Background

Last week we had lunch at a restaurant in Subang Jaya, near Asia e University. It served rice cooked in coconut milk with a choice of side dishes such as fried chicken and fried egg, which is commonly known as “nasi lemak”. We noted that the restaurant with a seating of about 20 were patronized mainly by non-Muslims. Half of the total seats were empty.

Although potential Muslims patrons were checking the menu placed outside the restaurant but they did not enter. The main reason was that the restaurant did not display a ”Halal” logo at its entrance. The potential Muslim patrons knew that the menu offered by the restaurant did not have pork ingredients, but they would not enter the restaurant because it did not display “Halal” logo on its menu; thus loss revenue for the restaurant.

The restaurant should consider applying “Halal” certification/logo as its “nasi lemak” menu is popular with both non-Muslim and Muslim patrons.

Normally, the application for the “halal” certification/logo could be made directly by a restaurant’s owner. He/she could also appoint a consulting company to assist in the application process. This would usually cost about RM8,000-10,000.

Value of “Halal” Certification/Logo

The restaurant was not attracting Muslim customers as it did not have “Halal” certification/logo. The restaurant would be able to achieve higher patronage from Muslim diners if it had the “Halal” certification/logo.

Let us consider a hypothetical full-service restaurant with 20 seats. In this example, a typical dish with a soft drink is about RM15.00. There are two peak periods; lunch hour and dinner. Presently, during each peak period, we assume that 20 non-Muslim patrons would fill the restaurant (half of seating capacity). Thus, on a daily basis, the revenue of the restaurant is:  20 X 2 XRM15.00=RM600. During each peak period, there would be 20 non-Muslim patrons.

In a year, the annual revenue of the restaurant is RM219,000 (RM600 x 365).

If the restaurant is certified  ”Halal” and displays the “Halal” logo, it would attract additional Muslim customers. We assume that the restaurant would now be full during the peak period. The daily taking is now: 40 X 2 xRM15.00=RM1,200.

In a year, the annual revenue of the restaurant is RM438,000.

The value of the “Halal” certification/logo could be estimated as follows:

	Industry estimates	Not having “Halal” certification/logo	Having “Halal” certification/logo
Sales	100%	219,000	438,000
Costs of goods sold	30%	65,700	131,400
Payroll and benefits	35%	76,650	153,300
Operating expenses	7%	15,330	30,660
Occupancy expenses	10%	21,900	43,800
General and admin expenses	3%	6,570	13,140
EBITDA		32,850	65,700
Value of “Halal” certification/logo @ 8 per cent capitalization rate		410,625	821,250

Please note, in Malaysia, the “Halal” certification/logo is renewable every two years. Thus, the intangible “Halal” certification/logo has an indefinite life.

Based on this hypothetical restaurant example, the value of the “Halal” certification/logo is the difference between the value of not having and the value of having “Halal” certification/logo, that is RM410,625.

The value is substantial if more restaurant outlets are involved in a country like Malaysia with a predominantly Muslim population.

Conclusion            

Having a “Halal” certification/logo would attract both non-Muslim and Muslim customers, thereby improving the revenue of a restaurant. The JAKIM “Halal” certification/logo has been accepted as a benchmark that the ingredients used in the menu of a restaurant are permitted by Islamic principles.

International food franchisers please take note!

Note:

Dato’ Dr Anuar Md Nor is a founder of Bison Consulting, which offers a range of management and technology services, including “Halal” certification/logo. Our website is www.bisonconsulting.net