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Why
So Many Restaurants Fail
by Steven D. Zimmerman,
Restaurant Realty Company
July 2002
After assisting in marketing
thousands of restaurants, bar, and
clubs, we have come in contact with
many restaurant owners and have been
able to assess why many restaurants
fail. The following are the primary
reasons:
-
Poor Location - Good
location is extremely important.
We have seen some mediocre
operations survive long term due
to a good location versus seeing
some good operations fail due to
a secondary location.
-
No Prior Restaurant
Experience - Having past
experience in the industry is
essential to assure success.
Learning from one’s past
experiences gives a person a
better understanding of the
business and enhances one’s
chance for success.
-
Lack of Employee Training
- Having all employees trained
properly assures that the
customer will have a good
experience and his chances of
returning will be greater.
-
Too Much Spent on Capital
Improvements - Often too
much is spent in building the
restaurant and the debt service
is so high that it keeps the
business from being profitable.
-
Inconsistent Food, Service
and Cleanliness - Consistent
good food, service and
cleanliness are high priorities
for the customer and customer
erosion is frequently a result
of the customer having a poor
experience with these items.
-
Rent is too High - Rent
should not exceed 6% to 8% of
gross sales. Frequently
operators pay too much rent
which leads to their ultimate
failure.
-
Lack of Professional
Management - Having well
trained management is imperative
to assure the success of the
business. Management sets the
pace for the operation in terms
of employee attitudes and the
ultimate experience the customer
will have.
-
Lack of Controls - Having
the proper systems regarding
cash handling, portion control,
and accounting systems, etc. are
necessary for an operations
success.
-
Poor Price Value - Not
giving the customer value for
the money spent. If the customer
doe not get good price value
there is a strong change he
won’t return.
-
Under Capitalization - I
have seen several situations
where the concept was viable,
the business was on the verge of
turning the corner and the
owners had to pull the plug as
they didn’t have enough working
capital to keep the business
going.
-
Outdated Concept -
Periodically the decor needs to
be updated as well as new menu
items introduced to stimulate
repeat business.
-
Partnership Disputes - A
partnership is like a marriage
and you should have a
pre-existing relationship with
your prospective partner prior
to becoming partners so you
understand each others
respective strengths,
weaknesses, values and
priorities.
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