Why Do Restaurants Fail?

Location!

That’s the biggest reason given for restaurant failure. But, let’s talk about that in a minute.

What’s the restaurant failure rate?

According to American Express, 90% of all new restaurants fail in the first year.

Actually, this statistics did not exactly come from American Express. It turns out that it was Chef Rocco DiSpirito who stated the statistic while appearing in an American Express commercial.

According to the National Restaurant Association, the number of new restaurants that close within their first year is closer to 30%. Another 30% of restaurants will close in the following two years. In other words, 60% of all new restaurants close within 3 years.

The #1 reason for closing is Location.

“Poor Location — Choose wisely. Don’t just do a quick walk through of the neighborhood and leave it at that. Research, research, research! Look at crime levels, schools, income levels, wealth, housing values, ethnicities, mass transportation, etc. Are there enough people in this neighborhood, or nearby, to comfortably support your new restaurant? Can the neighborhood afford your pricing? Can a competitor easily set up right across the street? Is there enough parking close by? Does your site have good visibility from the street?”

Other reasons for restaurant closings include:

  • insufficient capital
  • lack of commitment
  • lack of prior experience
  • out of control costs

 

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