know that it is a prime location to venture in to.
There’s a lot that goes into starting a restaurant. You need a great designer to help you get the best interior and exterior. You must also invest in the best local and exotic cuisines that will keep on pulling patrons through the door. We have already explored the intrinsic details if you want to start a successful restaurant in the Middle East. Here, we are going to look into the factors that you must consider when you are thinking of starting a restaurant in the Middle East.
How unique is the Middle East restaurant market?
A few decades back, Dubai was a desolate desert. It has undergone an incredible transformation thanks to the almost bottomless pockets of funds and the strong appeal of modern tourism. Since tourism in Dubai keeps growing at a tremendous rate, there is an increased appetite for all types of cuisines.
The UAE government is keenly devoted to growing the economy and the GDP of the Emiratis. The legal requirements required to start a restaurant in the country have been made to be straightforward and easy. However, for you to wish to learn how to run a restaurant successfully, there are a few conditions that you must first satisfy;
- The generally recommended restaurant space is 250 sq/m. (depending on the concept)
- The rent in Dubai is quite high
- Onshore and offshore restaurants require different licenses
- Getting the ideal location can be a hurdle
Despite the food and beverage industry in Dubai being a unique one in the world, financial success and business growth are assured when everything is done right. Let us look at the factors that you must consider when opening a restaurant in the Middle East.
Factors in Starting your Restaurant Business in the Middle East
Anyone can start a restaurant business in the Middle East. However, different laws apply to locals and foreigners. As a local, all you need to open a restaurant are the right licenses, enough capital, ideal location and the knack for business in a cosmopolitan environment.
As a foreigner, though, owning a business in the Middle East is not a straightforward issue but it’s not impossible. In Dubai, you are encouraged to start a business in one of Dubai’s free zones where foreigners are allowed to own 100% of a company. If you decide to own a limited liability company in Dubai as a foreigner, ownership is limited to 49%. The remaining 51% of shares must be held by a UAE national. Rarely will you come across a 100% foreign-owned Dubai LLC.
Starting a restaurant business in Dubai allows you to bring back the revenues and profits to your home country. Your business is also exempted from paying a range of taxes in the country. Elsewhere in Saudi Arabia, it is now possible to own 100% of a company (PWC, 2015). You don’t need a partner to start your restaurant. However, you will have to get your Saudi Arabia General Investment Entrepreneurial license and Commercial Registration first. It is also worth noting that you need to be in Saudi Arabia to complete the registration process of your restaurant.
Licenses and Permits
You might probably be asking yourself how to open a restaurant with no experience in the Middle East. Well, you must start with the basics. In our previous hospitality consultancy article, we explained why you should do a feasibility study, write a business plan and develop a strong brand to get assured success in an industry that is extremely competitive but very diverse. Let us look into the different licenses and permits that you need to start a restaurant in the Middle East
1. Business Trade License
In Dubai, you will need to acquire a Business Trade License to open a restaurant. The Food and Trade license is issued by the Department of Economic Development (DED). This also includes the No-Objection Certification (NOC). You will also need to get a license from the Department of Tourism and Commercial Marketing. Depending on what you want to do extra in your restaurant, the government demands that you get the appropriate additional licenses. You might need Ramadan permit, pork permit, delivery permit, and so on.
The license differs depending on what type of restaurant you intend to open. The restaurants can be a:
- Floating restaurant
- Multi restaurants centre
- Restaurant or coffee shop
- Restaurant and mini store
In Dubai, it could cost you anywhere from 8000 AED upwards depending on which authority you get the license from. This fee covers the court notarisation fee, labour and card fee, initial approval fee, immigration card fee, and trade name approval and reservation.
2. Food and alcohol license
Aside from the trade license, you also need to get a food license from the Food Safety Department. This license guarantees that you handle food in a safe manner. The Food Control Department of Dubai Municipality, which issues the license has to ensure that all restaurants in Dubai operate in accordance with the strict Food Code. To get a cafeteria license in Dubai for example, you should have with you a copy of the trade license and the blueprint of your restaurant’s interior. This blueprint should show the space for processing food, space for storing food, location of food equipment that will be used in the processing of food, among others. You also need a special pork permit in UAE and Saudi, if you choose to offer pork in your restaurant.
Since countries in the Middle East are mostly Islamic nations, selling alcohol is a bit more complicated than other countries. Alcohol is prohibited in Kuwait, Maldives, Qatar, Saudi Arabia and even Yemen. However, alcohol is only prohibited in parts of UAE and you can sell alcohol in Dubai if you have a license. This has been allowed to accommodate the interests and cultures of the millions of tourists who visit the UAE every year. To get a liquor license for your restaurant, the following requirements are asked by the government:
- The address of the restaurant
- Details of the security storage for liquor
- Applicant’s details and the name of the physical person who should be named in the license
- The estimated cost of monthly liquor required.
3. Vehicle permit and driver’s license
If you are considering offering food delivery services or collection of food supplies from the souk, you need to have a qualified driver. Such a driver must have a normal driver’s license in addition to the food delivery truck license. The whole process of acquiring a driver’s license is complex, especially if you are in the food industry. You must get approval from:
- Dubai Municipality
- Roads and Transport Authority
- Department of Economic Development
- Dubai Electricity and Water Authority
4. Taxes relating to restaurants
Taxation is also different in the MENA region. Most countries do not rely on taxes to fund the government but on their natural resources. This means that many enterprises in these regions pay little taxes. The taxation regime in Dubai is complex too. For a long time, companies incorporated in Dubai were exempted from VAT, withholding tax and corporate tax. However, in 2018, the law was changed, and several changes were made to the different types of taxes. If you are a foreigner and your business is incorporated in a free zone, it is exempted from taxes for a period of 50 years. The standard service taxes that apply to hotels and restaurants in Dubai range between 10-15% for hotels and 5-10% for restaurants.
Businesses with turnovers of less than 187,500 AED are not obliged to register for VAT and businesses with a turnover of 375,000 AED must register for VAT. Dubai has tax treaties with many countries around the world. This means that you can take the money you earn from your restaurant back home without the risk of your home government taxing you again.
Why do so many restaurants fail? One of the leading reasons is a poor location. Location is a critical factor that can make your restaurant business a failure or a success. Every restaurateur with a desire to succeed in the Middle East must realise how important location is when they are starting their business. Among the things to look into when it comes to location include parking space, accessibility, visibility, and base population. Click here to learn more about how Glee can help you secure a prime location for your restaurant in the Middle East.
For many years, women and men were not allowed to sit together in Saudi restaurants. This meant that if you entered a restaurant with your wife or sister, they had to sit in a separate section from you. In some restaurants where space was limited, women were simply not admitted. With the vision 2030 agenda being embraced across Saudi, the government no longer requires restaurants to separate women and men. The young generation has embraced the move as a move long overdue. When setting up a restaurant in Saudi, remember you are no longer obligated under the law to have a section for males and a different one for females. It is now common to see restaurants across the Middle East, having common food courts and spaces where men, women, girls, and children mingle freely.
Take the First Step to your F&B Business
If you are looking to open a restaurant in the Middle East, we understand just how important this venture is to you. We have in-depth knowledge on UAE and Saudi legal requirements when it comes to the restaurant market. We also have extensive tax knowledge, and we offer you bespoke services. With our experience and expertise, we provide a holistic 360-degree approach to the management and consultancy of food and beverage outlets in the Middle East. We help our clients save up to 20% on food cost and increase sales by up to 3%. Contact us today for a free consultation.