Why alot of restaurants fail

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Most of us have seen hundreds of restaurants come and go in our time. The restaurant industry is fickle and in fact, 60% of restaurants shut shop within the first year of business, and over 80% shut shop after 5 years. There are so many issues that can plague restaurants, from health concerns, poor location, bad reviews, rising rent and utilities costs and even changing consumer tastes. This article will identify and outline some common reasons why restaurants fail. This will enable you to look out for these pitfalls and avoid them.

Poor location

If your restaurant is hard to find or hard to access, you won’t get many walk ins or drop-in customers. Similarly, if there isn’t street parking, many patrons will neglect your restaurant in favor of more accessible locations. Choosing the right location with a good parking space here is the biggest thing that you can do to give your new restaurant a head-start.

Absent owners

Restaurants can be extremely profitable for restaurant owners – provided that they put in the hours and pay themselves a salary. Otherwise they are just another investor hoping for their project to take off. If you are an absent restaurant owner, you will not know the ins and outs of your business, such as where to troubleshoot and what needs work. As the owner, you should demonstrate dedication and drive. If you have a lax attitude towards your restaurant, so will your staff.

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An inept manager

Your manager is the linchpin of your whole business. They oversee your staff, inventory and day-to-day operation. They will manage customer service and relationships with vendors, bloggers and other members of the community. Especially when starting out, it is vital that your restaurant run without a hitch. You want to create a great name for yourself within the community. It is vital that you take your time hiring the perfect manager. The wrong manager may mismanage your staff, encourage a poor atmosphere or work ethic in your restaurant, or worse. Conversely, a good manager will drive success.

Tax issues

It might be tempting to simply leave your tax bill unpaid for years at a time, channelling hundreds of thousands or even millions back into your business to make it more profitable. However, the legal ramifications of tax evasion are severe, and you should do your best to be honest at all times. Tax issues can arise despite your best intentions. To prevent this, you can hire an accountant to help you with your tax returns.

Poor Customer Service

No customer likes to be treated badly. If your staff are rude, you will lose business. And even if you replace rude staff, it will be much harder to clean up your reputation if you are known for having poor customer service. It is vital that your staff are trained properly, and any instances of rudeness are dealt with promptly. You can also incentivise great customer service.

Neglecting the numbers

Even though they can make a lot of money, restaurants also have lots of outgoing expenses. Restaurateurs need to carefully monitor and manage their cash flow to ensure that monthly expenses can be met. There’s simply no excuse for not being business savvy. If you don’t know what you are doing – learn.

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Idle hands meant that you are employing too many people. Wages are a huge expense for businesses, so make sure that you are rostering as carefully as you can.

Poor advertising

Advertising is crucial to any restaurant’s success. Social media and write-ups in local newspapers are great ways to get the word out, and are often free or do not cost very much. There is no excuse for not having a marketing strategy, or at least engaging in some social media advertising. You can spend a couple of minutes each day keeping yourself up-to-date on social media trends, and then take some photos of your food or premises in the same style and post them to Facebook or Instagram. You want to create content that is visually appearing and shareable.

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It is so important that you price your menu items correctly. You should make back 15-30% of each dish’s ingredient and preparation time value. If you do a cost analysis and a dish isn’t profitable, scrap it from your menu. You can also add upmarket ingredients to certain dishes to justify raising the price. For instance, consider adding truffle oil to your mushroom pasta, or using caviar as a side for your salads.

Not having the capital

This one is self-explanatory. According to a friend who works for Brigit Loans, you need to ensure that you have saved up enough money or secured a sustainable loan. Opening up a restaurant can cost well into the six figures and that’s why it is so important to ensure that you have enough capital up front. This goes into your construction, equipment and services like an oil reclamation service, and then your startup produce.

Restaurant Insurance

One last thing that restaurant owners often overlook is restaurant insurance. It is important to have the right business insurance to cover your restaurant business so if accidents happen, you know you won’t risk losing everything you worked hard for.

Philip Okoye
the authorPhilip Okoye
Your favorite recipe author, faithful to every course. Mail me at

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