Why restaurants fail: Make sure you do not make these 38 mistakes

It’s easy to feel discouraged when something doesn’t work out, but if you take a step back and analyze the reasons for your failure, you can start again with a fresh perspective. Why do restaurants fail?

“Around 63% of restaurants close within their first year and 85% don’t last more than five years“

This sounds like the thing that’s stopping you from getting into the restaurant business, but maybe it’ll be easier than you think. Larger restaurant chains such as Starbucks, McDonald’s, Subway, and Yum China are examples of how successful the restaurant business is.

However, we see the restaurant business stopping for several reasons, such as a lack of clear planning or bad service, and more…
The purpose of this blog is to explain, “Why do restaurants fail?”. We want to make you aware of what causes a restaurant to fail and provide solutions.

There is a lot to know. Continue reading…

Why Restaurants Fail: Avoid These Mistakes

It has been said before that restaurants fail for many reasons, and can be categorized as:

Management	Marketing	Service	Technology	Capital and Location
No precise planning	Lack of digital marketing	Customers are not preferred	Not having inventory software	Not enough capital for the initial stage
Bad Management Team	Not using all social media platforms	Not listening to customers	Reporting and analytics	Not a financial source
Lack of good management	Lack of traditional marketing	Not responding to customers	Not using integrated payment	Not enough customers
Inexperience	Not following your customer	Lack of employee training		No parking facility
Ignorance of food licenses	Lack of competitive analysis	Employees not getting bonuses or compliments		Not for a family restaurant
No customer satisfaction strategy	The customer has not tracked	Complex menu		Not a healthy atmosphere
Afraid to take risks		Not asking for feedback		Not a child-friendly restaurant
Not using restaurant management software		Not focusing on repeat customers		High rent
		Not hiring good employees		No visual experience
		Not focusing on your uniqueness
		Employees not getting bonuses or compliments
		Online ordering

Management

Management is an important part of a business. Businesses can never survive without good management. One of the main reasons why restaurants fail is the inadequacy of proper management. They have a lot of responsibilities for the business in terms of management. Everything from managing the business to increasing sales comes under management.

Restaurant Manager Duties

• Ensuring Best Customer Service
• Management of Vendors, Inventory, and Equipment
• HR Objectives
• Marketing
• Planning menu
• Health and safety standards
• Managing costs

Many factors that can cause restaurant management to go unnoticed or overlooked can lead to a restaurant’s defeat. Some of them are:

No precise planning

Bad Management Team

Inexperience

Afraid to take the risk

Customer satisfaction strategy

Ignorance of food licenses

No Precise Planning

Planning is an important responsibility of any restaurant management. The mission and vision of the business should be clear. As a growing brand, management needs to have an understanding of what to achieve in the future and where to take the business from.

Many restaurants do business without a clear goal and fail. So make sure your business is well planned.

Bad Management Team

As you know, a bad management team is the main reason for restaurant failure. Good management is essential not only for restaurants but for all businesses. Inefficient activities between team leaders, supervisors, and managers can lead to a bad team.

Unwillingness to Cooperate with the team, Bad Attitude, Poor Communication, Infighting, and Conflict are the main signs of a poor management team.

A good management team includes:

• Open and honest communication,
• Clear direction,
• Mutually accountable,
• Support risk-taking and change,
• Common goals,
• Encourage differences in opinions,
• Collaboration,
• Team trust.

One of the most important skills for a manager is being able to skillfully build a good team.

Inexperience

Management must have a clear plan on how to manage a good team and move them forward. Management skills are essential for a good manager. But that kind of skill will come from their own experience. Make sure your manager has enough experience in the restaurant business.

Afraid to Take the Risk

As we discussed earlier, good restaurant management should be prepared to take risks. They need to be ready to bring new ideas into the business and add new dishes to the menu. Often, the growth of a business involves risks. Restaurants often fail because restaurant managers do not make the right decisions at the right time.

