It’s been Nkechi’s lifelong dream to own a restaurant. Ever since she was a little child, she has always been fascinated with the art of food. It was a no-brainer that she would become a restaurant owner. Right after NYSC, Nkechi set out to start her own food business venture. She was in high spirits, as this was her dream all along, and it was finally becoming her reality. However, after a year of doing business, Nkechi had to close down her restaurant due to its inability to generate money. Nkechi’s story is just one of many cases of failed restaurant businesses. No restaurant sets out to fail, but the honest truth is that many do.
According to a report, around 60% of new restaurants fail in their first year, and nearly 80% before their 5th anniversary. I know this might make you feel as though the restaurant industry is a very difficult one to venture into. However, this is not the case if you have done your homework and gained enough skills and experience in the restaurant business.
In this article, we share 5 reasons why restaurants fail and how you can avoid these mistakes.
5 Top Reasons Why Restaurants Fail
There are many reasons why restaurants fail, but for the purpose of this article, I have listed the primary reasons. If you can avoid these mistakes, you are already halfway up the ladder to success.
1. Lack of Financial Planning: You need money to venture into any business. While some businesses may be low capital-intensive, others, like a restaurant, can be quite high capital-intensive. If you do not have enough funds or lack an understanding of how to manage your finances, then a restaurant business may not be the best fit. Many times, restaurant owners, especially newcomers, go wrong with financial planning. They don’t keep track of how much money is coming in and going out, leading to overspending in certain areas. This often leaves restaurants with no money and no choice but to shut down. Proper financial management is key to avoiding this.
How to avoid this
Create a financial plan for your business. This serves as a forecast to show what you should anticipate. During the first few years, ensure that you effectively plan for your restaurant’s growth. Keep track of your financial goals and make sure you are meeting them.
2. Not Having Enough Industry Experience: Being a great chef or having a passion for food is not enough to run a business successfully. It takes more than passion and cooking skills to thrive in the food business industry. It requires years of work and dedication to learn the ins and outs of the industry. Failing to understand the complexities of restaurant operations can lead to business failure.
How to avoid this
Gain skills in restaurant operations, marketing, business management, and more through formal education, hands-on training, or a mix of both. Almond Rouge provides all the necessary skills you need to run a successful restaurant business.
3. No Proper Marketing: As of 2021, according to Statista, there were over 1,700 food and beverage service businesses. This highlights the level of competition in the food industry and underscores the importance of effective marketing. If you do not market your business, it may quickly get lost in this competitive space. A common misconception among restaurant owners is that marketing is expensive. However, marketing can be as affordable as creating quality content for your restaurant and promoting it online.
How to avoid this
Start taking marketing seriously, especially online marketing. Leverage social media, ads, and SEO in your marketing campaign. Use the right messaging and make sure to connect with the right audience.
4. Poor Customer Service: Customers expect to have a good experience when they visit restaurants. Leaving them dissatisfied with your service can result in low patronage, which may eventually force you to close down. Examples of poor customer service include late orders, wrong orders, long wait times, rude staff, and a hostile environment. If not taken seriously, these issues can destroy a business.
How to avoid this
Ensure you provide excellent customer service in all areas of your business. No customer should be treated better than others. Welcoming smiles, prompt seating, and personalized attention all help to create a positive atmosphere. You should also create a standard operating procedure (SOP) and invest time in staff training so they are prepared to handle difficult customers effectively.
5. Choosing a Poor Location: Location is one of the most important factors to consider when starting a restaurant business. However, many owners overlook this aspect. Often, they believe that serving great food alone will work wonders, even in a poorly located area. Before opening a restaurant, ask yourself the following questions:
- Is this area easily accessible by car or public transport?
- Is it friendly to foot traffic?
- Is there parking nearby?
How to avoid this
Make sure you can answer these questions affirmatively. By choosing the right location, you are setting yourself up for success.
Opening a restaurant is no small feat. It goes beyond knowing how to cook or having a passion for it. Passion alone cannot guarantee a successful food business. However, if you take note of the points listed above, you’ll be able to turn your love for food into a profitable restaurant business
