The booming food industry has given rise to cut-throat competition among food service providers. Restaurant owners and people in eatery outlet businesses are constantly struggling to meet the dynamic demands of customers.
According to stats, the failure rate of restaurants is 60%, referring to those who are unable to survive even the first year of their food business. And there are around 80% of restaurants that shut down within the first 3-5 years of their business.
Top 10 Reasons Why Restaurant Business Fail
As failure rate of restaurants is quite high about 60 – 90 %; it is crucial to look into the matter as why restaurant businesses fail within first couple of years of their business.
Here we have listed down some common mistakes that restaurant owners make, that becomes reasons for the high failure rate of restaurants.
1. Wrong Selection of Location
Picking up the wrong location for your restaurant business can be adversely impactful on your business. The majority of restaurant business owners don’t realize that picking up the right neighborhood for restaurant business is one of the most crucial decision in order to make your restaurant a profitable business entity. Some of the few common mistakes restaurant owners make while selecting the location for their restaurant include:
- Low foot traffic
- Oversaturation of similar restaurants in the area
- Not enough parking space
- Unfamiliar cuisine for that neighborhood
- Far from public transport locations
- Poor accessibility
- Area doesn’t have the targeted clientele
2. Lack of Vision
Having a clear vision gives you a clear direction. The philosophy about how you want your business operations to run and having a mission statement about your employee and customer relations will inspire your customer services and have a positive impact on your overall restaurant environment.
3. Not Enough Capital
Another basic mistake restaurant owners make is that they overlook the hidden expenses or unexpected overheads that come unannounced mostly during the initial months of the business. While planning for their restaurants they just consider the costs for location, equipment, salaries, food supplies etc. To save your restaurant business from failure you must realize that initially the business needs regular investment till it is set to generate profits.
4. Not Enough Industry Experience
Entering a restaurant business without having enough knowledge about the food industry is the main cause behind increasing failure rate of restaurants. Similarly, lacking experience in the related field and dreaming of opening and running a restaurant is one of the main reasons for the closure of most of the newly established restaurants.
A restaurant is much more than serving just great food. Knowing ins and outs of the food industry, links with professional restaurants food distributor, strategically planned menu, competitive pricing, management, pre-planning for overhead costs, competitors survey and a lot more needs to be considered and taken into account before you jump into opening of your dream restaurant.
5. Ineffective Leadership
Ineffective or uninfluential leadership is one of the contributing factors that increase failure rate of restaurants. The restaurant business involves workers and staff with diverse roles and varied skills. Keeping them all together and managing them as a team requires a strong leadership, failure in this regard leads to the crashing down of your food business within first year.
6. Poor Supply Chain Management
Last-minute order cancellation from your food supplier can put you in a troublesome situation. If your ordered supplies are not up to the mark or of poor quality, it can damage your restaurant’s image. A reliable and trusted food distributor can offer you hassle-free food supply chain management system.
7. Inadequate Marketing / Promotion
A major mistake restaurant owners make is not planning and investing enough in the marketing and promotion of their new business. To make your restaurant business stand out amongst the competition, a strong marketing campaign is a must. Marketing may seem a costly affair for new business ventures, but if done rightly with the help of a professional business consultant it can do wonders for establishing your restaurant business.
8. Unhappy Customers
Nothing can bring your restaurant business down as much as can an unhappy and unsatisfied customer can. The customers’ feedback goes a long way in breaking and creating the image of your restaurant. Most restaurant businesses fail because either the food is not of superior quality or customers are unhappy with your services. Either way, this can be very damaging to your restaurant’s image.
9. Pilferage And Thefts
One of the most overlooked problems in the restaurant industry is pilferage and theft. Not keeping an updated inventory of food supplies and food items and not keeping a constant check may lead to loss in the form of pilferage and theft.
10. Lack of Originality & Uniqueness
Originality along with a unique touch can make your restaurant stand out amongst the competitors. However, restaurant owners who ignore incorporating innovative ideas into their menu, ambience, serving styles, customer loyalty programs etc. put their business success at stake.
How A Food Distributor Can Save your Failing Restaurant?
With the constant rise of multi-faceted problems in the restaurant industry a restaurant owner cannot measure or have an in-depth analysis of restaurant metrics on his own. A professional food distributor can be a savior by helping you manage food costs, food supplies, maintaining a dependable food chain supply management system and keeping track of all food storage and supplies.