Own or work at a restaurant?
You can avoid failure, if you know what to look out for.
Restaurants can fail for a myriad reasons. Learning why can help you NOT fail.
[Author’s note: I originally wrote this piece in February/March of 2020. The one thing I could never have thought to include would be “a global pandemic”, but that’s what happened. I shelved the piece, and am just now publishing it, in early 2021. So here’s an article about why restaurants fail OTHER than a global pandemic.]
Many factors can be blamed, correctly or incorrectly, when a restaurant fails. Usually, some combination of factors brings it down.
Running a restaurant can be a tremendously tough business. Many people who try won’t be able to make it work, and most people who dream of starting a restaurant shouldn’t even try.
Want to start a business that could eat up 90 hours of your week? And take over a million dollars in startup capital to get off the ground? And be a constant human resources headache? Oh and the product could potentially kill someone if done poorly enough? And if you don’t sell the stock quickly enough, it rots? And your work force is known for being hard partiers?
That sounds like a great combination for an easy business, right??
Owning a restaurant is a great dream. And often, it should only be a dream, because the reality can be brutal, exhausting, and so expensive.
Restaurants make the world a better place, and whatever can be done to help them survive should be done.
Why do restaurants fail so often, and what can be done to prevent it?
Knowing why restaurants go under can keep you from failing too, so whether you’re a restaurant owner or manager, or just someone with a morbid sense of business, we break down the 15 most common reasons that restaurants fail.
1. It’s the owner’s fault!
That’s right, often the person (or people) that own the restaurant are at fault for its death. Why?
The Owner Is Inexperienced
Unless you’re super lucky and a business genius to boot, you need proper restaurant experience to open a successful restaurant. And unfortunately, eating at a lot of restaurants doesn’t create the kind of experience needed (or else I’d be a restaurant business genius myself).
When people think of famous restauranteurs, Anthony Bourdain might come to mind. Guess what? He started out as a dishwasher. Working your way up and having experience in every role in the restaurant is perhaps the best way to really understand the ins and outs of a complicated business model.
Can you own a successful restaurant without having a ton of experience? Yes, but it’s going to be expensive in one of two ways: Either you pay for management that knows what they are doing, or you pay the cost of failure (all that equipment you bought to open sure did lose value quickly once you put it in your kitchen…). Arm yourself with a team of experienced managers to help you run the show. Talk to restaurant veterans in the area to learn the specific challenges that your city and niche may provide for you. Partner up with another more experienced owner to survive.
Hiring experienced managers to oversee both the front of house and back of house is a wise investment to make sure that your restaurant doesn’t go under quickly.
And the owner should know how to delegate. He or she simply cannot do or know everything, experienced or not, and they need to be able to allow others to do the crucial work to keep everything running smoothly.
It’s tougher than expected
Often, those that dream of opening a restaurant don’t realize or appreciate just how difficult it is, and the demands that come with ownership. And once they do realize this, they’re neck deep in problems (staffing problems, financial problems, managerial problems, building problems, etc).
It’s a very complex business to run. Financials and staffing can consume a ton of your time. Just making sure shifts are covered can eat up hours of your day, when you feel like you need to be doing anything and everything else.
A restaurant is a manufacturer of a product, a place for people to gather, an employer of last resort to many people, as well as a marketing agency for itself, and a theater where servers have to have on a pleasant face no matter what is happening behind the scenes. Oh and the profit margin is slim, too.
The owner isn’t around
A friend of mine once said, “The dustpan of business history is littered with businesses that had absentee owners.” He said this to me after I told him one of my favorite coffee shop / bakeries was closing in my neighborhood. It was a great place, but the owner of the cafe lived in another state. And, well, that’s a good way to go out of business.
The owner, the person most invested emotionally and financially in the restaurant, isn’t there to see problems, to prevent issues from getting worse, to push people to work harder, to smile at guests, to do the myriad little things that add up to a great restaurant experience, to improve the menu, to check the books, sweep the floors, and everything else.
No one else will have the same desire for the restaurant to succeed as the owner, so it’s imperative that they are there. Seven days a week perhaps! Even if you’re only open six days a week!
Opening a restaurant requires an amount of commitment similar to bringing a newborn baby home from the hospital. You’ve got to watch it constantly. Once it gets to be a couple of years old and established, then you may be able to take your eyes off of it, but like a toddler, you can’t look away too long.
This is a labor of love. With so much labor. And time spent at work. You have to have absolute passion for food, for people, and for your restaurant to make it work.
It’s just too tough, so unless you have the passion to endure the battle, your restaurant will never survive.
Every restaurant has its own culture, and the owner helps design, nurture and fine tune that culture. Everything from the lighting to the way hosts great people to the way the place settings are laid out. Culture affects your team too, from who gets hired to how co-workers interact to how much people respect each other.
There are a lot of restaurants out there. Unless your restaurant can use its culture to stand out from the competition in some way, you’re more likely to fail.
Partnering with the right people can make it much more likely for your restaurant to survive, and the inverse is true too.
Business partnerships are like marriages, but actually more complicated, with nastier divorces. Picking the wrong partner(s) can ruin everything.
Many restaurants fail because the owner partnership fails, often because of the inability to resolve disputes.
A way to prevent a bad partnership from killing your restaurant’s chances is to partner with people who all bring different skills to the table and formalize the roles and duties. Having three partners with restaurant marketing skills might seem awesome at first, but stepping on each other’s toes and brutal disagreements on how to spend the marketing budget could easily sour the situation.
Choose partners slowly and wisely! Remember that the right partners can really help a new owner, so partnerships aren’t all bad. Just proceed cautiously.
The owner doesn’t handle the finances properly
Money, money, money. It’s a business after all. You’ll have to take care of all financial liabilities, payroll, food costs, utilities, taxes, overhead, lease, as well as all the unforeseen expenses and the unknown unknowns.
Here are a few ways the owner can really screw the restaurant’s chances:
- Takes too much profit out - The business owner is often (and should be) the last person paid. Just because the restaurant is actually doing well financially that doesn’t mean you can take out a hefty owner’s dividend and leave the business cash poor.
- Mismanages funds - Failing restaurants can play a game where they “rob Peter to pay Paul” to try to make the finances float for a while, but eventually it will all come crashing down.
- Bouncing checks - Once you start bouncing checks to suppliers and employees, you’ll start losing suppliers and employees, and you can’t have a restaurant without those.
- Doesn’t pay taxes - Yes, you could always launch your new restaurant in June, and know that you have taxes ultimately due in April, and just hope that later on you can save up enough to cover all that, but you’ll dig a hole that you may not be able to work your way out of.
- Doesn’t budget for marketing and other survival tools - You’ll have so many expenses that it might seem insane to try to set aside 5 or 10% of your revenue to spend on marketing, but by not having a proper marketing budget, you won’t bring in fresh customers to the restaurant and get the word out.
