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Three Reasons Restaurants Fail (And How to Prevent It from Happening)

By Victoria Brady

It's no secret that the restaurant business is tough. According to an Ohio State University study, 60 percent of restaurants don't make it past the first year, while a staggering 80 percent go under in five years. What's less clear is exactly why restaurants fail and what owners can do to keep their doors open long-term. With reports of a restaurant recession looming, restaurant owners need to be proactive to avoid becoming a statistic.

Identifying opportunities for improvement is a good place to start. Here are three common reasons why restaurants fail and how owners can avoid them.

Missing the Mark(eting)

Many people who start restaurants or catering companies are chefs and/or operators who really just want to focus on the food - they're not experts in acquiring and retaining new business. However, the bottom line is, you can have the best food in the world and still be left wondering where all the customers are.

Target the customers you want from the get-go and know how to get in front of them. If it's large parties you're after, consider attending trade shows to meet potential customers. Take a page out of Starbucks' book and consider implementing a loyalty or rewards program to incentivize customers to come back again. If your sweet spot is local businesses, consider partnering with a corporate catering marketplace that makes it easy for customers to order. Don't underestimate the power of social media, either. It's a free, easy way to let people know about your brand and engage with customers.

Not Using a Customer-First Approach

With access to food at the swipe of a finger, today's on-demand consumers want what they want when they want it. From third-party delivery services like GrubHub, business catering marketplaces like ezCater, and reservation apps like OpenTable, it's now easier than ever for consumers to plan their next meal. If your restaurant is not easily accessible to customers, they'll simply eat somewhere else.

To avoid falling behind, invest in technologies that cater to your customers - from online order processing to a user- and mobile-friendly website design. This is especially important for dealing with America's largest generation - Millennials. In fact, a recent Oracle study showed that in the U.S., 38.5 percent of Millennials have placed a delivery/takeaway food and drink order using a mobile device, and 56 percent want to do so. In addition, 28.7 percent of this group have used a mobile device to pay for food and drink purchases and 43.6 percent want to pay that way.

The demand for upgraded technology is there, and restaurants that don't adopt technology are missing out on new business and the opportunity to collect valuable customer insights. In some instances, enabling this technology can be expensive, but it's a huge convenience for customers that are starting to expect it, and well-worth the extra dollars in the long run.

Taking On Too Much

Another big pitfall of restaurant ownership is trying to do everything yourself. It's impossible to be the chef, the delivery person, the bookkeeper, the customer service team, and the web designer. As the business owner, it's realistic that you'll need to be involved in all of these functions, but it's overwhelming and inefficient to take it all on or micro-manage the process.

This is why building a good team is the key to running a successful and scalable business. Know where your strengths and weaknesses lie and find the best people, processes, and technologies to fill the voids. This doesn't necessarily mean going out and hiring an entire customer service team or delivery fleet; you can tap existing services to grow your business and help with day-to-day operations.

With increasing competition, uncertain economic factors, and a growing list of consumer demands, getting the details right is critical to success. By eliminating (or amending) these three common pitfalls, restaurant owners can improve operations and get back to the reason why they started their business in the first place - the food.

Victoria Brady Currently serving as Director of Caterer Partnerships at ezCater, Victoria Brady previously spent nine years in the restaurant industry, working her way up from server and hostess to trainer, shift management, marketing management, and general management roles. Her employers included the Grafton Group and Margarita's, a regional chain that repeatedly tapped Victoria to grow their business in multiple locations.

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