Should a Feasibility Study Be Credited Against the Development Mandate? What a "Stop" Costs and What a "Go" Buys

A café owner comparing proposals asked us a question that deserves a public answer: if I pay for the feasibility study first, is that money credited against the development mandate — and what do I owe if the study tells me to stop? The question is commercial on its face. Underneath, it is a question about whether the study can be trusted, and that is the part worth writing down.

What the study is for

The Feasibility & Investment Case exists to answer one question before the lease binds: can this concept, on this site, at this capital, carry its rent, its labour and its food cost and still leave a return? It does that by modelling the operation against the site and format actually under consideration — covers by daypart, average spend, seat productivity, the channel mix, the capital line by line, the working capital, the sensitivity of the whole model to landing ten to twenty percent off plan — and by reading the rent against the revenue the room can plausibly produce.

It ends in a decision meeting: go, revise or stop, recommended in writing and argued to the owner’s face. The deliverable is the decision, not the binder. A study that leaves the owner with sixty pages and no verdict has not finished its work.

Three outcomes are possible, and all three are successes. A go means the numbers hold and the mandate can be fixed from them. A revise means they hold under a different format, a smaller room, a different lease, a lower capital — and the study names which. A stop means the capital should not be spent, and says why.

The commercial problem with a separate study

Now the difficulty. If the study is priced as its own profit centre and the mandate as another, the consultancy earns twice from a go and once from a stop. Nothing about that makes a consultant dishonest, but it makes the owner right to wonder. Every “go” arrives from a party that benefits from it. The study becomes, structurally, the first step of a sale, and its recommendation has to be discounted accordingly.

The credit clause removes that structure. If the study fee is credited in full against the mandate when the mandate is signed within a stated window, the consultancy earns nothing additional from recommending a go — the fee it already holds simply becomes part of the larger engagement. A go and a stop are then worth the same to the consultant’s income, and the recommendation can be read at face value. That is the whole argument for the credit, and it is not a discount; it is a control on the advice.

What GGB decided

GGB credits the Feasibility & Investment Case in full against the development mandate when the mandate is signed within ninety days of the decision meeting. The study is priced from AED 45,000 — indicative, scoped per project — and that fee is never paid twice. If the study’s honest answer is stop, the owner keeps the study and the capital it saved, and nothing further is owed. If the answer is go, the mandate is fixed in writing from the study’s own numbers, never as a percentage of the capital, and the study fee disappears into it.

We took that position after the question above was put to us, and we took it for the reason above: it is the only arrangement under which our own recommendation carries no pull toward “go”.

What a stop actually costs, and what it saves

Owners sometimes read a stop as money wasted. Consider what the alternative costs. A café that should not have opened spends its fit-out, signs a lease it cannot carry, staffs up, trades for six to twelve months against a rent the revenue never supported, and closes with the capital gone and the lease still running. The study fee is a small fraction of that, and the study is the only point in the sequence where the capital can still be kept.

A stop is also rarely a dead end. In our experience most stops are really revises: the concept works at a smaller footprint, at a different rent, in a different area, or under a different format. The study says which, and the owner walks away with a clearer brief than they arrived with. The next site is read faster and more sharply because the model already exists.

What a go buys

A go is not permission; it is a set of numbers the mandate is built from. The development mandate — concept, design coordination, licensing, kitchen, procurement, pre-opening, opening — is fixed against the study’s capital, revenue model and timeline, so the fee is known before the first contractor is briefed and the decision gates the owner will approve are already written. The owner approves the key decisions, the budgets and the final selections; the mandate runs the programme between those gates.

A go also buys the sensitivity table, which is the part of the study owners use most after opening. It says in advance what happens when covers land fifteen percent under plan, or when the rent review arrives early, and it says which lever to pull first. The operation that opens with that table in the drawer reads its first bad month as a scenario it has already seen.

How to read a credit clause in a proposal

Four things to look for, and to ask for in writing where they are missing.

1. Full credit or partial. A partial credit keeps some of the double payment and some of the pull. Ask for the figure.
2. The window. Ninety days from the decision meeting is a workable period; it lets the owner run the site and lease negotiations that a go usually triggers without losing the credit. An open-ended window is generous; a thirty-day window is a pressure tactic.
3. What “signed” means. The credit should apply on signature of the mandate, not on completion, and the proposal should say so.
4. What is owed on a stop. The study fee, stated plainly, and nothing else. If the proposal is silent, ask.

Three ways a credit clause is quietly weakened

Because the clause is a control on the advice, it is worth knowing how it is defeated in practice — usually without anyone intending to.

The study is priced low and the mandate high. A modest study fee is credited in full against a mandate that has been priced to recover it. The credit is real and the arithmetic is not. Read the mandate fee against the scope it covers, and ask the consultancy to show how it was built from the study’s numbers.

The credit expires before the owner can use it. A thirty-day window on a decision that needs the lease negotiated, the capital confirmed and the partners aligned is a window designed to lapse. Ninety days is workable; anything shorter should be asked about.

The stop is discouraged rather than priced. A study that never says stop is not a study, and the sign is the language: “we recommend proceeding with adjustments” on a model that does not break even at the site’s rent. A stop should be a plain word on the last page, with the numbers that produced it beside it. If you have never seen the consultancy write it, ask when they last did.

The question underneath the question

The owner who asked us this was really asking whether the study could be trusted to tell them not to proceed. The credit clause is the honest answer: yes, because under it the consultancy has nothing to gain from a go that it does not equally gain from a stop. Read the clause first, then the scope, then the price. The order matters.