Restaurants fail not because of one problem but a combination of problems. As per American Express 90% of restaurants fail in the first year; Cornell University asserts that nearly 60% fail in the first and 80% fail in the first three to five years of ope
Here are some common reasons why many restaurants fail.
1. ‘Concept’less: Any successful restaurant needs a clear concept, i.e. identifying the specific customer it is target audience. You need to know the target audience for whom you are going to open your business. If this is not identified in the beginning, it becomes a general one and possesses no identify.
Cling to a specific cuisine or type of food for a few months until the restaurant crosses its developing phase, so that the audience is well versed with your signatory food item. Big brands like McDonalds and KFC are known for their signatory dishes, like burger and chicken wings, respectively. So keep the menu small keeping in mind the target market near your restaurant.
2. Unreliable partners: In the beginning you might make family members as partners. But in the long run, balancing family and work seems more difficult for restaurant owner like you given the time requirements they need to dedicate to both. When clients enter into partnerships hastily, it normally becomes the worst business plan.
3. Lack of capital: Your business can fail by either you not having enough money to start with or mismanagement of cash funds which can deplete your capital further or poor decisions. Always check your pocket before entering the restaurant business. Funding is the main reason for many of the restaurants to fail within a few months time.
4. Poor industry research: A market analysis is an important pillar before getting into any business. Talking to people, local market and doing a survey of the preferred location can help you enter the industry with a bang on.
5. Hiring poor management: You need to hire a manager to take of your restaurant, but don’t ever trust anyone completely with your money or your business reputation. Remember that no one is going to care about your business the way you do.
6. Lack of team spirit: Working in a group always bears fruit. A restaurant’s focus on the team spirit makes the business profitable. While choosing your employee keep in mind that it is not mandatory for the person to be well qualified but be ready to learn.
7. Bad customer service: A good customer service goes a long way. Shying away from customer feedback will do more damage than good to your restaurant. Every customer complaint needs to be addressed. If there are a lot of unhappy dining customers out there, they will never bother to return to the restaurant.
8. Delay in paying taxes: When taxes are paid late, hefty penalties, fees and other fines follow. There could also be a possibility that the restaurant is shut down completely.
Not maintaining checklists: Your restaurant should maintain proper training manuals/protocols, checklists, goals and incentives and follow a checklist for all of them.