14 Major Reasons of Restaurants startup Failure

14 Major Reasons of Restaurants startup Failure

Amber Alvi

With so much competition in the market, owning an eatery and running it swimmingly, without any hurdles, is no more a piece of cake!

There is a lot of passion and emotion that goes into creating a personalized dining experience for a restaurateur's patrons. But, when times get tough and the customers start to lose interest, it can be hard to keep going.

A Great Percentage Of Restaurants Fail

Numerous restaurateurs fail during the first few years and shut their businesses even before completing five years. According to National Restaurant Association, about 30% of restaurants will likely go to the wall within the very first year. It means that one in three restaurants don't survive and crash within the starting year.

If you or someone you know is planning to open a restaurant or already owns one but struggling for its triumph, it is crucial for them to understand why this fall happens and how to get a grip on it.

Never Fear - to help you with that, we've shared a list of reasons why restaurants fail and the ways you can save them from falling behind. It will take a failing restaurant from surviving to thriving!

Major Reasons Why Restaurants Fail

Many reasons cause a restaurant to lag, but here, we've mentioned the most common ones together with their best solutions.

  1. Absence Of A Clear Mission & Vision

A company's mission and vision have more importance than everything else. It should be at the center of any business decision.  Several people open a restaurant but fail to set goals and create a suitable plan to achieve them. And so, the lack of a vision causes their businesses to struggle.

What you can do:

Write a clear mission and vision statement for your restaurant to make business decisions that align with them. If it seems complicated to write one, then first ask yourself Why you want to open a restaurant. You’ll get the answer.

  1. Lack Of Industry Knowledge

In order to successfully run a restaurant, you need a lot of skills, as you have to manage your kitchen, your staff, your expenses, and, most importantly, your customers. It is inevitable for a restaurant to fail if its owner lacks any of these qualities.

What you can do:

If you’re a restaurant owner, you should first be aware of restaurant accounting procedures so you can analyze if everything is working smoothly or not. Plus, learn every skill required to own and manage a successful restaurant.

  1. Erroneous Selection Of Location

Setting up a shop in the right location has a huge impact on a business' labor costs, utility bills, marketing costs, and overhead expenses. It can either make it or break it. And if the location is prime, competition can become even more difficult.

What you can do:

When selecting a location, you should keep in mind the following points:

  • Is the spot easy to access via public transport?
  • How much space is available for the parking lot?
  • Do your target customers live in that area?
  • Are walk-in customers enough, or would you need to spend more on marketing?
  1. Limited Operating Capital

It takes many months for an eatery to gain traction and become self-sustaining. A lot of restaurateurs do not succeed in stocking up enough cash to cover expenses during the first year. And if they blow all their capital up front, there’s a high chance they’ll easily fail within the first year.

What you can do:

Until you have sufficient cash to cover six to twelve months' expenses, do not start a restaurant. Aside from rent and taxes, make sure to include labor costs, food expenses, and utility costs in your budget. In addition, don’t ever make the mistake of spending all your money on a fancy location or luxurious furniture.

  1. Inconsistency In Food Quality

No one would like to spend, only to eat a bland and unadventurous dish. If you cannot retain regular guests, it's because either your food is underwhelming or there's no consistency in your food quality.

What you can do:

Ensure that the food you offer your guests is of the highest quality, hygienic, and constant. You can do this by tasting your recipes frequently. Moreover, if guests have already accepted your current recipes and cooking methods, then there's no need to make any changes to them. Consistent food quality makes it easier for guests to return to a restaurant again and again because they know exactly what they're getting for their money.

  1. Unpleasant Customer Service

We live in a digital world, where poor reviews travel much faster than good ones, damaging our reputation hugely. A single negative review can lose a business approx. 22% of customers.

What you can do:

Make sure your staff treats every guest as friendly and politely as possible. Welcoming smiles, prompt seating, and equal attention to each table can create a positive atmosphere. Even the upset ones will feel better at your spot. This massively boosts customer service and increases rave reviews percentage, ultimately skyrocketing your reputation.

