Restaurant Failure Rate: How to Avoid These Common Mistakes

Restaurants have a notoriously high failure rate – whether or not the oft used statistic of 90% failure within the first year is true or not, there’s no denying that it is increasingly difficult to run a successful restaurant.

So why is the restaurant industry so challenging? What factors contribute to the downfall of so many promising establishments? We spoke with Montreal Restaurant Owner Zach Suhl to find out what you can look out for in order to keep yourself from becoming another statistic.

1. Financial Mismanagement
One of the main reasons restaurants fail is that “most people who enter the restaurant business are not business people.” Restaurant owners and managers have often gotten to where they are by working their way up through the ranks, and too often — as they pick up experience — the financial skills are missed. What can you do? Studying your competition or other successful restaurants is a logical first step to getting yourself on track. You may also consider forging a partnership with someone who has business experience. Understanding how business functions in general will give greater context to help you start developing your business acumen.

2. Poor Accessibility
The location of your restaurant plays a huge role in how successful your restaurant is from the beginning. As a general guideline, your location should depend on the kind of restaurant that you’re opening. “If you’re a cafe you’re going to rely on a lot of foot traffic, but restaurants rely a lot on being sought out and on reservations.” Restaurants that are looking to attract the under 25 crowd need to be accessible on foot or by public transport. For more expensive restaurants catering to an older crowd, parking accessibility is extremely important.

3. Inconsistent Customer Service
Customer service is one of the main elements affecting the success of a restaurant.  “Guests can be served very mediocre food, but if they really feel special and good about the way they were served — they will have a great time and come back. If people have the greatest food in the world, but they feel like they were slighted or rubbed the wrong way, they won’t be back.” Customers need to feel that their hard-earned money has been spent in an establishment that appreciates their decision to eat there, regardless of whether they purchased the most expensive bottle of wine or the cheapest.

4. Matching Expectations
A guest’s level of satisfaction with their restaurant experience is directly related to whether the experiences matches their expectations. With the popularity of online reviews and blogs, as well as the frequency with which people travel and have access to top-tier restaurants around the world, customers are increasingly difficult to please. “If you’re the owner, you should know more than anybody what kind of product you’re putting out there. If you can look yourself in the mirror and know that you’re doing everything well — you’re giving a good quality of food and you’re providing a good quality of service, generally that’s enough.”

5. Staff Reliability
A key element that may affect the success or failure of your restaurant is the reliability of the back of house and front of house staff. Reliability in every sense — having a stable work environment means that you can create a consistent product and deliver your best, day in and day out. What sort of elements may affect the stability of your restaurant? The restaurant industry is notorious for after-hours activities and hectic schedules; late work nights leading to even later parties. The importance of having reliable staff in the back and front of house cannot be overstated. “Your biggest asset is usually your staff” and ensuring that you have staff you can trust is crucial.

While external factors may play a role in the success or failure of your restaurant, it is undeniable that there are many things you can do to help yourself. Unfortunately, often having the passion and love for the business is not sufficient for running a successful restaurant; However, pairing your passion with the right mix of a dedicated team, well-informed management who understand the industry and an offering that matches the expectations set for your customers, your restaurant has a better chance of surviving one of the most fickle industries out there.