The Top Ten Reasons Why Restaurant Businesses Fail At the Beginning of Their Run
Studies show that during the first year of operation, sixty percent of the restaurants change ownership or close down, while eight percent of them fail within a span of the next five years. This brings out the question, what is wrong with
restaurant businesses? Why do restaurant ventures have such a high failure rate? The truth is that some of these restaurants fail due to a combination of strenuous problems. Below are ten main reasons why restaurants fail within a span of five years.
Ten Reasons Why Restaurants Fail
- Location– This is one of the main reasons causing restaurant business fail Choose a location that is visible to your target customer base and possibly have somewhere for your clients to park their vehicles. It should be accessible to clients who are pedestrians, to prevent them from walking for long, insecure, and strenuous distances just to reach your restaurant. Where you choose to place your restaurant will have a big impact on the proceeds.
- Working restaurant owners– Most people begin this venture thinking that they will pay someone to manage it for them. As a business owner, you should be ready to get your hands dirty from time to time. Working for you promotes Accountability and efficiency.
- The Efficiency of Management– Most restaurant owners hires personnel with the hope that they will be as efficient as they promised, only for them to become dead weight and drown the proceeds of the business. This is especially the case with people who tend to hire their friends and family.
- Tax payment failure– failure to pay taxes comes with hefty tax penalties, fees, and fines. The state’s tax body, due to this issue, shuts down some restaurants.
- Customer service– Customer service has a lot of power over the restaurant One wrong move and you might lose all your customers within a blink of an eye. Thus, it would be beneficial to seek customer feedback from time to time. Once you get a complaint about one of your staff members, you should talk to them to help them correct their approach to customers or simply fire them.
- Manage their proceeds– It is beneficial for any business to watch their proceeds closely. This will help them curb theft and manage their big expenses such as restaurant bills and debts. In addition to this, it will help you save money once you realize that most of the expenses will not be covered due to insufficient funds.
- High payroll– Most restaurant owners do not know how to cut down on costs. They will have all the staff working on a holiday or a Sunday when the restaurant is not that active. The idea is to bring in more staff on the active days and cut down on staff on the inactive days. This will help them save up.
- Advertising– The restaurant business is flooded. As a business owner, you will need to have a good marketing and advertising strategy in order for your business to stand out from the rest in the market.
- Food cost issues– Restaurant owners need to understand the reasons behind menu pricing. Some dishes are bound to be more expensive in comparison to others. Most restaurant owners have no idea about this. Thus, it would be beneficial to consult with the chef.
- Spending a lot prior to opening day– Some people, tend to spend a lot of money on the equipment and general outlook of the shop prior to the opening date of the restaurant. This leaves the owner with insufficient funds to deal with restocking the ingredients and dealing with repairs. This leads to loss of clientele and thus proceeds.