Restaurant Failures: Locations and Other Reasons

SDRandCo (1)Say, didn’t that restaurant used to be “insert any name here”? Restaurant failure is commonplace, and throughout the country, there are some locations that see a rotating door of different restaurants attempting to find success where others have failed in the same location. Cursed location? Inexperience in the food service industry?  A combination?

A recent Orlando Sentinel article cites plenty of examples of what seems to be cursed restaurant locations. An upscale sports bar in Winter Park has seen five different restaurants in the location in a decade, and it’s just one example of many in central Florida that have struggled to keep the doors open. In many cases, parking, ingress/egress, or visibility may be to blame.

In desirable parts of town, high rents challenge establishments that already have a tough time turning a profit. Lower rents can be found in districts that haven’t quite taken off yet; however, that means greater challenges attracting customers to new or unfamiliar locales. Rotating restaurants at the same location also leads to a stigma that can be an additional hurdle to overcome.

Reasons Restaurants Fail

The top ten reasons restaurants fail, according to Restaurant Innovations, a global restaurant consulting service are:

10. Lack of creativity in solving problems that will invariably arise. Contributing to that problem is failure to build rapport with employees and wait staff who can often bring a wealth of information and creative perspective.

9. Insufficient market analysis. This is especially apropos when opening a restaurant in a location where many others have failed. Understanding why those restaurants failed is critical to avoid making the same mistakes. Before opening the doors, restaurateurs should study the market to determine that their cuisine will be in demand and that they have an ability to capture market share.

8. Lack of attention to detail. One or two small issues may seem insignificant, but they can add up quickly, including restroom cleanliness, lighting, music selection and volume, customer greeting, wait staff knowledge of the menu, and of course, meal and drink quality.

7. Undercapitalization. Restaurant failures are high in the first year, often due to undercapitalization. Plan on needing a year of funding to establish a location before opening the doors.

6. Poor inventory management. Food costs are one of the top three costs for any restaurant. They can quickly rise due to waste, improper storage, inconsistent portion sizes, over or under ordering, or failure to monitor deliveries for accuracy.

5. Lack of dedication and time commitment. Running a restaurant is a tough gig and takes significant time spent there, both mentally and physically, to be successful. Restaurant owners who set the example to staff with dedication and commitment are typically the ones who avoid restaurant failure.

4. Inadequate training and/or poor hiring. Successful restaurants operate with successful teams – employees who can carry out the vision and execute the concept. This only happens with training and incentives to perform well.

3. Failure to brand. Successful restaurant owners understand the importance of establishing an identity and sticking to it. You can’t be all things to all people. Establish a target audience and cater to it. Thoroughly understand the overall experience you’re selling.

2. Lack of consistency. Once you establish your identity, stick to it. Return customers will stop returning when their expectations aren’t met. No matter which chef or wait staff may be working on any particular day, the customer experience should be consistent.

1. Ineffective marketing. Restaurants fail when they’re empty. Know your best target audience and advertise to them. High traffic leads to high profits. You must get people through the door or the previous nine steps are useless.

Helping You Succeed

At Atlantic License Brokers, we know the Boston and Massachusetts restaurant, pub, and bar industry inside and out, and we’re well positioned to help you make the most of your liquor license investment to put you on the path to restaurant success rather than restaurant failure.

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