The Truth About Restaurant Failures

restaurantThe Truth About Restaurant Failures

About 59% of all new restaurants fail within 3 years.

No matter what statistics you look at, the restaurant business is extremely difficult.

Most restaurant guests and outsiders believe that restaurants are “raking in” the money.

They don’t understand the cost of food, rent, insurance, employees, as well as all the other expenses required to succeed.

No doubt that some restaurants are “raking it in.” However, it is difficult to assess the success of a restaurant by looking at it.

A restaurant that always has a crowd waiting to get inside could go out of business tomorrow. A restaurant with fewer patrons may be making a nice profit.

If more money is coming in than going out, you have a successful business.

About 25% of all new restaurants close within a year.

About 59% of all new restaurants close within three years.

There is little difference between the odds of success for an independent restaurant vs. a chain restaurant.

Mexican restaurants, subs & bakeries, coffee & snack restaurants close more often than Italian, seafood and burger restaurants.

Here are the elements of a successful restaurant:

Elements of Success

  1. Have a distinctive concept that has been well researched.
  2. Ensure that all decisions make long-term economic sense.
  3. Adapt desirable technologies, especially for record keeping and tracking customers.
  4. Educate managers through continuing education at trade shows and workshops. An environment that fosters professional growth has greater productivity.
  5. Effectively and regularly communicate values and objectives to employees.
  6. Maintain a clear vision, mission and operation strategy, but be willing to amend strategies as the situation changes.
  7. Create a cost-conscious culture, which includes stringent record keeping.
  8. Focus on one concentrated theme and develop it well.
  9. Be willing to make a substantial time commitment both to the restaurant and to family.
  10. Create and build a positive organizational culture through consistent management.
  11. Maintain managerial flexibility.
  12. Choose the location carefully.

Here are the elements of a failing restaurant:

Elements of Failure:

  1. Lack of documented strategy; only informal or oral communication of mission and vision; lack of organizational culture fostering success characteristics.
  2. Inability or unwillingness to establish and formalize operational standards; seat-of-the-pants-style management.
  3. Frequent critical incidents; managing operations by “putting out fires” appears to be a common practice.
  4. Focusing on one aspect of the business at the expense of others.
  5. Poor choice of location.
  6. Lack of match between restaurant concept and location.
  7. Lack of sufficient start-up capital or operational capital.
  8. Lack of business experience or knowledge of restaurant operations.
  9. Poor communication with customers.
  10. Negative consumer perception of value; price and product must match.
  11. Inability to maintain operational standards, leading to too many service gaps.
  12. Poor sanitary standards — almost guaranteed to kill a restaurant.

To read the entire article go to:

Restaurant failures: The truth and the reasons


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