You opened a restaurant to feed people, help your community and make money doing what you love. The glamour of owning your own place and seeing people smile after a sumptuous meal makes your heart giddy.

Opening a restaurant is a great business idea until you are hit by the statistics of failure which is about 60% in their first three years. To be fair on the restaurant industry, every business has the potential to fail. The SBA highlights that 30% of new businesses fail during their first two years.

Can I be totally honest with you? To succeed where the majority have failed, you need to avoid their mistakes. Desi Arnaz said “Good things do not come easy. The road is lined with pitfalls.”

In this post, I’m going to show you why restaurants fail and you can survive the business. Let’s get started.

Opening a new location too soon 

Have you wondered about opening a new location? Most people including me get excited about the possibility of expanding. But, expansion without planning is a disaster waiting to happen. Before you go the way of failed restaurants or bars, ask yourself these questions.

Do I understand the new location well enough to succeed? Have I studied the market and their preferences? Do I have a strategy to sell to them? What arrangements I make to ensure the first location does not suffer?

Here is the truth. One good reason why most restaurants fail is opening a new location too soon.

Even if you are profitable every day, it’s not enough to open a new location. If you want to succeed, then you must carry out adequate market research and check your finances. Take time to prepare.

Target Customers and Distinctive Concept  

The second factor to consider in every business is your audience demographics and keeping a consistent concept that meets them.

Do you know your ideal customers? Do you understand their behaviour? Do you know how to satisfy their needs?

For instance, if your target customers are millennials in an up and coming area of town fresh farm to table style restaurant is sure to reach that demographic.

If your target customers are young families or senior citizens? What type of food do they like to eat? How do they like to pay for food and other services? What type of ambience would suit them? You need to understand your target customers, their food preference and their payment procedures.

Understanding this will make it easy for you to scale up your business and keep you away from the exit door.

Customer Satisfaction 

According to a recent study by Smart Customer Service, U.S. businesses lose $41 billion annually due to poor customer service.

But that’s not all. It also highlights that 53% of customers make a switch due to lack of appreciation from a business.

When you take payments, be courteous enough to say thank you. Leave the money counting and evaluation to an accounting team. You should focus on getting more diners while boosting your customer service speed.

Underestimating the competition 

Except you just hired the best chef in town or you have no other competitor, chances exist that your restaurant might never stand out. The restaurant industry is highly competitive. You must learn the strategy to use to ensure you don’t cut down your prices or shoot yourself in the leg just to stay above the competition. The race to be lowest price is rarely a winning strategy.  Increase your standards. Did you know that your menu is your most powerful tool – find the perfect menu plan (it might take a while, but it is always worth it). Set standards, understand your vulnerability and strengthen it. Ensure you cover loopholes. Make your customer service the best available and the sky will be your limit.


You’ve heard the advice a million times, numbers don’t lie. Finance is an area that can get confusing and lead to serious consequences. Bankruptcy and going into heavy debt is a big deal. You would want to look into issues like rent, mortgage, furniture, decoration and wages.

Restaurant overheads are high and you should have enough capital for the first year to avoid financial problems. Most people make the mistake of thinking the restaurant should fund weekly or monthly bills like food costs, rents and payroll in the first year. If you’re not making enough profit, you could get in debt trying to pay bills.

Setting enough capital aside to see you through the first year is a shrewd business strategy. Once you start operating and everything is running smoothly, you can start paying bills from your accumulated profit.

Try not to take out loans to pay extra bills; it could leave to you ending up with a mountain of debt at the end of the first year. Most importantly, separate your personal accounts from the business, if you take from the restaurant’s money to run personal expenses — you’ll destroy your business with your own hands.

Finals words

Finance is broad and still ranks as the number one while many businesses have closed doors. You don’t have to be part of the 60% of restaurants in their first three years. You too can save your restaurant by clicking the link below.

If you want to learn more, we suggest you read the the acedemic paper published by Cornell University.