- Doesn’t set aside emergency funds - You don’t know what will happen, so it’s key to have money in the accounts to cover unforeseen expenses and crises. Did your smoker break? Major theft or vandalism? Water main burst? Or even a couple slow months in a row could stretch your finances to the breaking point unless you have a little emergency cash to cover everything.
The owner doesn’t work
Owning a restaurant is a daydream for a lot of people. You’d be able to design a menu to your standards, and just do everything right, and create the perfect experience for everyone in your town.
It’s not a daydream though, it’s a ton of work. You’ll need to be there 7 days a week (even if you’re only open 6!) for the first year or two, unless you have the finances to hire a manager that you totally trust, and even then you still need to be very involved. 70 hour work weeks? Perhaps 80 or 90 hours will be enough to make sure it survives…
If the owner isn’t there, either physically or mentally, things will fall apart. You may think that once the restaurant is finally open, it’s smooth sailing, but you’ll need even more commitment to make sure your restaurant doesn’t die an expensive death.
2. Location Location Location
A great restaurant can survive in a lousy location, but picking the right spot will make your survival much more likely. Changing locations after opening and getting established will be super expensive and damaging to your clientele. So it’s crucial you make the right choice the first time.
Here are a ton of questions to consider when choosing your location…
Want to open your restaurant in the hip new area of town, where all the hot new stuff is going on? That’s awesome, and understandable. Who wouldn’t want that? So how much more per square foot is that lease than a comparable space in a less hot area of town? How many more dinners would you have to serve per month to make up for that? Will it really be worth it? The most exciting locations can come with the scariest lease amount!
Will the neighborhood clientele want what you’re serving? Sure, people will travel for good or novel choices, but the locals are the ones who can be your best regulars.
Are you visible from the street? Will it be clear that you’re a restaurant? Will people driving buy be able to realize you’re open for business so that they can mentally bookmark it and come back later?
How’s parking? Parking can be a real pain in the butt. Will you have to have valets running cars to a lot down the street? Would having valet only turn off your potential customers? Does your building include adequate parking? On the street or in lots? Paid or free?
Does anyone else serve the same food in your area? And does that indicate market desire, or too much competition for your niche?
Does the local population even eat out? What’s the demographic? An area with a ton of college kids will perform differently than an area with a bunch of DINKs (Dual Incomes/No Kids) or an area with young families or retirees.
Can you capture people walking by? Are there any other businesses very close to your potential location that could feed you clients, like a theatre that lets people out for a late dinner service, or a museum? Alternatively, are there any businesses close that could send you the kind of clientele you wouldn’t want, or just wouldn’t care about what you serve?
Have you looked into the history of your potential location? Every town has some of those cursed spots, where a business will go in, then last 8 months and shutter, then a restaurant will try it and last just a year, hemorrhaging money the whole time, then another failed restaurant or two. When you are looking seriously at a property, go talk to your potential neighbors, both residential and commercial. Ask them what all has been there in the past, and how long it lasted. Sit and watch the traffic to see how many people walk by or drive by. Try driving there at various times of the day to get an idea for traffic. Use Google Street Views to review the evolution of the spot over time and get an idea of how often it was vacant versus how often it looked busy.
Your location can make or break your survival, so choose wisely. Study your options and analyze what it will really be like to go in there. And be aware that new spots can open anytime (because so many businesses fail and spaces become vacant!) so not rushing the decision could end up giving you better options (or you could take too long and lose an ideal spot.) Fun, right?
3. Your marketing sucks (or doesn’t exist at all)
You have got to get the word out about your new restaurant. Or if you have or are buying an existing restaurant with a healthy customer base, you have to spread the word still so that you are in a healthy position to fend off local market changes and new competition.
Lack of Marketing
When you’re working on launching your new restaurant, you have a million things to figure out, but you can’t forget about marketing. Lack of effective marketing means customers won’t know to try out your new place, and without those new adventurous customers, your revenues will wither up and die and so will your restaurant.
Embrace the Internet
You have to have an online presence today, with a modern looking website, social media accounts, and results in the search engines.
It may be a pain to set all that up and feel frivolous, but it is crucial, especially as a new restaurant just trying to get established.
Get an Instagram and take high quality photos of your food, your staff, your space and share them. Use hashtags to try to get your initial followers, or try following people who follow similar local restaurants to get their attention. Hire a photographer to get quality pictures for The ‘Gram if you need.
Tons of restaurants have horrible websites and you don’t have to be one of them. A site builder like Squarespace or Webflow [INSERT AFFILIATE LINK***] can make it easy to build a handsome site that matches the quality of your restaurant. (More about websites below)
Have your web developer (or you) submit your site to Google and all the other search engines so that it gets found quicker and can get a chance to start ranking for relevant search phrases.
Start building up an email database so that you can send customers info about specials, new items on the menu, anything to try to get to get them to keep coming back.
Don’t have an annoying website
Like I just said, so many restaurants have terrible websites. You can do better than that!
Here are a few pointers to make sure your website doesn’t suck:
Mobile responsive - This just means that your website looks good and works on a mobile phone. Think how many people are using an iPhone as their main computer now anyway, and how often restaurant choices are made on the go. Make sure the menu can be read from a phone easily, and make sure your telephone number can be clicked to call, and that everything just works. You’d be amazed how many restaurant websites are impossible to use from a phone.
Hours - Post your hours, duh. Make it clear on the site and you’ll get less calls asking when you close.
Address - Make it easy for them to find your location once they find your website.
Images - Quality pictures of your space and your food will help convince people to come spend money at your establishment!
Clarity - Just make it clear with your website what kind of food you offer, where you are, and why people should bother coming in.
Encourage good reviews and listen to the bad ones
When you go around and ask diners how their meal was, you can encourage them to review you on Google and Yelp. Or if they’re given up any sort of contact info (such as giving a phone number to get a text when the table is ready), you should contact them after they eat to encourage a review. Or just have a sign up on the exit door or above a urinal (captive audience!) to encourage people to leave a review.
Having a ton of good reviews online will help with social credibility, which can help bring more people in.
Be a good business person and respond to all reviews, POLITELY, and thank the positive people and address the concerns with negative reviews. You can learn a lot from this, and the way you handle online reviews becomes part of your image too.
Get listed on Yelp and Maps
How do people look for new restaurants in their area? Many check on online directories like Yelp, or by finding their location on Google Maps and simply looking around the map.
Make sure you’re listed in Google Maps and Google My Business listings so that these people can find you. (And all your reviews will show up there too, another reason to encourage good reviews!)
Yelp listings and reviews help too, so make sure you’ve listed your restaurant on Yelp in the right category. Yelp itself is known for predatory practices and super expensive add on services that don’t really help, so be careful with them. You can get a lot of traffic from Yelp without giving them a dime.
Do people driving by your restaurant know that it’s a restaurant? You’d think everyone would work to make that obvious, but it’s not true.
