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Top 5 Reasons That Restaurants Fail


Owning a restaurant is a huge commitment and many who begin are not aware of what it takes to hold their own in this cutthroat business. Statistically speaking 60% of new restaurants fail within the first three years, which is an alarmingly high number. But this bears the question, why? What is going wrong? Well, as it turns out, there are some pretty crucial and common is takes that are being made. Opening a new restaurant is more than just having a love for food and wanting to share it. It is a business that requires knowledge, skill and the ability to assess, evaluate and rework your business as it encounters those inevitable bumps in the road. To avoid the most common pitfalls, let’s look at the top five reasons that restaurants fail.

Top 5 Reasons That Restaurants Fail

  • Location
  • Hands off owners
  • Poor management
  • Bad service
  • Miscalculating food percentages costs

Location Location Location

Choosing the right location is step one. Restaurants that are in busy, high traffic areas tend to do well. Out of the way, off-road and hidden are not good choices. Some restaurant owners choose their location based on their personal preference or cheap rent and don’t think about how convenient it will be for customers to find them.
You can not rely on everyone knowing you or about you or that people will go out of their way to eat at your restaurant just because you have a good review on Yelp (separate point altogether).
Think about where and when you would like to eat. Maybe when you go out for Movies with your loved ones, family, dates. Consider doing some basic research on nearby towns and population metrics.


Hands off owners

Looking to open up the doors and walk away? Restaurant owning is not a passive income business. Yet so many seem to think it is. Owners need to be on the premises and overseeing everything in order to keep up the standards. Opening the doors and walking away is a sure-fire way to fail.

No one will run your business the way you will. And I am not saying micromanagement is the way to do it, but make sure you are present. Only you (or well-proven Manager) can spot the little things that will make or break you.

Poor management

Hiring people who are under-skilled, difficult to work with or family that you can’t fire are all poor management skills and sadly very common ones. As an owner, one needs to be a strong leader.

In most cases hiring family JUST BECAUSE they are family is a BAD idea. Not to say that if your Sister has great experience in the Food Service business you should not hire her, but consider experience and background first.

As a Boss you will need to fire people and you will have to make these decisions based on solid metrics and NOT your likes or dislikes. This is hard but figure our what important to you in your staff and keep it tight.

Bad service

Customers will not return to a restaurant that has bad service-no matter good the food is. Restaurants are a service business and this must remain a top priority. Patrons should always be served in a polite and timely manner that makes them feel appreciated. As an owner, one must ensure this is a constant.

Remember someone receiving good service MIGHT or might not leave you a positive review on Yelp and Google and so on, but I can guarantee you, that if I get bad service I am DEFINITELY leaving a review on all these platforms.

It is much easier to get a negative review than a positive one.

Miscalculating food percentage costs

Budgeting and ensuring that expenses are covered and profits are made is also the owner’s job. Failing to ensure that the prices reflect the food percentage costs is a common mistake made by new restaurant owners.

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