Why Do Restaurants Fail?
There is a long standing belief that restaurants fail at the rate of 90% in the first year of operation. That myth was promulgated by a “rock star” chef entertainer in the 1990s and spread like an e-virus around the country. The truth according to academic studies performed at Cornell University, the University of Tennessee and UCF Rosen College of Hospitality Management is that the failure rate for an independent restaurant is 27% in the first year of operation, 19% in the second year and 14% in the third year, no significant difference from start up businesses in other industries. Furthermore, the failure rate is lowered significantly to 10% for that of a chef owner.
Those same studies revealed the real reasons for failure are many, none of which have much to do with actual lack of restaurant experience, but more the result of lack of business management experience. According to Rosen statistics, restaurant failures are the result of any one of the following factors: undercapitalization, poor physical site, wrong demographics, entrepreneurial incompetence, lack of experience in the industry, poor leadership qualities, inability to build the brand, choice of name, design and layout, Taj Mahal syndrome, lack of concept differentiation, excessive prime cost, and excessive rent. I am in full agreement and here is why.
In searching for furniture and equipment to open my newest venture, a cafeteria style restaurant serving eat smart food, I have found it necessary to scour the web for best buys on used equipment and furniture. In doing so, I have met many a failed restaurateur, and am never surprised at their outcome after hearing their story. I am always surprised, however, at their lack of business management experience, education and skills. Yes, managing a food service requires some unique skills, if you expect to manage the kitchen. However, the business of operating a restaurant is nothing more than a manufacturing plant where parts (ingredients) are ordered, processed (cooked) and assembled. If you look at it as a production line, the only real experience that counts is that required to manage any business successfully. From personal experience, I concur with the Rosen survey’s thirteen reasons for failure. Follow me as I explore and help you to avoid each.
Buon Appetito e Buona Salute, Chef Angela Bell
Beyond the Bull (an “eat smart” kitchen)
233 W. Main St., Central, SC 29630
This story is part of our Small Business Corner, a peek into the life and trials of small business owners.