Restaurant Blunders: Top Reasons Restaurants Fail (Even if the Food Is Delicious)

May 27, 2019 7:30:00 AM

Why Do Restaurants Fail? (Even if the Food Is Delicious)

Why do restaurants fail? If you're a restaurant owner, read this guide to learn why restaurants fail, even if the food is delicious.

17% of restaurants fail in their first year of operation.

It may not be the blockbusting figure of 90% that is thrown around. But the restaurant failure rate is still alarming.

All restaurateurs desire to operate sustainable businesses. However, many commit blunders that cause their businesses to sink.

So, why do restaurants fail?

Failure can’t be blamed on one thing. Here is a look at some of the things that lead to failure that you can mitigate against.


Location is one of the most important factors when it comes to the success of restaurants.

A restaurant is primarily a walk-in operation. You need the right kind of customers to walk through your doors and buy the food.

A suitable location for your restaurant must offer accessibility. You need to be where customers find it easy to get in and out. That is the reason why highway exits are popular locations because of their ease of access.

Along with being accessible, your restaurant needs to be visible. Your customers have to know it exists for them to buy from you. That can happen through in-person or digital awareness.

Find a location in a more developed area for more walk-in business. Downtown areas are also a prime spot for restaurants due to high visibility.

If you haven't yet, consider search engine advertising and other forms of mobile advertising to create awareness. Social media is an excellent ground to make some creative noise about your restaurant.

When you list your restaurant on search engines, don't forget to list the food you prepare, your price point and operational hours. You also need to register the exact address and a functioning phone line.

Assess the parking status when looking at a potential location for your restaurant. Whether it will be your parking lot or a partnership with a hotel that has the parking lot space you have to give your customers an option.

Or, you can offer valet parking.

When scouting for location, founders of successful restaurants have learned to be impartial. Do not fall in love with a particular area until it meets the criteria for a successful venue.

Inefficient Management

A restaurant, just like any other kind of business, needs a capable and efficient management team to run things successfully.

When a customer comes to your restaurant, they have in essence chosen not to go elsewhere. Your management team must have the skills to deliver on the expectations of such a customer.

Develop a human resource (HR) system that encompasses employee onboarding to their exit to help management support the other staff.

If you don't have such a system, consult an HR agency to help you develop a suitable solution.

An essential motivation for your staff, beyond the financial reward, is personal development. Create an environment that provides opportunities for them to grow in their skill sets.

With every step forward they will grow their productivity, and it will ultimately boost their morale.

Make sure that you check in regularly with your management team to know how your business is going. As you delegate, remember that it is still your business. Train the team to run it according to your expectations and standards.

Poor or Nonexistent Advertising

If paying customers are the heart of a restaurant then effective advertising is its lifeblood.

Putting your restaurant out there is what will get new customers to walk through your doors. How you go about that is critical.

In today's highly digital age leveraging consumer technology to make your advertising campaigns more effective is a no-brainer.

Targeted social media ads will help your local customers know what your restaurant has to offer.

Signing up for top review sites like Yelp will help those customers who stumbled onto your restaurant via social media find out more before deciding to come in.

Create a newsletter to keep in touch with previous customers. Update your digital menu listings to avoid putting off customers who walk in with certain expectations only for them to not be met.

Take your digital advertising a step further and consult online marketing firms that use data and Artificial Intelligence (AI) to design and deploy your campaigns.

Using AI will help you refine your campaign based on the lengths generated from your data leading to great marketing Return on Investment (ROI).

No matter what medium you use to advertise, the mission-critical insight is to understand your target audience to know how to reach them best.

Inadequate Capital

Another top reason that leads to restaurant closure is the lack of enough capital to sustain it before breaking even.

When you are considering opening a restaurant, you should consult a financial planner to assist you in developing a plan on how to reduce the initial cash burn rate.

Avoid buying any item that isn't mission-critical to your opening to reduce your initial expenditure. When you need to purchase equipment, consider going for pre-owned ones that are still in great operational shape over new ones.

If your restaurant is already operational, you need to determine what levels of cash reserves are optimal for you to avoid cash flow disruption.

These reserves will help you when you need to buy more inventory, hire extra staff for a busy season or get through a slow sales period.

Don't fall into the trap of cutting costs on critical services that you need to run the restaurant profitably. You need a budget for professional services that you can't do without. These include lawyers, accountants among others.

Why Do Restaurants Fail?

There are a variety of reasons that can cause a restaurant to go under. Whatever the problem is, you need to find the answer to the question “why do restaurants fail?”. Only then can you increase your odds of success.

As part of helping you shoot for success, Targetable would love to equip you with the skills necessary for insight-driven advertising for your restaurant.

Contact us today to know how AI-based marketing can help your restaurant leap to the front of the pack!

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