Your branch is a savings circle: you pay first and collect last

0From the customer to the riyal

Season 1 of Beneath Marketing was about the customer: how they circle a decision, how they read a price, and when an offer actually brought someone new. Season 2 is about the riyal: the riyal that leaves your account the day you sign for a new branch, when it comes back, and who takes a cut on the way.

Eight episodes, each about a decision an owner makes while expanding, and each ending in a rule you write before you sign, not after.

1The site everyone loved

On Sunday they meet: what’s the rent, what’s the fit-out, when do we open. The one question nobody asks: how many months until this money comes back?

If it does get asked, the answer arrives after everyone has fallen for the site. Once you love the site first, the number stops being a decision tool and becomes a persuasion tool. The sales forecast creeps up, the fit-out becomes “we’ll bring it down later”, and the spreadsheet produces the answer you wanted from the start.

2The jam’iya

Every Saudi household knows the jam’iya, the rotating savings circle. Ten people each pay a fixed amount every month, and each month one of them collects the whole pot. Whoever collects first has effectively taken an interest-free loan. Whoever collects last has paid for nine months while waiting, in effect lending to everyone else.

A new branch always puts you last in the circle. You pay the fit-out, equipment and deposits before the first order, then get your riyal back piece by piece, month after month.

But there’s one important difference. In a jam’iya you know your turn before you join; your number is written on the sheet. With branches, most people join the circle first and ask about their turn afterwards.

3The one number

The sum fits on a napkin:

Payback months = capital cost ÷ monthly net contribution

Capital cost is everything you pay before opening: fit-out, equipment, deposits and pre-opening costs. Monthly net contribution is what’s left of the branch’s sales after cost of goods, rent, branch payroll and delivery-app commission. That’s the instalment that actually comes back to you each month.¹

Now move one number. If delivery commission turns out higher than you assumed and the monthly instalment drops to SAR 40,000, the wait becomes 30 months. One channel decision just pushed your turn back six months.

One honest line: this number ignores two things. First, the early months: a branch doesn’t open mature, its contribution starts lower, so real payback is longer than the napkin says. Second, cannibalization: some of the new branch’s sales would have gone to your nearby branch anyway. The napkin gives you the shortest possible wait, not the longest.

4The idea beneath the number

Why write the ceiling before the site and not after?

In 1993, Daniel Kahneman and Dan Lovallo described a recurring error in investment decisions: optimistic forecasts come from the “inside view”, absorption in the details and scenarios of the current plan while neglecting what actually happened to similar past projects. Their remedy is the “outside view”: ask how projects like this one turned out before you ask how this one will.²

For branches, the outside view is your own branches. The payback plan for the new one isn’t compared with your partner’s hopes, but with what your last three openings actually delivered.

An honest note: I looked for a published Saudi benchmark for restaurant branch payback and didn’t find a documented figure. Any number you hear at a majlis, of the “restaurants pay back in a year” kind, comes without a source or a method. Your best benchmark is your own books.

In the doctrine I work by, the bands are written in advance: 18 months or less is healthy; 18 to 30 months means sign only with a written lever plan on rent, capital cost or format; beyond 30 months the answer is “not yet”.³ Your group may choose different bands. What matters is that you choose them before the site.

From my own practice: across more than six launches I worked on, the brands reached break-even in 11 months against an 18-month plan, as reported by the groups.⁴ That isn’t a market benchmark, and it isn’t a target I’m asking you to hit. I mention it for one reason: the plan was written before signing, so we knew we’d beaten it. Without the written number we’d have had nothing to measure against. And break-even isn’t payback: break-even is the branch covering its monthly costs; payback is the branch returning what you paid before opening.

5Where the money leaks

When the ceiling is written after the site, the spreadsheet never rejects a site. Every location you like finds a sales forecast to justify it.

And the leak isn’t in one branch. Every extra year at the back of the queue is locked-up capital that could have been the next branch, or the fix for a struggling one that pays back in half the time. Open five branches in a year, each waiting 30 months, and you’re last in five savings circles at once. The cash that covers that wait comes from somewhere, and that’s the subject of a later episode.

6The Sunday-morning question

One question, one metric, one rule

8Your turn is written on the sheet

A jam’iya is fair because everyone knows their turn before paying the first instalment. A branch becomes a capital decision when you know your turn before you sign.

In fairness: payback periods are older than any of us, and the outside view is Kahneman and Lovallo’s. The jam’iya belongs to our grandmothers. All I did was put the three on one napkin.

And the napkin left something out on purpose: the sales a new branch takes from its sibling down the road. That’s the next episode: “Choose the neighbour before the house… unless the neighbour is your own branch.”