Restaurants fail for a variety of reasons. Due to poor location, expensive leasing costs, and your lack of expertise, your restaurant’s prices can rise, causing it to go out of business. When thinking about why restaurants fail, the lack of owner engagement, internal thefts, and poor resource allocation is frequently ignored.
The causes for restaurant failure, bad employee management, a lack of reporting, and poor marketing are at the top of the list. In a nutshell, the following are the primary reasons restaurants fail:
Thefts and Robberies
Theft and pilferage are at the top of the list of reasons why restaurants fail. Inside thefts and pilferage often go unnoticed by restaurant owners and managers. Thefts from behind the counter and from the inventory can devastate a restaurant’s finances, making it the number one cause for its demise.
Theft and pilferage can cost an ordinary fine-dining restaurant up to five crores of rupees in five years. Internal thefts increase the restaurant’s food prices. That said, the restaurateur suffers the same financial loss twice: first when an employee takes food, and again when the restaurateur needs to use earnings to make up for the crime. In a study by the National Restaurant Association, 4 percent of a restaurant’s food expenses were stolen.
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What You Should Avoid
Keep track of all company transactions and inventory with the help of a sophisticated point-of-sale system equipped with strong inventory management and an anti-theft system. To prevent thefts, provide specific responsibilities and rights to each employee.
Request information about how you can prevent thefts from occurring at your establishment.
Inconvenient Location and Exorbitant Rental Prices
The location of your restaurant is critical since it can either make or destroy your business. The expense of excellent sites sometimes exceeds the revenue a restaurant can generate. It’s vital not to overpay when choosing an area since a bad one can spell disaster for your business if it fails to attract enough customers.
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What You Should Avoid
Consider the format of your business while deciding on a location. Your location’s rent should never be more than 10% of your entire income. This is a significant factor in restaurants going out of business. You need to be near your intended market if you want to be successful. If a site is appealing, but there isn’t any competition nearby, resist the temptation and investigate why there isn’t another restaurant of your caliber in the exact excellent location.
To learn about the spending patterns of the individuals that frequent your market, get evaluations and references from various sources, and make a few trips there.
Unsatisfactory Service
One of the most common reasons restaurants fail is a bad customer experience: the client will almost definitely never return. A bad experience can be because of untrained staff or the commercial kitchen needing immediate filter cleaning. They can even write negative evaluations about your restaurant on review sites and social media, which can be devastating for your business if you don’t address the issue right once.
Anything that causes a client to be dissatisfied can constitute a poor customer experience to a delay or mix-up in the orders, from impolite and aggressive waiters and waitresses. A strange odor in the air or loud music that doesn’t fit the concept can detract from the client experience and contribute to why businesses fail.
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What You Should Avoid
Ensure that your employees are well-versed in the procedures. Maintaining your cool is critical when dealing with an unreasonable client. Here’s some advice on how to cope with abrasive consumers. In addition to treating customers fairly, well-trained employees also operate efficiently, which helps to minimize delays.
It’s also crucial to figure out what’s causing the customer’s angst. Figure out the cause for the delay, for example, if you’re collecting customer evaluations, and they keep complaining about how bad the service is or how long it takes to get their meal.
Lack of expertise
Because of the widespread assumption that there are no entry barriers in the restaurant business, many people think anybody can start a restaurant. This could not be farther from the truth. First-time restaurateurs often fail because of a lack of business acumen, bad management, and financial preparation. These aren’t industry-specific issues.
Every phase of your restaurant endeavor should be meticulously planned for the next six months, at the very least. If you are a first-time restaurateur, you should employ a restaurant consultant to help you with your business.
You’ll get repeat business by serving tasty cuisine prepared with sound cooking technique and a tidy presentation; more than just Asian pears in gelato, black pepper-grape foam, and a blue cheese tuile.
