Top Reasons Why Restaurants Fail – What We Can Learn

When asked, successful restaurateurs are not embarrassed to admit that they’ve encountered bumpy roads along the journey. Many of them have nearly gone bankrupt and others were forced to close their restaurants before starting from scratch again. Rather than running from failure, they confronted it. That is what primarily distinguishes them from those who sank and never recovered. Failure is not something to be proud of. Nor is it meant to extinguish whatever entrepreneurial spark you have. It doesn’t, however, need to become a (unbreakable) habit. Mistakes will be made but they don’t have to be repeated. Whether you are an experienced or a prospective owner, learning why restaurants fail can not only help you anticipate the challenges that surface but also prepare you to deal with them accordingly so that your venue won’t be part of the restaurant failure statistics.

The restaurant business is not for the faint of heart……or stomach for that matter. There are aspects that can jeopardize your business – many of which are out of your control but does not release you from the responsibility you have to your restaurant. Much like jumpstarting any other business, running your own restaurant is a gamble. You either win some or you lose some. When you launch your restaurant concept, you expect it to last. But approximately 60 percent of independently-operated new restaurants fail within the first year. As if that is not unsettling enough, some reports show that the number of failed restaurants reaches as high as 90 percent! What is even more alarming is that 80 percent of restaurants fail within the first three to five years of operation. The restaurant industry attributes failure to economic and social factors as well as legal restrictions and government intervention. Playing it safe or not willing to take risks will not ensure the security of your business. Denial will only sink you further if and when you hit rock bottom.

Location is one of the top reasons restaurants fail. Restaurant owners who open their venues without conducting prior market research on the choice of location are doomed from the start. There is not much hope for success in your endeavors if you open a new location with poor visibility, little foot traffic and no parking space. You should have long-term goals in mind when searching for the right space. Affordable real estate won’t necessarily serve in favor of your business plan. When investing in a spot for your restaurant, you should map out your target demographics and keep score of your competition rate.

When you read negative feedbacks people give about a restaurant online, you will notice that the biggest complaint they have is with the service next to incompetent staff lacking interpersonal skills and other important qualifications. Being understaffed can create a lot of issues with service as well. Disengaged staff can be off-putting. Patrons can also be turned off by overpriced low quality food, uncomfortable seating, lack of hygiene and slow delivery of their order. The crux of the problem within operations points to not focusing on service and leadership while training your staff. Lack of social graces and a sense of professionalism can lead to catastrophe. Although poor customer service is a foremost problem, it can be prevented by recruiting staff that possess the same qualities you would seek in a manager; leadership and communication skills. To attract qualified candidates, you need to thoroughly outline the duties and attributions in the job description. Don’t expect your employees to show up the day after they are hired with their game face on without any guidance whatsoever. Implementing rigorous and detailed training will help them acclimate into your workplace culture.

The most successful restaurant concepts know their niche. But not all concepts work. If the restaurant concept is not in synch with the market, it won’t appeal to the audience you want to target. Originality is what differentiates you from your competitors and if you are lacking in that department, or even worse, unwilling to think out of the box, the chance of survival for your business is very low. Not honing in on your specialties can lead to overcomplicated menus, lack of uniqueness, and decrease in revenue. You need to have a keen sense of how your restaurant breathes, let alone, a sense for the industry itself in order to make the right decisions. Unfortunately, many new owners have very little to no understanding of how the restaurant industry operates. You can read, attend seminars and educate yourself as well as seek help from experts who can determine a concept with restaurant promotion and marketing ideas that work best for you. Advertising and marketing are key to establishing a reputation for your venue. There is always room for improvement and you need to do anything you can to be a better manager.