Two restaurants in my own neighborhood came to mind for the “bad signage” issue. Look at these pictures below. Would you know while driving by that one is a delicious bakery and one is an outstanding asian fusion place?
Make sure your signage works, both when you’re open and after hours. Make sure you have signage hanging perpendicular to the restaurant too so that people going PAST it can read the sign, and not just people looking AT it.
Customers don't just happen
It would be awesome if you opened the doors to your new restaurants and people just came in and sat down to eat. That’s the dream, right? But it doesn’t work like that. You have to put a ton of effort into getting people to your restaurant and building your brand.
Many restaurant managers underestimate this. People don’t just show up. And they won’t come back if it’s not a really good experience.
Focusing on the wrong marketing efforts
It doesn’t matter if you have a ton of fans on Facebook or lots of followers on Instagram, if it doesn’t actually move the needle and get people to come in and spend MONEY.
It’s often hard to quantify, but try to track the results from your various marketing efforts. If you can see people coming in from a specific tactic, double down on it. Not sure something is actually helping? Then back off on it, especially if it’s an expensive effort.
It’s crucial to stand out from the other places in your area. It’s a matter of survival.
Why should people choose you over the chain restaurants that they trust? Why should they try you over other local places that have a similar offering?
Your marketing needs to address differentiation, and you need to market to differentiate!
Run a PR campaign
Do your local newspapers write about new restaurant openings? And not just the major newspaper for the city, either. Keep in mind that there are a lot of smaller, neighborhood focused newspapers, plus business focused papers and in some cities the free weeklies. Running a PR campaign to these papers and reaching out to journalists who have written about new restaurants before can help you get some free press and awareness.
Similar, go DIY and search for food bloggers and restaurant reviewers in your city and reach out to them. And don’t forget to search on Instagram for people who review restaurants too, or even just “influencers” who eat out often and post about it. Influencer marketing is somewhat BS but it came into existence because it does work to an extent!
Not enough marketing
Don’t be too cheap with marketing efforts, both in time costs and money costs. Include both traditional media and online marketing efforts.
Doing a minimal amount of marketing can give you a weak position when you open, and you’ll realize that as you look across all the empty tables on a Friday night.
Hiring a lousy marketing company
Many business owners I know have been burned by expensive marketing agencies that don’t see to really do anything for the amount of money they get paid. If you do decide to hire an outside marketing firm (probably a good idea), make sure you ask local restaurant owners for recommendations of who to hire and more importantly who NOT to hire.
Hiring the wrong marketing company can waste a ton of your time and money, especially in those crucial few months when you’re freshly open. Choose the right agency before you open your doors!
Your image is your marketing, too
And remember that everything is marketing. Does your delivery driver cut people off in a branded car? Is your toilet paper super cheap? Is your trim work a little dirty around the walls? Everything is marketing, as everything can contribute to what people think of your restaurant!
Some quick marketing tips
- Formalize your brand, including your logo, your graphics, and your color guidelines for all your web and printed material.
- Ask other local restauranteurs what marketing tactics worked for them when they were newly opened.
- Write a year long marketing plan with ideas and how to do them. Overwhelmed? Prioritize by either what’s cheapest to do or what’s easiest to do and go for it.
- Cross promote with other local businesses. Create a special offer for the bike shop in your neighborhood and see if they will leave cards out by their register.
- Participate in a local food festival to get out in front of people.
The quality of your food is really your best marketing effort, though, so making sure the dining experience is incredible is what will create the best kind of marketing: word of mouth.
4. Your Finances Don’t Add Up
It’s a business after all! If your finances are proper and you’re thriving, your restaurant will feel like a great place to work and something wonderful to own. But if your finances are in trouble, this restaurant you’re indebted to will feel like an albatross around your neck.
Knowing and controlling your food costs and payroll
You’re doing a lot more than just buying uncooked food, cooking it, marking up the price and reselling it, but that’s essentially the basis of your business as a restaurant. Sure, entertainment, service, ambiance, convenience, community and a myriad other factors come into play, but the numbers ultimately matters when it comes to food costs.
Keep in mind that your food cost may change depending on the season, the provider, and other factors. Set a menu price for dishes that have wiggle room so that even when ingredients have gone up, you’re still making enough. And then if you get a good deal on a dish’s ingredients this week, you can enjoy a little bonus in your margin, at least for now.
Also it’s crucial to keep an eye on each dish’s food cost and margin. As an owner, it’s easy to get complacent and do the math for a new dish, then forget to keep checking it regularly. Food costs may creep up slowly, and that lasagna dish may have gone from 21% to 29% food cost over the last three years, and so slowly that you never noticed.
Watch for waste, watch for liquor “mysteriously” going away faster than it should, and watch for snacker staffers to help control your material costs!
Another major cost other than food is going to be staff, including your non-tipped staff. If you’re a new establishment, you’ll see with time when your busier shifts will be. Tuesday night is not the same as Friday night, and brunch rush on Sundays may be way different than Saturdays because of all the church people who flood the local restaurants at 12:30pm.
Surprisingly slow night? Cut people. Is your city’s football team in a playoff game and you expect them to win and then everyone will be happy and go out for pizza, but oh wait they lose even though it looked so promising at halftime and now people are sad and not going to go out to celebrate? Cut people. Extra slow lunch shift for no clear reason? Cut people. Ask who wants to leave and you’ll probably get volunteers and won’t have to hurt anyone’s feelings.
Not knowing your data
Take a more holistic view of your food costs. Sure, you know that your prime rib entree has a heavier ticket than most entrees, so you like it for your top line numbers, and yeah, it has 40% food cost so it’s not super profitable, but do you really keep track of how many you sell? Would it be better to ditch that item for a similar petite filet that may move faster?
If you take a more holistic view of your menu and consider the difficulty of the dishes, versus how often they actually get ordered, versus storage and shelf life of the necessary ingredients, you may realize that some of your proud plates may be fairly unwise to have on the menu, taking up space in the walk-in, and keeping easier more profitable dishes from getting ordered.
Really look at your menu. What are your most profitable menu items? What almost never gets ordered? (A good POS system can help you obtain and digest this data easily.) What does it cost to make each menu item? What’s the profit margin?
Unforeseen external forces
Industry change can feel slow, but it’s constant. Stay ahead of new labor costs, regulations, tax / insurance changes and so on by reading restaurant news, talking to your peers, and keeping an eye on industry trends. These changes can really affect your bottom line, so be educated and prepared.
Not reinvesting into the business
You have to make enough that you can set some funds away for marketing, your rainy day fund, taxes, capital expenditures, expansion/improvements, and everything else that you feel like you can ignore on a daily basis but will come back to bite you in a few months.
Be diligent about setting money aside. Make it a requirement that when you do your books on a weekly or monthly basis that you assign your money for these uses. Move tax money into a separate account that you don’t usually look at, so you’re less likely to rob it.
