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Why Newly Opened Restaurants Fail

It’s well known that most restaurants that open fail within their first year (60% of restaurants will shut down in their first year and 80% close in their first five years). Running a restaurant is not an easy task, and takes a lot of organization, funds, time, and effort for it to be successful. For the most part, lack of knowledge about the industry is what leads most restaurants to failure. You must be very well informed in what you are doing, as well as always watching the numbers of your business.

There can be multiple reasons why restaurants fail, the main ones being poor location, inexperience in the restaurant industry, lack of owner’s involvement, poor allocation of resources, and internal thefts.

Poor location

Poor location is definitely the main factor in whether or not your restaurant will be successful or not. If the location is poor, you may not gain enough customers as they cannot see it or it is inconvenient for them, which ultimately will lead to failure. On the flip side, a good location can cost high rent, and spend too much can cause you to fail as you cannot afford the rent because of overspending. A good way to know whether a location is too expensive is that the rent of the location should never exceed 10% of your total revenues. You must ensure that the restaurant is close to your primary audience.

Poor customer experience

Another primary factor in why restaurants fail includes customers having a poor experience. The main reason people go to restaurants is to have a good experience, and if that can’t be provided then it is unlikely they will return. Furthermore, it is likely they will spread bad reviews and as a result, you will lose business. It should be the restaurant’s number one goal to give the customer the best experience possible, as this will ensure that they will keep coming back and giving the restaurant the best reputation possible.

Lack of marketing

With so many restaurants on the market, the competition is higher than ever. You will need a way to stand out and become known to the consumer, and that is through marketing. Too many times new restaurants don’t market enough and no one knows their business. Restaurants that are constantly running advertisements will gather more awareness and business than one that doesn’t and will ultimately be more successful.

These are the ways that new restaurants fail and how you should combat them to ensure success for your venture.