Why do restaurants fail?
There are many reasons that lead to some of the bleak statistics we hear about the industry. In an already difficult market, around 60% of restaurants end up closing their doors within three years.
For restaurants, profit margins tend to be quite slim—hovering around 6% (or less) on average.
The causes for failure often begin at the outset.
Many restaurant owners don’t always pick the right location for their establishment or they overspend before even opening their doors. Some restaurateurs don’t factor in the competition when doing their market research or they fail to develop an original concept that entices guests to try out their cuisine.
Once a restaurant opens, there can be huge challenges as well. In such a saturated market, the guest experience needs to be top-notch. The food, of course, should be unique and delicious, but most importantly consistent. Finance must be tended to and leadership should be strong. Restaurant owners also have to be sure that their supply chain is diversified and effective when it comes to delivering the right ingredients for their meals.
Also, promotion and marketing plays a critical role in letting people know your restaurant exists and entice them to come through your doors.
When these many challenges are not anticipated and go unaddressed, that is why restaurants fail.
Understanding and preparing for these seemingly predictable obstacles that virtually all restaurants face can make the difference between a restaurants that thrive and those that do not.