2017-02-22 00:00:00 Running a Business English Dreaming of opening a restaurant? Check out the top eight reasons restaurants fail, and get tips for avoiding these common stumbling blocks. https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/restaurant-cashier-rings-up-customers.jpg https://quickbooks.intuit.com/ca/resources/business/8-reasons-most-restaurants-fail-avoid/ 8 Reasons Most Restaurants Fail and How to Avoid Common Pitfalls

8 Reasons Most Restaurants Fail and How to Avoid Common Pitfalls

4 min read

The failure rate for restaurants can seem intimidating to aspiring restaurateurs. According to CNBC, nearly 60% of restaurants close within the first year, and only one of five make it to a fifth anniversary. This doesn’t mean you should give up your dream, but it is important to understand why restaurants fail so you can avoid the usual stumbling blocks.

1. The Wrong Location

Location is often the biggest factor in restaurant failure. When choosing a location, you want to make sure your desired clientele live or shop in the area, and know the median income of these consumers as well as their general tastes. Try to take note of what’s working in the area, but be careful to avoid market oversaturation. For example, if an area has three thriving streak houses, it is an indicator of big ticket spenders who like quality food, but their craving for steak may already be met so you may want to focus on a complementary or alternative concept.

2. Unimpressive Openings

Everyone who comes into your restaurant on opening night has the ability to post an online review within seconds of sitting down. As a result, it’s nearly impossible to open quietly, and if an unimpressive start makes a poor first impression on customers, your business will suffer. Before you welcome your first diner, it’s critical to be prepared. Consider a soft opening with friends and family so you can make sure everything runs smoothly before you open to the public.

3. Bad Food

Diners enjoy everything from fast food burgers to coq au vin and a host of treats in between. To be successful, you don’t have to serve gourmet food, but to keep diners coming back, you need to prioritize the food. Your kitchen should have well-trained, creative professionals who can maintain consistency at all times.

4. Overcomplicated Menus

If a big menu is your calling card, go for it, but in most cases, it’s safer to keep the menu short and simple. A short menu can speed up table turnover, allowing you to serve more customers each shift. It also streamlines inventory and makes it easier to train your kitchen and wait staff.

5. Unfocused Brand

Successful restaurants typically have a clear brand image reflected in their menu, service, and decor. Depending on the restaurant, successful themes may include convenience, affordability, luxury, exclusivity, friendliness, or a long list of other themes. Keep in mind that diners want to know what to expect when they walk into a place, and a well-focused brand image can help.

6. Staff Issues

A quality staff is essential to the success of a restaurant. When hiring staff members, you want to look for experienced individuals who reflect your brand. For example, at an upscale bistro, you may prefer servers who are professional but polite, while at a family restaurant, you may prefer servers who are a bit more casual and naturally chummy with diners. To keep staff on track, you also need strong leaders. Your head chef should be able to keep the line cooks on task, and your hostess should know how to stagger seating to avoid overwhelming the wait staff and the kitchen. Training is a continuous issue. When you roll out new menu items, you want to spend some time training the kitchen how to prepare those dishes. At the beginning of each shift, review specials with servers, and consider regular meetings or informational handouts about wine pairings and other information your staff needs to know.

7. Lack of Restaurant Experience

A lot of restaurateurs have dreamed of opening a restaurant their entire lives, but they’ve never worked in one. If you’re a novice to the industry, consider taking an entry-level job at an existing establishment so you can observe what works. Otherwise, try to work with a restaurant consultant who can help groom you for success, and hire and listen to people with experience in the industry.

8. Lack of Business Experience

On the flip side, some aspiring restaurateurs have lots of experience working in restaurants, but they lack business experience. If this describes your situation, you can hire an accountant or use small business accounting software to handle the details, but you also need to understand the basics of profit margins, labour costs, budgets, and other managerial concerns. In these cases, you may want to consider working with a business mentor. Although failure rates for restaurants are high, you may be pleased to know they aren’t that much higher than failure rates for businesses in other industries. All business owners face challenges, but as a restaurateur, it’s critical to understand your unique challenges. To stay competitive, keep the above eight things in mind, and don’t give up.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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