A total of 57 leaders participated in the survey conducted between March 21-April 19, 2021.

 

Breakdown of respondents:

Question: Compared to pre-Covid-19 (Jan 2020), How is your company’s financial position today?

The pandemic has been extremely detrimental to the restaurant sector, with 89% of the respondents feeling their companies have grown significantly weaker (40%) or somewhat weaker (49%) after the pandemic. In addition, no respondent reports that their business has seen any significant growth after the pandemic.

Question: How are your CAPEX investment plans looking for 2021?

In the face of the pandemic, the Saudi restaurant sector is resilient.  Almost half of the companies covered in the survey will put in CAPEX investments this year, with 15% of the leaders planning to reach full-scale, pre-pandemic levels of investments.

Having said that, 1/5^th of the industry is still at risk of divestments.

Will you look at acquisitions this year?

Covid-19 pandemic slowed down acquisition’s activity all around the world. But for Saudi Arabia's restaurant sector, acquisitions are very much on the table. Out of 52 leaders who responded to this question, 15 scored a perfect 100 to "definitely will acquire," and 9 respondents scored above 80.

However, an average score of 58 also indicates that many businesses will hold on to precious cash during this year.

Question: How well do you feel supported by the following partners during this pandemic? Please check only one box per row.

CEOs find aggregators to be by far the least supportive of all stakeholders – 40% feel "most unsupported" and 31% "somewhat unsupported" by aggregators – by far the worst scores in the industry. Suppliers are second on the list, and banks are 3^rd in terms of not providing support to the industry when they needed it.

On the positive side of the scale, 64% of leaders feel at least somewhat supported by their landlords – 6% being most supported. For half of the respondents, the government is also supportive.

Question: Choose your top 5 focus areas in 2021.

It is very clear from CEOs' responses that the new normal in the industry – focus on delivery to deliver sales growth – remains the top priority for restaurant CEOs. This is followed by a continued focus on safety and hygiene. While landlords have been supportive of the industry, rents remain an area of concern for CEOs.

In total, 2 of the top 5 concerns for CEOs are delivery and marketing spending. And now, they are all about topline as they fight their way out of survival mode and focus on growth.

The bottom 3 areas are increasing salaries, bank renegotiations, and supplier payments – which may have been addressed last year.

Question: What do you see are the biggest barriers to business recovery in KSA? Select your top 3 only.

VAT (Value-Added Tax) and labor availability are the biggest barriers to business recovery in KSA – both relating to governmental actions. In fact, if the next 2 barriers, government regulations and government stimulus, are added to the mix, much of the recovery for restaurant businesses will depend on the government.

The survey showed that the pace of vaccination and travel are not troubling decision-makers.

Question: Thinking of the past year, how do you describe last year? Please choose only one option per row.

This question showed some real positives after a tumultuous year as leaders feel their teams now communicate better than before (60%), are more efficient (60%), and their morale is largely up (45%). They also feel much closer to their teams (60%).

All this has come at the cost of their own mental health, as their stress levels are worse than before (71%).

It will also be important to note that some businesses are still struggling with team morale, efficiency, and cohesion issues – and many need support, particularly this year.

Question: How has your customer changed due to Covid?

Consumer behavior has the most impact on the general dynamics of a business.

This pandemic has spurred three main trends:

1. Safety consciousness
2. Deal seeking behavior
3. Digital savviness

Mingora’s global insights indicate these changing consumer behaviors were evident even before 2020 but now have been exacerbated by the pandemic.

On the other end of the scale, these survey results also indicate that consumers have become less respectful towards restaurant staff with distancing and mask mandates putting many out of their comfort zones. Staff support in these challenging times will go a long way to preserve their mental health.

Questions: How do you foresee the impact of following new government steps in 2021?

Zoning in on the government, it is again clear that CEOs feel VAT increase (85%) and labor regulations (60%) will have the greatest negative impact on their businesses.

On the other hand, they feel a VAT decrease (68%) will help their brands grow more.

There is a general level of skepticism toward vaccinations, with 47% feeling mandatory vaccinations will have no impact on their business growth.

Ease of travel restrictions has spurred a dichotomy, with 47% of the respondents feeling the ease in travel restriction will be good for their businesses while 32% feeling the opposite.

Respondents don’t feel the government will employ rent or price control mechanisms in 2021, and for those who did, more people think such controls will leave their businesses worse off.

Question: When do you see the following happening in 2021?

In the first half of 2021, most leaders don’t see much change in external factors affecting their businesses. The overwhelming majority believe that global economic activity, supply chain, international travel, and local industries will not return to normal in 1H2021. In addition, only 7.7% believe that the customer demand will be back to normal in the first half of 2021, and only 5.8% think restaurants will be running at full capacity.

Conversely, most leaders have a significantly more positive outlook in the second half of 2021. For example, 65% of the respondents believe that all the restaurants will be running at full capacity by year-end. A majority also expect that consumer demand, international travel, and supply chain will be fully restored.

However, only 10% of the CEOs believe the global economic activity will be back to normal this year.

Restoration of global economic activity is the biggest external factor CEOs see not happening in 2021, followed by all other KSA industries.

Question: Moving forward, what system are you going to adopt for your office-based teams?

An average score of 74 indicates that most CEOs expect their staff to be back in the office now. However, 12 out of 47 respondents scored a perfect 100, meaning the days of working from home are coming to an end. Only a few respondents advocated a hybrid system of part home, part office, but not many believe in working from home.

Conclusion

While Covid-19 has significantly impacted the Saudi restaurant industry, the sector remains defiant. Most CEOs still indicate plans to invest behind their businesses and look for new acquisition opportunities.

For their part, they have focused on ensuring the survival of their business in tough times through a combination of cash preservation and growth focus and, through all this, have kept their teams energized and efficient, even at the cost of their own stress levels. During this time, they have got support from some external partners such as landlords and the government but have been severely let down by partners such as aggregators, banks, and investors.

To bring their growth plans to fruition, they need help, particularly from the government. The support is expected in 3 main areas – VAT decrease (or at least no further increases), helpful regulations, and labor availability.

 

About Mingora

Mingora is MENA’s Restaurant and Food Service Performance Company. We combine the power of data with our deep knowledge and connections within the global restaurant industry to develop innovative products that transform business and industry performance.