If your restaurant is doing well, and you’ve proven that a certain type of marketing works to bring actual customers in to actually spend money, consider some of your own money our outside money carefully into a bigger marketing campaign to bring in enough new business that it would be worth it and would also generate enough income to pay the investors back.
Even if everything is going well, entropy exists. Your bathroom walls will look worse with time. Furniture wears out. Things will need to be fixed, replaced, repaired. Be sure to set money aside for that, too.
Startup capital and a cushion
It takes a lot of money to open a restaurant, and it arguably gets harder once your doors are actually open and people can come eat at your establishment.
Beyond the money needed to open, you’re going to need enough funds left to float the operation while you wait for people to become aware of your restaurant and for it to become known and popular in your community. Before that happens, you need to have all the ingredients for all the menu items for anyone who walks in, plus funding for all the staff needed to serve those people.
Keep enough startup capital available to run a marketing campaign too. And keep in mind that some restaurants get to profitability sooner than others (and some die expensively faster than others).
(Im)proper bookkeeping and cash flow
Have an adequate accounting system. Learn basic restaurant accounting at least. Your restaurant needs enough cashflow to pay staff and all the bills, with profits generated by the right balance of food cost versus menu price, as well as the right number of staff with neither too few (service and morale suffers) or too many (finances and morale suffers).
Keep proper books! Every business has a different set of costs to keep track of, and with restaurants you’ll need to track food costs, how many items you have to comp or discount, food waste, order errors and so on. These are easy to lose track of, but they drive your costs up and/or drive your revenue down. If you have staff that are too quick to comp dishes, it can hurt your bottom line and also indicate there are other issues that you need to look into and correct.
If you don’t keep good books, it’s hard to know why you’re not profitable! Don’t let it become a fatal mystery. Data can be powerful in your business. Investing in a good account that you trust that has industry experience can be more than worth it.
Keep checking your numbers. Never let finances go on auto-pilot. It’s easy to zone out once you have a system established so that you can put out other daily fires, but ignoring your financials can kill you before you realize you’re dying.
Cashflow is important and your servers are your salespeople. Pay attention to who can really SELL dishes to people and generate higher tickets. Keep them in your employ. Let low-effort servers go, as they’re not helping customer retention, word of mouth marketing, or your revenue.
Also, even if you trust everyone that works with you, keep an eye on finances often enough that you could catch an embezzler. If you rarely do your books, you could give someone months of free rein to pilfer you before you catch on. But if you diligently review your books weekly, you can spot abnormalities more quickly and realize there is an issue.
Extra income sources
Establish multiple revenue streams: food trucks, catering companies, corporate contracts. Cash is King and your only job is to generate a lot of it. Your kitchen is already cooking, so take full advantage of all the sub-businesses you can use it for. Can you do drop off catering to help pad the till?
Depending on what kind of restaurant you have, you may be able to establish extra income sources that will bring in more cash to help you survive initially, or long term.
A food truck is a relatively big capital cost, but would it make sense both to get your restaurant in front of new people and to bring in a new source of revenue?
Can you do catering also? Especially drop off catering, where you wouldn’t need to staff the event, but merely cook and deliver? If you can label the food with your restaurant name, too, that’s marketing for you.
Can you get any corporate contracts and regularly cater office lunches or anything else? You already have a big expensive kitchen, why not use it to the full potential?
What else can you sell? Obviously, if you’re a high end sushi restaurant, you’re not going to sell t-shirts in the lobby, but if you’re a BBQ place or a restaurant at the beach, you may be able to sell lots of custom t-shirts, custom hoodies, or custom tote bags. Your profit margin on those items could be 70%, and increase your average ticket size substantially, plus allow your customers to advertise your restaurant when they’re walking around town or traveling.
5. Killed by Launch Costs
Sometimes you’re screwed before you even plate a dish for your first customer. Opening a restaurant is a very expensive endeavor, and you may be dead in the water immediately because of the cost to open.
Simply not enough startup capital
We touched on this in the last section, but the issue of startup capital is so huge that it warrants more focus.
It could cost a million dollars to build out your location. Literally. Perhaps more. Opening a Sonic Drive-In franchise can be more than a million dollars, for example. And beyond the build out and buying all your ovens and those nice looking forks that you couldn’t pass up and everything else that ate up all your money so far, you need a cushion to fund the restaurant while it operates at a loss until you have a sustainable customer base and your marketing efforts have time to play out and actually work to drive business.
Ideally, have a year worth of cushion. Calculate salaries for everyone involved (including what you’ll pay a handyman to finish things that your builder ignored before he left you for the next project), marketing costs, food costs (to stock up and keep stocked up!) and everything else you’ll need to keep the doors open before you can rely on customers to keep you alive.
The most common problem of all new small businesses, of any sort, is that they underestimate the need to start and operate the business. Especially if you’re a first time restaurant owner, you may make mistakes in choosing equipment, or realize you underestimated printing costs, or come to the conclusion that the cheap marketing agency you hired isn’t actually doing anything and you need to talk to the expensive one that you turned down before because they were, well, expensive.
You may not turn a good profit for several months if you’re lucky, or several years if you’re unlucky (or ever), so have a cushion and be prepared, and make sure you really understand what it will cost to do EVERYTHING necessary to get your restaurant healthy.
And remember, if you go deep into debt while trying to get customers in the door, whether it’s credit cards, more family loans, or another mortgage on your house, it can be hard to dig out of debt ever because your cash strapped business may not be able to easy afford financing all that debt, or even the interest for it.
Overspending before opening
You’re excited. You’re finally opening your restaurant. You get to design everything yourself! All those ideas you’ve had while eating at other people’s restaurants, well, now it’s your turn and you get to put everything into place just like you want it to be. You deserve the best equipment and supplies, and you’re going to get it!
And you’ll kill yourself financially doing so.
How can you save money while building out your kitchen? What restaurants have closed in your area lately, and can you benefit from that by buying their used hoods and ovens?
You don’t need brand new shiny equipment, you just need quality working equipment. Buying used freezers, ovens, prep tables, everything, can reduce your cost greatly, and leave more cushion for when you’re open and asking yourself “why did I ever open a restaurant???”
Opening a new restaurant costs more than anticipated, due to unexpected expenses or construction delays or problems, so your budget just to get everything physically in place needs to allow plenty of wiggle room for such issues.
6. Competition can be brutal
Generally in business, especially if your business model is new or your startup idea feels unproven, it can be a positive thing to see competition in the market place. And with restaurants also, some competition can be a good sign.
If you’re in a city of 400,000 people and there isn’t a single Greek restaurant, does that mean that no one wants good Greek food there for some demographic reason? Or does it mean that the city is ripe for the picking when you open your Greek restaurant and people say OMG baklava and you find success?
In the restaurant world, competition is as likely to kill you as it is to show you that you’ve got a good idea. Let’s talk about why competition can be brutal.
Poor knowledge about competition
Just like you did your due diligence when picking out a physical space, surely you did major research on your competition, right?
You need to research not only restaurants that serve similar cuisine, but restaurants that serve similar demographics, plus restaurants in your area that were similar to your idea but failed (to try to find out why!)
Be aware of who you’ll be competing against for customers, and consider that a few similar restaurants to your concept in the area may be a good thing.
Lack of original ideas
Are you doing something different than everyone else? Or is your coffee shop / cafe nearly identical to the Panera Bread Company a mile down the road in both style and substance?
If you’ve got nothing new to offer the community, why should they come? What’s the point?
And it’s okay to be the fourth burger bar in your town, if the community can support it, as long as you have some original spin to bring to it (menu-wise, style-wise, ambiance-wise, or other).
Have a unique selling point
What are you? What is your restaurant’s raison d’être? Are you a cute local bakery? Or are you a dive bar that happens to have the best no frills greasy burger in town? Are you a diner that focused on breakfast and closes at 3PM, or a romantic dinner spot?
Your customers need to know who you are, what you do, and why they should eat at your restaurant. If your selling point is confusing, your potential clientele will be confused.
Quick story time: There was a food truck in my town selling these little donuts. And they were pretty cute and tasty so the truck did fairly well. So the family opened a little donut shop focused on these small donuts. But I guess business didn’t follow the truck like they wanted, so out of desperation, they started focusing on other things. They started promoting all the craft beer they now offered. And then they became a game cafe. And then started having live music. And they still don’t have much business so they will probably go under this year. Instead of focusing on their core product (small donuts) and perfecting them and bringing people in for it, they lost their focus and their way and didn’t save themselves.
Not keeping up with the times
Perhaps you’ve been successful and kept the doors open since 1985. That’s incredible! But you’ve got to keep up with the times. The same decor and the same menu for 20+ years often doesn’t work.
Keep the best of the past but update your menu to go with the times and fit your clientele as they evolve too. Cities grow and change over time, so you may find yourself having to adapt to your surroundings.
Losing regulars to new competition
Speaking of cities growing and changing over time, with success over a few years, you may find yourself in a weakening position as your local dominance wanes when more and more new restaurants pop up in your area. The law of supply and demand is real!
Be aware of new competition opening in your area. There’s perhaps nothing you can do to stop it, but you need to know about it.
Try to foster better connections with your customers. Step up your game. Improve your menu. Increase your marketing. If you’re established, and scared of new competition, give customers a reason to eat at your place instead of the new restaurants.
Oversupply of restaurants
Cities go through booms and restaurant booms go with it. Nashville, for example, went through rapid growth in the last few years that brought a LOT of new restaurants. And market forces stepped in and many interesting restaurants didn’t last but a year.
But the folly of too many restaurants can hurt you, too. All those new restaurants that come in after you’ve finally opened your doors can draw customers away before they fail (or before they become established and keep those customers!)
A market can only support so many restaurants, so what do you need to do to be one of the survivors?
Don’t let take out take you out
DoorDash and UberEats and Postmates and GrubHub and all those other startups that want to bring food straight to your door, their impact on the marketplace cannot be ignored.
Not everyone wants to cook every night, and now, with way more options than Chinese or Pizza delivered like in the old days, you can’t ignore the impact that delivery can have on your restaurant, good or bad.
People that don’t want to cook dinner don’t have to go to a restaurant to get a nice meal, they can tell an app to bring them a nice restaurant meal at home. And while some of these delivery startups are merging or imploding, they’re still shaking up the market.
Should you embrace it and work with one of these companies? Do your research and choose the right one, as they do take a cut, and your margin may already be unpleasantly small.
Think holistically too about the marketing impact if you get listed as an option within a take out app. If someone sees your place listed as a great Cuban restaurant option, will they possibly come in some day or tell others about you? Would they have not learned about you otherwise? And is what you make selling Medianoche and Vaca Frita via an app worth it?
You know who has perhaps millions of dollars in cushion, unlike you? Stupid chain restaurants. Boring souls corporate chains, the ones that people will choose over your local mom-and-pop shop because they’re not adventurous people and “Honey, tonight I just want to go with something I know. I don’t feel like trying a new place.”
If you’re in an area that doesn’t support a lot of local restaurants and instead spends money at chain restaurants, you may have trouble surviving, even if you’re better and unique.
A chain location can spend months or years unprofitably before corporate decides to shut it down. You, however, can’t do that because you’re not part of a chain and you need to make actual money, and fairly quickly.
Oh, and chains that open in your area don’t have to spend time and effort getting the word out and convincing people to try, because they’re already known in the region. You don’t have that luxury. It’s unfair, perhaps, but it’s how it is.
Local market concerns
Will the local market even support something weird and interesting? Or something novel, or just something independent?
Can the size of your market support your restaurant? Will your neighborhood’s demographic support you, and if not, can you really count on people traveling very far to try your place?
Regardless of which aspect of competition is scariest to you, you’ve got to keep an eye on your competitors, be aware of them, and survive with them around you.
7. The food should be the focus
No matter what kind of restaurant you’re opening, and what you serve, and what decor you have and what sort of neighborhood, the food you give to people is what can make or break you.
To paraphrase 90s politics in America, “It’s the food, stupid.”
Low food quality
How long has it been since you’ve tasted one of your standard dishes? This is the surest way to keep up with your quality, by actually paying attention to it, regularly. Don’t let your quality slowly decline from great to meh.
And like stated earlier in this article, never sacrifice quality for price. Yeah you can save a quarter on a dish by going to some cheaper bread for the sandwich, but what harm does that cause to the overall experience of the sandwich? Is it as remarkably good? Will someone still enjoy it so much that they’re likely to tell someone else about your restaurant? Every aspect of the dish adds to the overall quality, so keep every ingredient high quality.
People are coming to your establishment to eat, to eat your food. If the food isn’t good, why would they return? Why would they leave a positive review on Google? Why would they tell others to come try it out?
If your restaurant’s food isn’t great, what are you doing?
A specific dish on the menu should be the same experience no matter who is cooking it or plating it. Standardizing processes and recipes will give your customers a consistent experience, and make production faster, and make it easier to train new hires.
Lowering quality to offset rising food costs
You know your customers aren’t going to be excited to see their favorite dishes go up in price, so you’re hesitant to raise the price. But your food costs went up (again!) so what are you going to do?
Sure, you could leave out a few expensive and minor-seeming ingredients, like those fresh mint leaves, so that you bring your cost down. But what does that do to the experience? Is your dish losing its appeal while you try to increase its profit margin?
Is that worth it?
Don’t fall into the trap of lowering the quality of your offerings to make things more profitable. Find another way to get food costs down. Work with your chef if necessary to keep the flavor profiles similar while you swap lower cost (not lower quality) ingredients as necessary, if necessary.
A few very quick tips to keep food costs down:
- Cut down waste
- Buy in bulk
- Buy in season
- Preserve foods (pickle, smoke, can, preserve. Buy when prices are seasonally low and then preserve for more expensive times)
Standardize and control
Control your portions and measure what you’re putting on a plate. Not applying portion control leads to not only inconsistent experiences for your diners but also very inconsistent profitability for an individual dish.
Standardizing your dishes and recipes help reduce waste too.
If you aren’t standardizing, controlling and measuring, you don’t know where your money is being spent. And that’s a terrible place to be in a difficult, low-margin business.
Breakdowns in the chain of command can lead to recipes and procedures not being followed. Regularly tasting dishes can help you make sure recipes are used.
Prepping food can become monotonous easily, and the people who do it, while super important, don’t always get paid enough to really care, and they may start cutting corners. But repeat customers can notice changes overtime and see a decline in your offering, which is never good for business.
Stay diligent in the fight to keep your quality up and your dishes executed to their original specs. Don’t lose sight of the passion you had that made you want to open up a restaurant and pour all your effort into crafting your signature dishes!
The Food Is Just Bad
To beat this point into your head further, if your food is bad, your restaurant is pointless and it will fail. People will not come back for bad food. They may come back out of desperation for mediocre food, like if you have some geographic corner on the market (like a cafe in the main floor of an office building.) But you cannot thrive with mediocre food and you cannot survive with bad food.
Some owners don’t know how their food taste. Some owners step away and don’t keep an eye on their restaurant. Some owners try to manage it from a distance. Don’t be like those owners. Those owners fail.
Start with great dishes, and keep them great by routinely tasting and testing them. Don’t let your quality devolve until one day you wonder how you got to a failing restaurant with lackluster food, no customers, and every account in the red.
8. Your menu is killing you
A proper menu has a huge impact on your restaurant. And it doesn’t have to be beautifully laid out and glossy and gorgeous for your restaurant to survive. In my home town, there’s a fantastic restaurant that has a menu that changes every season, and it’s handwritten and photocopied. It’s just cursive writing with the dishes and explanations and pricing.
Perfecting your menu can help your average ticket price, your turn time, how quickly people actually order, your food bills, and how happy your kitchen staff is.
Large menu means lower quality and bigger inventory
Ever go to a restaurant with a huge menu? Did you find that it was not a great restaurant?
Generally, a longer menu means every dish is less focused and lower quality. Not true in every case, but it’s a good rule of thumb to expect.
You don’t want to be like that. It’s better to just do a few things, and do them really well.
More dishes on the menu means more ingredients, which means keeping more inventory, which can also lead to more spoilage and waste, not to mention more money to keep everything stocked.
Longer menus take longer to order from
Besides indicating lower quality, a longer menu takes longer to order from, so your guests will take more time at your tables deciding what to get, leading to longer stays and fewer turns during service.
The “paradox of choice” is real, and confusion on what to get because of too many options can make your guests feel stressed and overwhelmed.
A good menu requires figuring out how many items are too much versus offering too few options. If you’re new, watch what dishes don’t sell well and consider cutting them from the menu. If you’re established, keep track of how newer dishes faire and don’t be married to keeping items that rarely get ordered but require esoteric ingredients that you don’t need for your other dishes.
Don’t be like the Cheesecake Factory. Your menu should be a single sheet of paper, not much more. It should not be a spiral bound textbook of every possible dish that your kitchen could crank out.
Your menu is hurting the kitchen
A huge menu with lots of different dishes leads to longer ticket times, which won’t help your finances or your customer experience.
More types of dishes going at the same time in the kitchen means less of the same items getting cooked, which slows production.
What does this mean? Each table takes longer to serve. It’ll be harder to time dishes to come out together for guests at a table. Dwell time under heat lamps for some dishes, harming the taste and freshness. Less guests served, longer wait times both for dishes and to get seated, lower profit in an evening, and more likelihood for your restaurant to fail.
Have a small menu and a big kitchen!
Align your menu with your mission
Keep your menu aligned with your restaurant’s unique proposition so people know what you’re about.
If you’re a sports bar close to the stadium, having a ton of salads may not make sense (but having a few may help). If you’re a country club, having a Philly cheesesteak on the menu may not make sense either.
Clarity and consistency in your menu offerings is as important as having clarity and consistency in your branding, marketing, and overall theme.
Better menu design
The design and layout of your menu matters. And no, a bad menu itself isn’t going to cause your restaurant to fail, but everything you do goes together to impact your overall effort and survivability. It’s all marketing, and it’s all important.
Group your most profitable items together.
Don’t use dollar signs. This way, you can still show the price of dishes, but it is recognized less as a cost and people will be less hesitant to spend money.
Update your menu and your prices annually, at least. Your food costs may change and the dishes may evolve, so make sure the price you charge is still in tune with the cost to serve the dish.
Build your menu around popular items. Suggest pairings that can help raise the ticket price.
Placement of items matters, as dishes closer to the top and easier for eyes to find can sell more. Highlight what you want to move. Need to get rid of an overstock of pork? Boom, there’s tonight’s special.
Grouping items logically matters. Have menu sections to people can find what they’re looking for.
Do people ask the same question about the menu all the time? That means it’s broken. Pay attention to repeat menu questions because that means you’re not explaining things well.
Your menu gives you a chance to present your offerings well before the guest sees any food. Take advantage of this opportunity and do it well!
9. Management and Mismanagement
A fish rots from the head down. And not just the halibut in your walk-in. I’m talking about your restaurant.
When your management stinks, it trickles down to make everything else rotten in your organization.
Staff, customers, presentation and marketing will be affected by poor management.
And your restaurant will be one step closer to death.
You have to have management
Without an onsite manager, small restaurants can’t pay attention to the number of customers they feed per day, nor keep track of popular items ordered, or most profitable dishes, and their inventory loss. In addition, a manager keeps track of staffing, customer disputes and other shenanigans during operating hours.
Bad managers kill morale
People will leave a well paying job if they’re treated poorly, and stay at a low paying job if they’re appreciated and given a schedule they like. A bad manager can mess up a good employee situation by not treating people equally and ignoring individual staff needs.
A good manager needs to be able to call out employees when they aren’t working well, and to never play favorites, which can create animosity within the staff.
Managing online reviews
Someone has to oversee your online reviews, and any marketing firm you hire isn’t probably the best one to watch over them and respond to them.
The manager needs to pay attention to your online reviews and respond to them, as well as encourage positive reviews. Email or text people who have eaten at your restaurant (you may have their email addresses or phone numbers from your wait list or reservations system) and ask them how they’d rate their experience from 1 to 5 stars. If they say 5 stars, then give them the link to your Yelp or Google listing and ask them to leave a review. If they say anything less than 5 stars, ask them how you could improve!
Poor inventory management
Managers have to pay attention to profitability, and what’s really happening to your inventory.
