5 Restaurant Owners Share Why They Failed
We’ve all seen our favorite restaurant close or notice a location with multiple failed ventures. Although statistics vary, experts agree that investing in any business is risky. However, the Small Business Administration reports, “the food services industry shows no greater propensity to fail” than other business sectors.
From weak partnerships to a lack of access to capital or experience, a restaurant business operates with limited room for error. J. Stephen Sadler, a former restaurant owner, writes on Quora, “From my initial “learning experience,” I learned number one, that the restaurant business is unlike most other business. It’s much harder work than most and only those who have a passion for the business will survive.” Former business owner-turned-restaurant-consultant, Kelly Hopper, echoes that thought and adds, “I could list 20 reasons why my restaurant failed, all of which stem from setting yourself up to fail from the start.”
In the US, more than “1.6 million small businesses are partnerships.” Restaurant owners turn to partnerships to increase their access to startup capital, share the risk, or fill a knowledge gap. However, Reddit is full of horror stories about partners who “emptied the bank accounts and took off.”
Choosing a partner for your restaurant business is more than just knowing the person well. Stories abound of partnerships with family, close friends, or life partners that ended in disaster. Hopper gives a warning about alliances, “No matter how much you think you’re on the same page, think again because you’re not. Make sure one person has the final say in anything. Never enter into a 50/50 partnership in a restaurant.”
Lastly, Boe Miah, former restaurant owner, adds on Quora that “Partnership is a two-way relationship. Speak up or lose out.”
Problems with the location
As rents rise and restaurant owners feel priced out of high-traffic areas, finding the perfect place seems impossible. Other restaurateurs obtain the ideal location only to face substantial rent increases that shutter their doors. For Sadler, the lack of parking at his former restaurant was, “one of [his] biggest mistakes on [his] initial venture.”
To cope with rising rents, restaurateurs find themselves cutting back in other areas which can snowball into disastrous results. That’s why even confident restaurant owners who are well-versed in the industry face an uphill battle when it comes to location.
Pulling it all together
Business Insider reports, “82% of small businesses fail due to cash flow problems.” However, lack of access to capital is only one reason for restaurant failure. With so many working parts in a restaurant, staying on top of each aspect is challenging. Failures stem from:
- Unclear brand and culture
- Management and staff issues
- Inexperience with accounting, inventory, or marketing
- Not enough access to capital
On Quora, Michael Kowalski, Director of Product Communications at Xenial points out, “Some critical stress-zones for restaurants are the kitchen and the cash register, and how well they work together (or don’t).” Whereas Greg Saarinen, former co-owner of Reality Bites, says that “a combination of partnership and financial woes leads to a disconnect in operations making issues tricky to resolve.”
Although opening a restaurant is risky, growth in the industry is strong. Plus, research from a Stanford study finds that “entrepreneurs who failed once in business were more likely to succeed the second time around.” So, even if your first go-around isn’t successful, the lessons that you learn may help you in the long run and prevent your next restaurant failure.