Why do Restaurants Fail? What Can Employers do Better?

According recent studies, 60 percent of new restaurants do not make it past the first year, and 75-80 percent go under within five years. So why do restaurants fail? How can you ensure that your restaurant is not another casualty?

Avoid these top five reasons that restaurants fail:

  1. Wrong location
  2. Bad management
  3. Poor quality
  4. Out of control costs
  5. Bad Service

Some of these issues are tougher than others to rectify.  You can’t change locations without racking up enormous expenses, for example. But you can make intelligent marketing and management decisions to attract first-time diners and entice them to return.

Ideas for Running Your Restaurant Better

Get more involved. If you are the owner, don’t just sit back and let someone else manage it for you. Be present at the restaurant every day. This is your livelihood and likely your life savings – no one will ever care as much about its success as you do.

Hire better. If you opt to hire a front-of-house manager, look for someone who has moved up through the ranks and touched on as many duties as possible, from bussing tables, to interacting with diners to understanding food costs.

Take your time hiring staff as well. Ask chefs to prepare sample meals for you. Don’t hire servers who are just warm bodies. Look for people who understand your vision and have worked in similar establishments.

Control costs. Don’t overstaff. If employees are regularly standing idle, you may have too many of them on the payroll. Benchmark salaries among competitors to ensure you are getting high-quality staff without paying a premium. Know food costs inside and out.  Cost should be 30 percent of menu price or less to keep your books balanced. But don’t skimp. High-quality staff and high-quality service brings repeat business.

Work closely with your staff. Model the behavior you want to see, from exemplary customer service to showing consideration to other employees. Get input from the staff – they are on the frontlines and may have insight into what works well and what doesn’t. Be aware of – and handle – any conflict before it gets out of hand. Be sure that your people know that they can come to you with any problems, questions or suggestions.

In short, make smart business decisions and make your restaurant a place that people want to return to again and again – whether they are diners or employees – and you will be well on your way to success.

Need to learn more about running your restaurant more effectively or hiring better? Contact the recruiting experts at Horizon Hospitality today.


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