Why Do 90% of Restaurants Fail in the First Year

Posted June 18, 2012 | By csponline

With only a one in ten chance of success, starting a restaurant appears to be a high-risk venture. We’ve heard this statistic thrown around in the media time and time again; thankfully this number is drastically overstated. A recent Cornell University study showed the number of restaurants failing in the first year is closer to 60 percent, and while this may still seem a high, statistics need to be examined in context to be fully understood. Restaurants are actually no more risky than any other new business according to the U.S. Bureau of Labor Statistics. Don’t give up your dream of owning a restaurant without taking a closer look at the restaurant industry. There are many steps you can take to increase your chances for success.

Are you thinking about getting a Degree in Food Industry Management?

The majority of reasons restaurant fail are avoidable. Often would be owners have a great restaurant idea and lots of motivation but little knowledge or experience of the restaurant industry. Many factors go into running a successful business and many owners do not realize the skills and knowledge needed to start and keep their restaurant successful. Turning a profit is crucial undoubtedly; however, a profitable restaurant can be shut down for repeated health or safety codes. Additionally, a profit today does not equal a profit tomorrow. The industry and economy are constantly changing. Restaurant owners and managers must stay abreast of trends, regulations, consumer wants and a number of other dynamics.

Common Mistakes Restaurant Owners Make

1. Weak or ineffective leadership

A strong management team is vital to running a successful restaurant. Good managers define, follow and promote the restaurant’s vision and mission in all aspects of operation and build a team of capable, satisfied employees. A manager with poor hiring practices, inconsistent discipline, an inability to motivate, or a lack of commitment cannot build a successful team.

2. Poor choice of location

Many restaurant owners failed to consider the various factors that make a location successful, largely because they lacked the knowledge. Visibility, accessibility, and parking are key location factors most restaurant owners consider. However, many overlook other important aspects of location such as demographics and neighborhood traffic generators. A fun, family friendly restaurant is unlikely to be successful in an area largely populated by young, career driven people without children. 4.Underestimating or failing to evaluate competing restaurants. Restaurant owners should know how to evaluate the competition and be able to implement strategies to surpass or stay abreast of competitors. A solid knowledge of the restaurant industry is the key to beating the competition.

3. Lack of proper focus

It is easy to become overwhelmed with the myriad tasks required to operate a successful restaurant. Balance is important. Expending too much time, energy, and money on one area while neglecting others is another reason some restaurant fail. An elegant atmosphere and award winning cuisine only go so far if financial duties are not completed or are done incorrectly. The world’s best food cannot save a restaurant running at a loss. Conversely, trying to be everything to everyone can also spell doom. A restaurant need not serve every item under the sun or aim to please every consumer demographic to be successful.

4. Inability to balance family and restaurant demands

Starting and operating a restaurant requires a lot of time and energy. This can be a problem in two ways. One, some owners underestimate the amount of time and energy needed to run a restaurant, causing both the owner and family members to become frustrated and overwhelmed. Support and understanding are crucial to keep both family and restaurant successful. Second, many restaurant owners run into trouble by trying to do everything themselves. They may not have the skills to effectively delegate. Obviously this is going to take up most of their time, leaving little for a personal or family life. Feeling overwhelmed and unable to meet all the demands, many restaurant owners will sell-out or close. Experienced owners or those with a food service management degree usually have the skills to start and operate a restaurant without giving up their personal lives.

A food service management degree can give you the knowledge and skills needed to start and operate a successful restaurant and avoid the following pitfalls that cause some restaurant to fail. A lack of formal operational standards and/or an inability to maintain operational standards. Formal policies and procedures are needed for every operational function from inventory control to purchasing to safety and sanitation and so on. Having these in place allows managers to run operations proactively and not reactively. Reactive managers spend most of their time putting out fires and making snap decisions which may not even carry over into the next day resulting in continued “emergency management.” For example, failure to maintain proper sanitation can result in health department fines, ill customers, lawsuits and ultimately closure. In many cases owners lacked the knowledge or experience to develop a set of standards and procedures, or system for their restaurant operations.

Each of these reasons for failure is avoidable with proper knowledge, skills and training. Starting and operating a successful restaurant requires a specific skill set. Retail finances, marketing and merchandising, restaurant operations, employee and customer relations, purchasing and inventory control, and consumer behavior are a few of the skill sets necessary to operate a successful restaurant. With a Bachelor’s Degree in Food Industry Management you can learn the skills necessary to start and operate a successful restaurant.

Also published on Medium.