The 5 Most Common Reasons for a Restaurant to Fail within the First Year

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According to a study conduct by Cornell University, almost 60% of independently owned restaurants shut their doors permanently within the first year of operation. Restaurants.com also discovered some worrying trends, including that some 80% of restaurants close down within the first five years of operation. There’s no doubt about it – opening a restaurant or similar venue is a high-risk venture, and all of the studies are there to back up this rather sobering fact. However, by meticulously avoiding the more common pitfalls that new restaurant owners make and be engaging in a lot of hard work, you’ll be able to give your venue the best chance.

#1. Poor Competitive Insight

To establish a successful restaurant, you’re going to either need to be a marketing guru yourself or hire one to give you some professional industry advice. You might think you have an excellent idea that no one else in your area has ever thought of, but competitive insight is not as simple as that. You need to be able to identify your competition both in your immediate area and beyond while also identifying the more successful businesses from those that are themselves likely to fail sometime soon. You also need to understand what sort of venues the local market can handle. After all, there’s little point in opening a fine-dining venue in a low-income area.

#2. Unsuitable Location

Finding the right location for your restaurant isn’t as simple as just grabbing hold of a premises right in the heart of town. However, finding the right retail space is arguably the most critical factor of all when it comes to building a successful restaurant business it can take months or even years to find the perfect location, but you cannot afford to rush into the decision and settle for a place that might have too little foot traffic, inadequate parking or poor visibility from the street. Ultimately, you’ll need to define your ideal customer, know your competitors extremely well and, most importantly, be extremely familiar with the area yourself to choose the right premises.

#3 Inconsistent Offer

Having an inconsistent offer is every bit as bad as trying to be everything to everyone. All you’ll achieve is to give your potential customers the impression that you really don’t know what you’re doing. Additionally, if you have an excessively complicated menu or you’re changing it all the time, you’ll confuse both your staff and customers alike. Of course, however, if you run a restaurant that specialises in fresh food, you’ll be changing your menu regularly, in which case it’s far better to have just a handful of items on the menu. Just like your food, your customer service also needs to be consistently good.

#4. Low Startup Capital

One of the factors that make starting a restaurant so risky is that it requires a great deal of startup capital, but there’s absolutely no point in trying to do it on the cheap. Should you not have enough money to start the venue you want, you’ll have to make sacrifices which, in turn, will greatly increase your chances of failure. According to restaurantowner.com, it costs an average of around $3,000 per to start a restaurant, although the figures vary wildly depending on your area and the type of venue you’re looking to establish. A universal rule, however, is that you must keep enough cash on standby for at least 12 months.

#5. Inadequate Promotion

Sometimes, all it takes to market a good restaurant is a perfect location with high visibility. However, not every venue is or even should be located right in the heart of a tourist centre of an extremely busy town or city. Today’s consumers are increasingly likely to find you while they’re out and about, but instead of seeing your venue in person, they’re more likely to find it on a mobile Internet search. As such, having a strong online presence, particularly with regards to mobile media, has become essential for both promotion and customer service. It will take time to build up your online visibility, but it’s now even more important than your physical visibility.

Final Words

You shouldn’t let the above put you off your dream of running a restaurant, but there’s no denying it will be an expensive and challenging undertaking requiring a lot of hard work, a personal touch and a unique value proposition. Some professional help and advice can also go a long way to helping you realize your ambitions.

Author: NaijaRoko

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