If you’re in the restaurant business, somebody’s probably told you that most restaurants fail. Alarming statistics float around online: 60% of restaurants fail within a year, 80% within five years. But the research doesn’t quite bear this fatalism out. One study done in 2014 found that only 17% of restaurants fail in their first year—which is actually slightly lower than the 19% failure rate for other service businesses. The smallest restaurants were the riskiest, however. Restaurants with five or fewer employees tend to fail a little more often than other very small startups.
Whatever the research shows, you don’t want your restaurant to become a grim statistic. Here are 5 reasons restaurants fail—and how to avoid them:
Location can make or break any small business, and restaurants are no exception. You need a steady stream of foot traffic, but you also need a rent payment you can manage every month.
Poor customer service can tank your restaurant, especially these days, when your reputation can so easily be damaged by even one bad review online. So you’re going for great customer service—and that starts with the way you manage and train your staff.
You don’t have to have an MBA to run a small business, but you do need to take some time to plan for the future. And yes, there will be math on this exam.
A restaurant could be packed every night and still lose money—if the food isn’t priced right, or it’s overstaffed, or any of a number of other cash-flow issues crop up. Dig into the numbers to make sure that your business is sustainable for the long haul.
Don’t forget the basics! In a world where any food a customer craves can be at their door in under an hour, you’ve got to provide a great dining experience to keep people coming back.