While it’s not the part of the industry that any restaurant owner necessarily likes to think about, the fact is that many restaurants will fail in their first few years of business. However, by avoiding common pitfalls, you can help stack the odds in the favor of your restaurant succeeding.
Here, we’ll discuss 8 common reasons why restaurants fail. By exploring these common reasons, you can begin to understand why they drag restaurants down, and how to proactively avoid them. This will help you avoid becoming one of the statistics and help your restaurant thrive.
- You don’t have a clear concept. No matter how talented your chef is or how savvy the investors are, without a great restaurant concept, your restaurant will crash and burn. A concept for a restaurant is like its mission statement and the front which it shows to the world. Without a clearly defined concept, there’s no context for your cuisine or service.
Before you open the restaurant–before you even finish your business plan–give some long and hard thought to what you’d like your restaurant concept to be. Really refine it and get clear on it, because this will help you stay true to your mission with every investment and business decision you make.
- A poor location. The location of your restaurant is of extremely high importance. While it’s not vital to have a restaurant right in the center of town, there can be a big difference between an “up and coming” neighborhood and a neighborhood that is down on its luck.
The fact is, restaurants with prime locations pretty much always outperform restaurants which are in out of the way or inconvenient locations. Really strongly consider how the location of the restaurant will work for your business and in your community.
Transportation matters, too. For instance, if you live in an area where everyone drives everywhere, you’ll absolutely need to have ample parking; otherwise, people will get frustrated and go elsewhere. If you live in a big city, you should make sure that your location is easily accessible from mass transit.
- Spending too much before you open. This is an all too common mistake, particularly with first-time restaurant owners. In an effort to make everything perfect, you spend way too much money before you even open your doors.
Listen, opening a restaurant is not cheap. It requires a lot of money, and usually invested from a variety of different places. But just because you’re receiving investments and loans doesn’t mean you can’t cut the costs in little ways.
Taking proactive steps to reduce your opening costs, like buying pre-owned kitchen equipment and making sure that you hire quality staff, can ultimately cut your restaurant overhead in a big way. The less money you spend before you open, the less you have to make up for. So try to do whatever you can to cut down on opening costs; this will help ensure that you’re in the black sooner than later.
- Weak management. Oftentimes, the owner of a restaurant, due to lack of interest or time, decides to hire a restaurant manager instead of working at the establishment him or herself. This can be a good decision, but only if you make a good choice in terms of the restaurant manager. The quality of your restaurant manager can literally make or break a restaurant. Which do you prefer?
You want to have strong management which will help your establishment succeed. Can you find a budget manager for a cheap wage? Yes, but they probably won’t do a great job. Do yourself a favor and hire great management; it will pay off in the long term.
- Bad service. Hiring employees is hard. Did you take the easy way out and hire the first people who came along? That could be not only a big, but a potentially ruinous, mistake for your business.
Your staff is the face of your restaurant. They are the ones who greet your customers, they are the ones who serve and inform your customers, and they are the ones who prepare the food. What could be more important than hiring the right staff?
Take the time to hire appropriately. This means checking their references, making sure that they know their stuff, and training them properly so that they can be the best ambassadors for your cuisine and your mission.
Beyond that, do treat your staff well. Pay them appropriately, and let them know they are appreciated. This will be the single thing that will affect day to day life with your restaurant.
- Your vendors are all over the place. Do you have a million different vendors who you pay in different ways and at different times? It’s time to reign things in.
Maybe it’s a matter of editing your menu and making it smaller, so that it can be stronger and more cohesive while also cutting your food costs. Maybe it’s a matter of choosing more comprehensive vendors so that you can order more from fewer people. Getting your ordering situation in place will help your restaurant attain success.
- Not paying taxes. Ooh, it can be tempting to not pay taxes as a restaurant. After all, so much of it is a cash business–who will suffer?
Well, the answer is that if you’re ever caught, you will be the one to suffer, and bigtime. The IRS is wise to restaurants underreporting their income, and take this offense very seriously. Maybe you’ll never be caught, but are you really willing to take that risk?
- Not advertising. You figure, you opened your doors, you put up a sign; that’s enough advertisement. Right? Maybe 40 years ago, but not in this day and age. In the super-saturated restaurant scene of today, you must remain competitive to stay alive.
Maybe for you, this means advertising in the local paper, or creating cool specials and touting them on Facebook, Twitter, or Instagram. Whatever mode of advertising or marketing, it’s going to help your restaurant.
Conclusion: Everybody wants their restaurant to succeed. But the cold, hard truth is that many restaurants failing in their infancy. It’s wise to take a look at the common mistakes that make restaurants fail, so that you can take proactive steps to avoid the same fate. While nobody can tell the future, by avoiding these common reasons behind restaurant failure, you’re stacking the odds in your favor to be one of the establishments that rises above and not only survives, but thrives.
Is your restaurant in danger of failing?