  1. Little Or No Repeat Customers

It is said that 80% of business revenue is generated by 20% of repeat or loyal customers. If your restaurant is not generating high revenue, fewer or no repeat customers might be one of its reasons.

What you can do:

Be consistent in terms of quality. Provide customers with great quality food with excellent consistency. Not only this, build a good relationship with them. That way, you'll get more repeat customers.

  1. Fruitless Menu Pricing

If customers rate your food as too pricey, next time, they won't come back to your restaurant.

What you can do:

The best you can do is adjust the prices according to the quality of food and service that you offer. It is essential that the cost of each dish covers all expenses and come out with a profit. Besides, only serve the best dishes to escalate your sales grandly.

In addition, wasting food also causes a decline in revenue. Avoid it by trying to include the same ingredients in multiple dishes.

  1. Less-Revenue Items On The Menu

A meal that is priced too high will drive customers away, whereas a meal that is priced too low will leave you unable to pay your staff. On top of that, there might be low-margin items on your menu that bring less revenue, or items that are shunned are a waste of both your resources and time.

What you can do:

You should remove the low-margin items. Perhaps, you should also consider removing those items from your menu as well that are unpopular.

  1. Terrible Resource Management

When you hire too many people for a shift, you'll bleed money, or if you have insufficient workers on duty, your service will be slow. Moreover, you may have employees that indulge in fights frequently, and things get out of your hand, or some friends who have too much fun instead of working, attacking your reputation in the end.

What you can do:

Polish up your management skills or save time and partner with an expert who may help you tackle unavoidable flare-ups and non-serious employees.

  1. Dreadful Staff Management

The front-of-the-house staff is the face of a restaurant. If they don’t show much courtesy and a positive attitude toward the guests, they are not likely to return or will leave bad reviews in return.

What you can do:

You should put your best foot forward by hiring passionate, energetic staff - A staff that can confidently respond to your guests' queries and guarantees a positive dining experience, leading to favorable customer feedback. That’s why every interaction needs to be amicable.

  1. Ineffectual Opening & Closing Hours

If your restaurant is closed during hours with high foot traffic or if it is open during a time that sees little crowds, then your restaurant is at a disadvantage. And you won’t be getting more traffic.

What you can do:

Simply adjust the opening and closing hours of your eatery house to receive heavy traffic.

  1. Poor Restaurant Promotion

Wretched or no marketing could cost your business heavily. In the world that's going digital, advertising by word of mouth doesn't seem effective. Unfortunately, people don't talk too much face-to-face anymore. That's One Big Reason why your food house is not a big hit!

What you can do:

You can use social media platforms such as Instagram, Facebook, Whatsapp, and others to promote your restaurant and tempt new customers appreciably. Make a budget for its advertising. Come up with some innovative ideas to popularize it or pay some marketing company and let them do this work for you.

One great advantage of using these platforms is that you'll get to receive reviews and feedback, as about 94% of people read reviews before going to a restaurant. This way, you will know what customers want and what they don't.

  1. No Online Delivery System

Customers of this era appreciate the convenience and often use smartphones to look for a restaurant. Your restaurant will lose out to your rivals without a mobile-friendly website or app. The less you provide convenience, the less likely they will reach or prefer you.

What you can do:

Create a mobile-friendly website or app. Offer your customers an online food ordering and delivery service and let them enjoy food in the comfort of their homes!

One can avoid failure if one knows what to look out for.

You Got This!

Getting your business off the ground is not an easy task, but putting in the extra effort is what helps you avoid a colossal washout. Besides money, you need to invest your time in apprehending the inner workings of your business plus the needs of your customers. It will make you proficient at reacting promptly and aptly to any troubles that arise. You can even learn the pitfalls of those that came before you.

Closing Thoughts

It takes an entrepreneurial vision, whip-smart leadership, an ideal location, a finger-licking menu, trained staff, an online delivery system, and plenty of capital to save a restaurant business from failing. Furthermore, modifying the opening hours, spending funds wisely, and enhancing customer service can also boost a restaurant's sales and ultimately help in resuscitating a dead restaurant.


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