It’s not at all surprising to know that 60% of all restaurants shut down early during their first year of operations itself. Also, up to 80% restaurants close down in the first five years. However, running a restaurant from afar might not seem such a difficult thing to pull off but it is not even close to easy. This truth is not to demotivate aspiring restaurateurs out there, or to lower the morale of the ones who are already out there putting up a fight. But, we do believe that prevention is better than cure. So, here are some of the most common but amendable reasons why restaurants shut down:
1. Ideal location And Costs
The importance of an ideal location can not be ignored or underestimated. It is one of those things that can actually make or break your restaurant. A bad and not well thought location can turn fatal for your restaurant. But, that doesn’t mean that overspending is good. Most of the time overspending leads to situations where restaurants are not able to cover their costs.
Study your restaurant’s concept and then based on that choose the ideal location. 10% of the total revenue is what you should be sparing out for rent.
2. Customer Experience
A poor customer experience most certainly means that the customer will not be coming back for the second time. To add to this they can post bad reviews throughout social media and review sites, which are a big no-no for every restaurant and should be taken care of immediately.
Poor customer experience is a vast category and can comprise of almost everything that makes your customer unhappy. Be it a lousy and careless waiter, delay in orders, weird smell in the air or music that is too loud can all add up as negatives and result in undermining the customer experience
Having a well trained staff who know how to keep their calm and to deal with difficult customers.
3. Inefficient Planning
It is very easy to say and think that the restaurant industry has no barriers of entry. But this is just a very general perception and is very far from true. The thing about the restaurant industry having no barriers to entry is the general perception that anyone can open a restaurant. This is far from true. Poor business ethics, no management skills, and inadequate financial planning among first-time restaurateurs are some of the biggest reasons why restaurants shut down.
What you should ideally be doing is to be planning ahead each and every stage of your restaurant up to six months. Hiring a restaurant consultant could also come in handy.
4. Poor Staff Management
Hiring the wrong set of people is something that all restaurants should definitely try and avoid. Bad staff quality can lead to major setbacks and damage for the restaurant. From the restaurant’s reputation, quality and customer retention everything is at a risk.
Regular staff training for your employees is a must. Day to day meetings and communication maintains a transparency and high motivation in your team.
5. Owner’s Role
One of the most important things that all aspiring restaurateurs often seem to forget is the importance of their involvement in the restaurant’s management and success. Some owners can be self-destructive, read most common destructive behaviors to avoid. Putting all your money and thought into something and then later depending completely on other people to manage it can turn out to be fatal.
It is a must for every owner to know whats happening and whats not with their business at all times. Thus, being involved and trying to make it better.
6. Marketing and Analytics
The importance of marketing has been an unanswered question for a quite a long time now. But, in today’s time the power of right marketing cannot be disregarded. With competition increasing on a daily basis and low attention span and quality of customers marketing for restaurants is a must.
Whereas analytics is an important factor that can help an owner avoid a lot of mistakes and make his business better. An owner ignoring analytics signal can be a reason why restaurants shut down. Further, analytics also help you know the exact reasons for your profit or loss.
Realize the importance of marketing and analytics and put an efficient POS system into place, like CirQ POS, that provides you with live analytics and various marketing options too.