Why Most Restaurants Fail

Deciding to start a restaurant because you make great chili and love to cook is the reason why most restaurants fail. Seriously! Everyone who has a dream to open their own restaurant needs to take heed that there is much more needed than the great taste of their chili and the love of cooking to succeed. Much, much more.

The Owner Is The #1 Reason Why Most Restaurants Fail!

why most restaurants failThere is a big difference between working ON your restaurant, and working IN your restaurant. (Most rookie owners don’t understand this until it’s too late!)

When opening your own restaurant, you must decide how much your time is worth to you and how much time you can afford to spend in your restaurant. If you are working 90 hours a week in your restaurant you will burn out and not be very productive. Most new restaurant operators get so caught up in being and working IN their restaurant that they can’t seem to think clearly about what is best for their operation. You need to step back and take an honest look at your operation and see if it is running to its fullest potential.

If you have to be there, all the time, realize that you have bought yourself a job, not a business. When the owner is so busy working IN the restaurant they let a lot of little details slip. Your customers notice those “little things”.

Why Most Restaurants Fail? Reason #2

Just take a look at most start up restaurant business plans. There are usually unproven assumptions and guesses about income and expenses. That’s called gambling. And like gambling, that’s a good way to lose a lot of money. Everyone thinks that they can make their plan up as they go along. Having a dynamic business plan is important, it must be flexible enough to change with the market, customer wishes and changing resources. However, do you really think you’ll have MORE time to flesh out your business plan once you open? How can you do that if you are working so many hours and are burning yourself out? How can you think clearly when you are overtired?

Your plan has to be right from the beginning, before you do anything else. If there’s something in your business plan that throws up a red flag, deal with it before you proceed. Also, make sure you have an impartial person go through your business plan with a fine toothed comb. Don’t just give it to your cousin that works in construction. Find someone who understands the restaurant industry and ask them to find the problems. Most rookie owners don’t do this, and that’s why most restaurants fail!

Wrong Priorities Is Why Many Restaurants Fail!

Most rookie restaurateurs want to design their menu and find their location quickly. They get the adrenalin flowing and start making these elaborate plan. Though these items are VERY important, they are NOT the most important facets of their business. Many newbies want to decorate their restaurant to impress everyone and this usually causes them to max out their budget. They dream of all the customers that will be lined up outside their door. They believe that by the power of the universe their restaurant will be special.

“If You Build It, They Will Come”

- quote from “Field of dreams”

This is a HUGE reason why most restaurant fail. Just because the inside of your restaurant is amazing, and your food is superb has really very little to do with how much money you’ll make. That is why most restaurants fail.

A few other reasons why most restaurants fail?

Not enough emergency cash in reserve.

Money to pay for those set backs that you never dreamed would happen, yet always do. (Like a blown water heater or a deep fryer that just won’t work)? Most new restaurant owners have limited resources, and they spend way too much on the wedding day (sorry, I mean “opening”) and that that is a major factor in most restaurants fail. Not enough money to carry you over until the money starts coming in.

Bad Hiring;

Ever meet someone who absolutely hates their job? Do you really want to be around them? Your customers sure won’t. Hiring staff in a hurry usually leads to hiring bad staff. Disgruntled, unmotivated staff will not go the extra mile that is needed for your business to survive. Be a good boss, treat your staff right, regardless if the business is making money or not.

Out of control expenses;

Having your till ring is a great sound. But always remember: “The amount of money coming in is harder to change than the money that goes out.” If a product doesn’t sell and keeps spoiling, get rid of it. Make sure you have cash controls with all staff that are around cash and be wary of insider theft. Insider theft accounts for eight times as much loss as that stolen by your customers and strangers.

Most restaurants fail, but keeping your cash flowing, your staff happy and your expenses in line will hopefully help you be one of the success stories. With a little knowledge anyone can start a restaurant and make it profitable.

Another MAJOR reason most restaurants fail is that the owner isn’t aware of a few newer ways to attract and retain more customers. The owner sits in the back booth and prays that more customers will walk through the door. That isn't a marketing and promotion plan, that's gambling!

Without a steady flow of new, and return patrons, most restaurants fail!

The reason most restaurants fail is because the owner simply wasn’t aware of ALL the things it takes to open and operate a profitable restaurant. You can do 80 things right, but if you don’t know the other 20 things you aren’t doing, you’ll probably fail. The statistics don’t lie. Most restaurants fail!

The good news is that YOUR restaurant doesn’t have to fail. It is one of the few places that anyone with a dream can build a wildly reward, profitable business without a regard to race, sex, nationality, education or finances. (Yes, you can actually open a restaurant without a lot of money!)

The owners of most new restaurants are unaware of all the important information that makes for a profitable restaurant, aren’t focused on the most important money making priorities, don’t understand the current dynamics of their market or are burnt out and don’t see the big picture.

That’s just a few reasons why most restaurants fail.