Not Having a Customer Satisfaction Strategy

You cannot succeed without a proper customer satisfaction strategy. plan what you can do to engage them. You need to understand their pain points and provide a solution for them. As a manager, his job is to come up with new customer satisfaction strategies.

The lack of a customer satisfaction strategy is often a major reason for restaurant failure. Many businesses do nothing to satisfy their customers.

Ignorance of Food Licenses

Many businesses only think about legal procedures when legal issues arise. however Many restaurant closures are also caused by legal issues. Make sure your restaurant has all the licenses that are shown below.

• FSSAI License
• Shop and Establish Licenses
• Eating house license
• Liquor license
• Health/Trade license
• Lift license
• Signage license
• Fire Safety License
• Environmental clearance license
• GST Registration
• Insurance
• Music license

Marketing

Marketing plays an important role in every business. You cannot succeed without a proper marketing plan. The truth is that many restaurants do not pay enough attention to marketing. Some people think that marketing is just about spending money.

Once Henry Ford said, “Stopping advertising to save money is like stopping your watch to save time”

There are so many social media and other online platforms to promote your restaurant. you can share photos, videos, and other customer reviews. You can also go for paid marketing such as google ads, Facebook, and other social media.

Some online platforms to promote your restaurant

• Directories
• Social media
• Restaurant listing apps
• Google my business
• Email newsletter
• Start a blog

Responsibilities of Marketing Departments

• Listen to customer needs
• Track trends and monitor competition
• Jobs and brand values
• Look for new (helpful) marketing tools
• Coordinate efforts with the company’s marketing partners
• Bring updates
• Communicate with the rest of the company
• Help improve sales processes and customer
• Estimated Marketing Budgets & Calculate the ROI of a company’s operations
• Define strategic marketing plans

Remember money is not the issue, business cannot succeed without marketing. One of the main reasons most restaurants crash is the lack of proper marketing.

Common Mistakes When Marketing Restaurants:

Lack of digital marketing

Not using all social media platforms

Lack of traditional marketing

Not following your customer

Lack of competitive analysis

The customer has not tracked

Digital Marketing

This is the age of online business. Almost 62% of the global population used the internet in October 2021. Of course, a large percentage of customers are also active on online platforms. That is why digital marketing has potential.

Digital Marketing uses different online techniques to help brands grow using the internet and other forms of digital communication.

Social media usage now exceeds 4.55 billion. Facebook has become a popular social platform with 2895 million MAU (monthly active users). The average person now spends an average of 2 hours and 27 minutes a day on social media. Instagram has 1393 million MAU.

You can enhance your social media presence with the help of organic digital marketing techniques. use marketing methods like social media paid ads, SMM, SEO, content marketing, Influencer marketing, etc.

92% of restaurants use Facebook marketing for their branding purposes.

Online platforms influence customer decisions. They want to be part of an innovative and growing business. One of the major drawbacks is that online platforms are not properly used by restaurants.

You can approach a digital marketing agency or hire an expert to manage your digital presence.

Not Using All Social Media Platforms

As mentioned earlier, the use of social media is increasing day by day. The major social media platforms are Facebook, Instagram, YouTube, Snapchat Twitter, etc. Restaurant businesses, their targeted customers are active on all of these platforms.

Your presence is a must on every social media platform. Brand awareness and being able to follow customers outside of the business also build customer trust.

There are many ways on each social media platform to grow the business and become more engaged with the customer.

Instagram and Facebook: Instagram is a great option to engage your audience. Use Instagram posts, reels, IGTV, Instagram stories, etc. You can increase your followers and reach more customers.

YouTube: YouTube is one of the main social media sites typically used for video uploading and sharing. You can share videos related to your business. Lots of content like food recipes can be uploaded on YouTube. You can also make money by qualifying for YouTube monetization.

Some youtube content ideas

• Introduce your chefs, and staff through a video
• Share employee thoughts and experiences
• Show technologies that are you using
• Introduce your new outlets, partners, and customer
• Be an industry leader. