Why do so many restaurants go out of business?

Question

I heard that the attrition rate of restaurants are high. I want to start a restaurant but I am scared to death.

Answer 1

Be sure there are always cars in the parking lot.  Even if you have all your family park all their extra cars in the lot.

But, really, most are not realistic about getting a following.  You need word of mouth and advertising like flyers with discounts and free stuff.  

Think about the neighborhood you are considering, and the type of restaurant you are opening.  I recently saw a little restaurant that mentioned Italian meals and fresh homemade garlic bread.  It was in the middle of a part of town full of Hispanics.  Agreed, they like Italian as much as anybody, but the place would have gone over much better in the "Soccer Mom" neighborhood of 2-story executive homes.  

What do Baby Boomers want?  The US is now focused on what they want and need.  Convenience.  Retirement.  Keeping active.  Spending money saved over the last 40 years.  Vacations.  Even though you have a restaurant - be sure to think long and hard about how to present your to-go menu/take-out dinners for people who want to call ahead and pick up an entire meal for the family.

Answer 2

Bad help, poor planning, too little capital, bad management, poor menus, poor quality food, and problems with service.

Answer 3

People think that running a restaurant is easy. I've been a waitress at a restaurant for over 20 years, and it's not easy. You have to have the right attitude, towards your employees and your customers. You have to be gentle but firm when dealing with people. The main cost is the rent or lease on the restaurant. And the electric. Everything is high, and people think they get a thousand dollars, that it's a lot of money, and they can spend it on themselves. And you can't. You have to put it right back in the business. For all of the money you take in a months' time, you have to pay your rent, electric, phone, employees, food, insurance, which is multiple, between workmans comp, property insurance, local taxes, fed. taxes, and soo much more. There's advertising, utensils, it's endless.

But a lot of people think they can just go in and run a restaurant, and that's it. You have ordering to do, inventory, employees dedication, and experience. Then there are breakdowns, and you have to pay someone $100 an hour to fix something, plus the parts.

You really have to know what you are doing. Then there is the competition end too. With the way the economy is, it's a bad time to open a restaurant.

Answer 4

it is a very competitive business.  Corporate restaurants have huge marketing budgets and excellent systems for making consistently delicious meals.  An independent operator has a lot of things to manage.  Imagine how many things can go wrong in a restaurant.  Staffing is a nightmare.  Ordering supplies is a major pain.  You have to be a savvy marketer, not just a food service operator.  You have to watch every penny or you will not make it.  There are a lot of upfront costs that most people don't plan for.  I run an independent restaurant and I work about 70 hours a week.  It is a really tough business.

Answer 5

In economic terms, it might be due to the number of producers. Too many restaurants popped out and started their business. And people would choose their favorite restaurant(s) or restaurants could offer foods similar to each others' .

Perhaps the lack of creativity in food such as pastas or grilled steak and restaurants for decades have been selling that and people might lose interest in the similar food they would have to eat everyday. Someone must come up with new secret recipes which could lure the people back to dining at restaurants.

The prices of food might have gone up and since the US currency is currently low and weak, most people would cut down on going to restaurants and shift towards eating at small-time deli or other dining locations.

In economic terms, many restaurants going out of business in an attrition rate could be because of "Necessity versus Luxury" . Eating at a restaurant is a luxury while eating anything that is edible and proper is a necessity to survive, thus saving money too.

It could be the income being lowered down for some families or people, so they would thus choose the next best alternatives to dine in or eat.

The quality and quantity of food in the restaurants might be the cause too.

As more restaurants pop out , depending on the population too , people do not know which restaurant(s) to choose to dine in and loyal customers to particular restaurants before other restaurants came about might stick to the old ones more, thus other restaurants would face competition with each other.

Prices competition in having discounts or none at all and the rising in oil prices could mean less people would want to drive all the way here to eat and might prefer to take the subway and discover other stores or deli to eat at.

And starting a restaurant business means taking risks.

Without taking any risks and being scared, your restaurant would not venture far and might be that ordinary restaurant on the streets.

Know what you want to do and make sure your dream of setting up your own restaurant scares you to bits, if your dream does not scare you, it meant that your dream is not big enough.

Come up with lots of food choices and creativity in the food and beverages and the design and comfort of the building and dining tables and chairs. Start small and slowly climb up the ladder to a bigger restaurant by getting feedback from customers or families and friends on how you can improve your restaurant further.

Advertisement is a great way too in assisting you to get more people into your restaurant.

Do your homework by researching online on how other successful restaurants business(s) came to be.

Have your restaurant located at an area or location where most people such as businessmen are likely to be present looking around for a good rendezvous point for their business deals. Good customer service is important and the shortest time possible in delivering the food ordered, so in that way, you would not get black-listed by the customers that your food take a long time to come. Get your friends and families to promote your restaurant. Your food have to be attractive and something that would enable your customers to return with their friends to dine in your restaurant.

I hope that helps.