At the bar, theft, free drinks, spilled drinks and free shots for their buddies can add up to a 20% loss of all your sales, which can mean thousands of dollars. And if you’re not tracking it, you won’t even know. Implementing a system to track and fix that can instantly boost your profitability.
Beyond the bar, paying attention to what items are getting depleted fast, and what is getting routinely wasted and why can help you better manage inventory needs and costs, also boosting profitability.
In order to have proper stock control, you need to have specific requirements for ingredient lists going into inventory items.
Scheduling is a nightmare
Employee schedules constantly shift, because your dining room load can change weekly or seasonally, due to outside influences like weather, new marketing efforts, or seemingly for no reason at all.
Keeping enough staff on shift, but not too many, is an important game for both financial and customer experience reasons.
You’ll have to be able to juggle what your employees need for their own schedules versus what you need for proper staffing. And you’ll need to be able to give each employee enough shifts that they don’t feel like they need to go look elsewhere for ample employment.
Software can help plan and track employee shifts, but if Thursday night is unexpectedly slow, ask for volunteers to go home early.
And give people time off when they need it! Whether it’s for a full week of vacation, or just a few days in a row to relax, if people feel like they can possibly get vacation sometime, they’re much more likely to stick around and work until they feel like they do really need that vacation.
The best managers washed dishes
Restaurant managers with expansive industry experience will not only have the most skills for the job, but also the most empathy for their employees. If they started out as a hostess or a busser, they’ll understand those positions better. And if they used to wait tables themselves, they’ll understand the concerns and challenges that the wait staff has.
If they’ve been in the staff’s shoes before, they’ll know how to best related to and motivate all the different positions needed to keep your restaurant humming along.
Bad Managerial Skill Set
Not everyone is cut out to be an awesome manager, and that’s okay.
Being a great manager requires experience, personal skills, a strong backbone, and a hard work ethic. They need to understand how to reprimand people as well as inspire and motivate people to keep persevering during a rough shift.
Your managers are responsible for training staff, and teaching them how to interact with your diners, which has a direct impact on customer experience, and an indirect yet quick impact and your restaurant’s profitability.
Poor Hiring Decisions
Hire slow and fire fast. Hiring the wrong people, especially managers, could cripple your restaurant.
Even if you have a trusted manager hiring people, oversee who they are hiring to make sure they represent your business like you would want, and to make sure personnel quality doesn’t decline over time. An “A” employee will want to work with other “A” employees, but a “B” manager may only hire “C” employees to make themselves look better.
If you do hire the wrong person, the best thing to do (although it can be very difficult in the moment) is to let them go. Do so for the sake of your own restaurant and the other employees.
Avoid spending money on workers who are not making your restaurant greater and helping you achieve all your goals!
Overwhelming administration for management
Your day to day managers will have plenty to keep them busy, as they oversee staff and operations, handle customers, and put out proverbial fires constantly (and perhaps a real fire every now and then). So it’s easy to let the administrative tasks fall to the wayside, but this can’t happen.
Inventory, ordering, finances, there is a ton of administrative work that must be done to have a successful restaurant with accurate data, and as an owner you should delegate as much as you can to your (skilled and trusted!) managers.
10. It’s the Customer Service, Stupid
In the 90s, political analyst James Carville summarized what was most important to voters when he said “It’s the economy, stupid”, and if there’s one thing (beyond food) that is crucial to your restaurant not failing and taking all your money with it, it’s your customer service.
Bad and inconsistent customer service
There are so many restaurants out there that it’s imperative to give good customer service, because people will have a ton of other options if you disappoint them.
If your customers have a bad first experience, they’re not likely to return, and they’re more likely to tell others about a bad experience than a decent or good experience. But give a first time diner a good experience, and they’re much more likely to return. (And remember that customer retention can be a lot cheaper than getting new diners to try it, marketing wise.)
Every interaction with every staff has the possibility of either improving or worsening the diner’s experience, so every interaction needs to be consistent and pleasant.
Invest in training your front of house in how to greet and treat guests, and make sure it’s all standardized so that the experience is the same no matter which host or waiter a customer has when they return.
Consistently great customer service is crucial if you want to stay open beyond the first year!
Going above and beyond
Going the extra mile is what gets remembered and remarked upon, so your staff should do it whenever possible.
Over ten years ago, I was at a Starbucks on a date. We got our fancy coffees and left, and as soon as we stepped outside, my date dropped hers and boom, it was all over the sidewalk, ruined. An expensive puddle. We decided to go back inside and buy a new one, since she didn’t get the chance to actually enjoy it. And you know what? The staff had seen the unfortunate spill and went ahead to re-create her drink for her, for free.
What’s the point of that story? It was over ten years ago and I remember it clearly because the staff there went above and beyond in their service. They didn’t owe us a drink. We had paid for it, left with it, and spilled it. It was our fault. They took the two minutes and a dollar or two worth of COGS to replace that drink, and created an experience that made me think better of that Starbucks location, forever.
How can you give that sort of experience to your diners so that you earn their long term admiration?
Strong customer service creates more customers
The best marketing is word of mouth, because it’s people recommending you to their friends and family, and since the recommendation comes from someone they trust, it’s listened to and often acted upon.
And it’s exceptional customer service that creates word of mouth.
Make sure your managerial staff knows all your customer service policies. When do you replace a meal? When do you refund a meal? When should the manager or owner come over to the table to check in and perhaps apologize when something goes wrong?
This is one area where you can spend money to invest in a long term customer and referred customers. What does a free meal cost you, and what does it earn you long term?
In Ann Arbor, Michigan, there is the Zingerman’s group of restaurants. Those guys have perfected customer service so much that they now travel to put on conferences about how to give bette customer service. I attended one of those events and I’ll never forget what they do at their deli when someone doesn’t like the sandwich they ordered. While most delis may offer to replace the sandwich, or refund it, they do both. And they give a coupon for a free sandwich next time. So a bad sandwich experience becomes a totally free new sandwich plus a future free sandwich. And what does that cost them, versus the good will it creates? And how likely is that person to tell his friends about how well he was treated at that deli?
Be scared of yelp!
Just to reiterate this since we live in the era of online reviews, you need to be scared of Yelp and other review sites.
One bad experience can send people scrambling to complain online, where tons of people can see it, so this makes it even more imperative that you focus on consistent quality customer service.
11. Staff Staff Staff
The people who interact with your diners make a huge impact on the experience, nearly as much as the food. Bad staff can override good food, experience wise. So staffing properly is critical, since improper staffing can hurt you financially and kill your restaurant slowly.
Good staff is gold
Great staff can reduce your costs over time and make customers come back when they receive quality customer service.
Spending a bit more time to hire a great waiter rather than an okay but available immediately waiter can have a huge long term impact on your business.
Use training manuals, checklists, goals and incentives to bring new hires up to speed quickly. Let them know what is expected of them, and let them know what they can expect from you and the managers as well.
