Facing Your Biggest Fear: Restaurant Failure

Every new business owner faces the same dilemma: what if it doesn’t work out?

Well, it’s not as bad as you think. According to the U.S. Bureau of Labor, 75 percent of new businesses survive their first year. But the challenge continues as 69 percent survive the second year and only 50 percent make it to five years.

But just because the data says so, doesn’t mean you will just let chance dictate your fate. By learning about the most common mistakes many restaurant owners make, you increase your chance of surpassing the challenges and succeeding in your business.

What are some reasons why restaurants fail?

Lack of Experience

It takes a great deal of experience with your craft to start a business and make it work. Just because you know how to cook and you cook well doesn’t mean you’re all set to succeed at owning and operating a restaurant.

There are many things you should learn about before you launch your restaurant business. That includes managing people and resources, budgeting and marketing. At first you might find yourself doing everything from preparing the dishes to cleaning the tables, making the inventory, shopping for supplies, and even promoting your business on social media. As you gain experience, you will learn how to delegate tasks, manage people, and give your restaurant an edge over the competition. Consider undergoing restaurant management training to gain knowledge and experience.

Poor Knowledge About Competition

The restaurant business remains to be profitable, but the competition is fierce. And according to research, it’s the number of new restaurants opening each year that drive industry growth. Approximately 60,000 new restos are launched each year and 50,000 close, resulting to 10,000 restaurants added to the list. Because of the tough competition, you have to be continually innovative with your services and marketing approach. From your interiors to your menu, food presentation, and promotions, you’ve got to be creative. And you must study your competition to learn how to better operate your business.

Wrong Location

Location is one of the biggest factors that determine your success in the restaurant business. Poor location could mean:

  • There’s not enough traffic
  • Your neighborhood (target market) is not interested in your offerings
  • You are not visible from the street, or
  • Your neighboring competitors serve the same menu, but at a cheaper price.

Conducting a feasibility study is essential before opening up a restaurant. You have to study your business concept and find the best location that’s a fit.

Low Start-Up Capital

There’s no telling that the most important things you need to start a restaurant is capital. You need around $450,000 to $525,000 for a small restaurant. These costs include rent, location improvements, miscellaneous opening expenses, marketing and advertising. These days with the availability of many financing options like personal loans or business loans, putting up a business even if you don’t have enough in your bank account is possible. It is also important to keep your expenses as low as possible until you’ve built out your product and you start seeing returns.

Poor Restaurant Promotion

No matter how great your menu is or how cool your business concept is, if people don’t know about it, you’re setting yourself up to failure. Marketing is in the heart of every kind of business. It is easier and much cheaper to promote a brand these days because of the internet. By using social media, you can reach out to thousands of people on Facebook, Instagram and Twitter without spending much. Don’t neglect all opporutunities for community outreach. People like to see a face to  connect to the business.


Consistency is the key. A simple mistake that ruins your dish can cost. People  search for top-value services and are less likely to tolerate inconsistencies. Americans have changed their spending habits for the better. The hesitant customer, for example, is not only less likely to order a favorite dish again when it comes to their table poorly seasoned. Worse, they are less likely to return to that restaurant. Bad word of mouth can cost even more. Quality control is the key to maintaining consistency.

Bad Service

Customers are the foundation of any business. If they are not treated right, the impact is huge and could even lead to the downfall of your business. So make sure everyone on your staff is trained to provide quality service all the time. And lead by example. 

Bad Partnerships 

If you have partners, the lower the risk will be in operating a business. But then, this does come with disadvantages too. Choose your business partners properly. You should share the same vision and mission and make decisions as a team.

Bad Managerial Skills

Managing a restaurant is not easy. It takes skills and experience to do it properly. While as the owner you can be the manager, it is a great idea to hire an experienced manager to make sure there is oversight and you don’t overextend yourself.