Food service might be the most volatile industry. Between operational issues, changing consumer trends, and other internal and external forces, your restaurant could fail for a mountain of reasons.
As a restaurant owner, you need to recognize these risks and strive to continuously mitigate their effect on your business.
We’ve compiled 7 of the most common reasons that restaurants fail and how restaurateurs can overcome these obstacles. Use this list as a guide to measure the current and ongoing state of your restaurant and make changes, when necessary, to keep your business thriving.
1. Keeping Unpopular Items on the Menu
Is your menu as thick as a copy of Moby Dick? Do you keep adding new items to appease broader palates? If this sounds like your restaurant, it may be time to cut your menu down.
They say that if you’re good at a lot of things, you can’t be great at anything. This adage is true with restaurants. If you have several options on your menu, especially across different cuisines, it’ll be hard to stand out.
In a survey of the top 500 restaurant chains, most menus had an average of 130 items. This list includes sizes, appetizers, and drinks.
The size of your menu will depend on your restaurant, but often, you’ll find value in condensing your menu.
Look at your tickets and see which items have the lowest order rate. Test different menu sizes and see how your customers respond. You most likely will find that your menu follows the 80-20 rule: the top 20% of items make up 80% of your sales.
Fewer items mean less work for your kitchen staff and more opportunities to perfect these dishes. A smaller menu also means fewer ingredients and provisions that you’ll need to stock, which can cut down your expenses significantly.
2. Forgetting to Market to New Customers
Every restaurant has its regulars. The staff loves them. They tip well. They are important to the success of your business.
However, you also need to appeal to new customers. Your business needs a steady flow of new customers to keep growing. New patrons fill the space left by lost customers and lead to increased profits.
Kaleb Harrell, cofounder of Hawkers Asian Street Fare, shared how he handed out samples and discount cards at an event. The company spent a total of $2,000. However, if it acquired even 25 new customers out of 1,000 people at the event, the company would profit more than $1,500 per customer over 2 years. One event is worth almost $40,000 to them.
Consider how you market your business and what opportunities exist for you to bring in new people.
3. Failing to Keep Up with Your Books
Most restaurants don’t fall into the red overnight. Instead, restaurateurs continue cutting into their profits and neglecting operational problems until they are too far in debt to keep their doors open.
If you want your restaurant to thrive, keep a close eye on your finances. This practice includes closing the books nightly to see what expenses and profits you accrued and reviewing your finances monthly to account for major expenses or changes.
Be diligent with your bookkeeping, and don’t be afraid to cut excessive spending quickly.
If you don’t have a financial background, then you may want to find an accountant who specializes in restaurant management. He or she can take you on as a client and notify you of financial trends that might be killing your restaurant.
4. Not Adopting New Restaurant Technology
The technology available to restaurant owners today is nothing short of amazing. You can measure restaurant noise levels and adjust your music automatically to improve customer satisfaction. You can use inventory management software to track and order ingredients in real time when your stock reaches certain levels.
In short, if your restaurant has inefficiencies, there’s probably software to help.
Look at your day-to-day tasks, along with the challenges that your team members face. What slows them down? Where do you experience bottlenecks? Determining the answers to these questions and the effect they have on your bottom line will help you decide whether you should pursue a technological solution.
If you can automate a clunky process or shave a few minutes off the wait times for your customers, then you can make a significant impact on your productivity and profits.
5. Neglecting to Train Your Staff
On-the-job training can be incredibly powerful and effective. Your new restaurant employees can learn from your more experienced staff members while applying the lessons directly as they work. However, this method shouldn’t be the only training that your staff members receive.
As a restaurant owner, you’re staking your reputation every time someone dines at your establishment. However, you can’t oversee every order, so you must trust your team. If you neglect training, your restaurant is more likely to have inconsistencies with quality, service, messaging, and more.
Strive to develop a culture of learning in your restaurant. Empower and reward senior employees for training staff. Consider setting aside time at least once per month for team training. You can do this as a whole staff or have your staff hold training during different shifts.
Review industry best practices, customer service expectations, and other ways team members can improve their work. Even if you don’t have new staff, this training can help refresh your employees and correct any issues they have.
6. Keeping Difficult Employees on Staff
The restaurant business is personal. You work alongside team members all day, serving food and helping customers.
It’s not uncommon for employees and management to develop friendships. Many restaurant owners even hire significant others and family members to their staff. These relationships are often more personal than in other industries.
As a result, it can be difficult to let staff go—especially if they are someone close to you personally.
However, a toxic team member can drag the whole restaurant down. Not only will he or she provide poor service to customers, but the lack of accountability can drive your good employees away.
Review your HR manual (or develop one through the help of examples online) and create a process for reprimanding employees. This process can include disciplinary activities like warnings and write-ups to help improve the behavior of these employees.
Documenting toxic behavior will help you create a case for firing your staff members that is transparent and fair to all employees—even those with whom you have a close relationship.
7. Losing Your Vision for Your Business
When you first opened your doors, you likely had a vision for the type of restaurant you wanted to create. You probably had a certain passion that made you excited to come into work every day.
Over time, it can become easy to ignore the forest for the trees. You get so focused on small problems and challenges that you forget your overall dream. You forget why you started the restaurant in the first place.
Take some time for yourself at least once a quarter to look at your business from a high level. Are you providing the value you wanted to customers? Do your menu and service reflect your brand? Recalibrate and refocus to get your restaurant back on track.
Running a Restaurant Isn’t Easy
Simply put, operating a successful restaurant takes a lot of work—otherwise, everyone would do it. The 7 activities above can kill your restaurant quickly if you’re not paying attention. However, if you’re proactive and diligent with your management approach, you can mitigate these risks and increase your chances of success.