Make sure roles and responsibilities are clear, so that the division of work is obvious, and everything that needs to get done actually does get done.
Unpleasant surprises when staff doesn’t come to work
You open the restaurant to start prepping for lunch, and since you’re the owner you’re there well before open, and you keep busy as you wait for your staff to show up.
But what if they don’t? Or what if only half of them show up? What if all your wait staff is there, but not the line cook and the disher?
Staff calling out last minute, or worse, just not showing up, will be an ongoing nightmare. You’ll end up calling people on their day off and beg them to come in to help when you get in a bind.
People sometimes have legitimate reasons to miss work last minute, but you might reduce your headaches by removing staff that repeatedly does no call/no shows. You’ll have enough to deal with anyway trying to keep your restaurant alive, and delinquent staff definitely won’t help you out, so warn no-shows quickly and let them go if it’s habitual.
Poorly trained staff
It’s on you and your managers to train your staff properly and let them know your processes, your offerings, your culture.
If they can’t explain to a diner what goes into a certain dish, it’s a lack of education.
If they don’t know how you’d want them to interact with a diner in a certain situation, it’s a lack of training.
Poorly trained staff can be a problem, but at least it’s relatively easy to fix (train!) and not a more fatal issue like toxic attitudes or poor work ethic.
Not enough talent out there
There are three categories of employees: necessity, career and a calling. I contend that 90 percent of foodservice employees start in the first category and were mentored by caring managers to evolve into the second and third. The best leaders build their own replacements.
Retaining quality staff
People will leave often and quickly. Even if your restaurant is doing well. Even if you’re a wonderful owner. Even if you have great managers that respect all the employees. It’s just part of the industry.
The average hourly employee turnover rate is 155 percent a year. You may have employees that stay for years, but they’ll be balanced out by several people who leave in under a year.
Managers leave too, with an annual turnover rate of 61 percent.
When you have staff and managerial turnover, it costs you in both time and money. To help reduce the damage from this, having standardized training helps bring new hires up to speed quickly, so be sure to implement training systems and practices that can be repeated easily.
How do you keep people? Offer them what they want. Flexibility in scheduling, a good salary, perks based on seniority, but also give them dignity, recognition and respect.
Never treat your employees badly, unless you do want them to leave (and even then, an employee you love seeing you treat a bad employee rudely could affect how likely they are to stay). And never treat your customers better than your staff. People may not stay long and become loyal employees if you treat them well, because of the nature of industry turnover but they certainly won’t become loyal, longterm employees if you treat them poorly.
Dealing with turnover
A well managed business can run (at least temporarily) without oversight. By establishing structure and procedures, your restaurant can run without you there. And if you set it up so that it can run without you there, when you are there you can actually focus on improving the business instead of just running the immediate nature of it.
The turnover rate is huge, and you’ll probably get applications and requests for jobs when you don’t need them yet, so keep a stack of resumes the higher quality applicants on hand so that you can call on them when you find yourself getting tight on staff.
Turnover will create inconsistencies everywhere, and systems can help prevent that. Keep the knowledge in the institution instead of just with the workers, and the knowledge won’t leave when the workers leave.
People will leave whether your standard of quality is high or low, so keep it high.
Theft, both petty and malicious
Employee theft can come in two flavors: I’m stealing and I don’t know it, and I’m stealing and I mean to.
Overcomping of tickets to friends and good customers, having an extra shift drink, and eating while on the clock is technically theft that isn’t malicious or even always conscious. Those employees are costing you money but they may not realize it, and they probably don’t mean any harm by it. But it’s hurting your bottom line, which hurts your business’s viability.
And then you have the employees who are stealing, and realize it. In this business, stealing can be too easy. Depending on how closely you watch your bar inventory, a bottle of liquor could easily disappear. Food could be taken.
And besides taking physical items, petty embezzlement could happen, too. If you’re not using a point of sale system, waitstaff could write up checks for less than what was sold, and keep the difference. If they did it constantly, you could lose hundreds a week to a single employee.
I heard a story once about an independent pizza restaurant that mostly did takeout. Some employees got wise and started bringing in their own dough, because that was the only thing the owner tracked, inventory-wise. So for some of the cash orders during the shift, these guys would use their own dough, use the company toppings, and put the cash into a separate till they had going at the register. They only got caught when a friend of the owner saw them separating the money like that. If the owner tracked the other supplies than just pizza dough, they could have been caught sooner.
Some rotten apples can spoil the bunch, so it’s crucial to be diligent about catching thieves and removing toxic staff as soon as possible.
12. A few other things that can help your restaurant fail
In case you didn’t find enough reasons above to worry about your restaurant dying a slow (or fast) and expensive death, here are a few more potential issues to keep you awake at night.
Bad kitchen design
After you spend a ton of money on build out, what if you’ve designed your kitchen badly?
Maybe you don’t realize the issues in the layout until people are actually in there moving around and cooking and trying to survive getting slammed with tickets, so what do you do now that you’re open and you have a bad kitchen design? You can’t just close for a month or longer to redo the kitchen, right?
Maybe you can afford it, but that would have huge financial costs, and not with just that month long loss of revenue, but with the long term hit to returning customers and also the staff that left because they couldn’t just hang out for a month while you redid the kitchen.
Having a poorly designed kitchen can hurt staff morale, increase ticket times, and just make it harder to operate.
You do have to deal with health inspectors, who work to keep the public safe.
Improperly kept food can cause food-borne illness that at best gives an upset stomach and at worst could kill someone, so while the inspections may be annoying or stressful, they’re important.
And you’ll have to do your best to stay ahead of any inspections (which can get you on the nightly local news when they do one of those round up pieces on the dirtiest restaurants in town) so that you can get a great score.
With so much competition in the restaurant world, the last thing you need is for customers to be turned off because you had a lousy inspection and had to post it up for everyone to see.
Untimely equipment failure and other acts of god
There’s a coffee shop and restaurant in my town that has a separate space next to it just for take out. But it was closed the last time I went by. Why? Because the wall collapsed in the next space to it! And there’s no way they could have seen that coming. But it’s hurting their business.
There are a ton of things that could go wrong (but may not) and they range from mechanical to natural.
Buildings have structural issues. A fire takes out half your space. Your town has a 100 year flood event that destroys your beautiful restaurant. A heavy snow storm collapses your roof.
All these unpredictable, seemingly totally random can kill you, or at least be quite expensive to recover from. Good insurance helps. Good luck is even better.
There is hope!
A restaurant is a passion business. People choose to go into it for love of food, for love of serving others.
And a restaurant can work! If it was an impossible business model, there wouldn’t be any restaurants still open and serving, and it’s obvious if you look around that many restaurants not just survive, but thrive for years or decades.
It’s obviously quite a hard business. But that doesn’t have to stop you.
Knowing what all can wrong helps you prevent it from actually going wrong.
Hopefully reading everything laid out here can help you overcome all the obstacles.
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