One of the most popular small businesses is a restaurant. Every year new ones pop up, but most restaurants fail within their first year. Why?
We’ll explain some typical pitfalls that torpedo many potentially great restaurants within their first year or two of opening so that you can avoid the same mistakes.
Location, Location, Location
The primary factor for many restaurants shuttering their doors revolves around the location. A location can make or break a restaurant in several ways, mainly regarding foot traffic and rent prices.
A location with minimal to no foot traffic will have a difficult time attracting new customers and getting its name out there. On the other hand, getting a place in a trendy, hip neighborhood can be problematic due to high rent. It’s a difficult middle ground that restaurants and small businesses need to find to thrive.
Pro Tip: The rent of your location should never exceed 10 percent of total revenue.
No Marketing Outreach
Getting the word out is vital to a restaurant trying to survive past its infancy. Older, existing restaurants don’t have to worry much about brand outreach, but it’s crucial for the new shops on the block. Unfortunately, marketing is a substantial challenge for any small business, not just restaurants.
Marketing isn’t just about attracting new customers but also reminding past customers you’re still there and why they should return to your business. It’s an uphill climb for new restaurants, which is why opening a franchise is easier in many respects, thanks to its built-in marketing strategy.
Too often, new restaurant owners or investors think that their job ends after they pay their dues. They imagine owning a restaurant as a hobby or something they can mostly delegate and forget.
But owning and operating a restaurant is a full-time job that demands commitment, diligence, and attention. Many restaurants fail because the owner is primarily absent and lets mistakes and bad habits take hold until it’s too late to turn the ship around and into a thriving business.
Some restaurants have dedicated owners and managers; unfortunately, they don’t always have the experience to know what they’re doing. Opening a restaurant is a lifelong dream for some, but many people may not know enough about the industry to run a business adequately.
Before opening a new restaurant, it’s highly beneficial to get some experience in the industry, whether that be working in a thriving business, reading books, or talking to other restaurant owners.
Now you know some of the primary reasons why many restaurants fail within their first year or two. It’s hard to crack into, but if you’re committed and avoid some of the many pitfalls, you can have a thriving business!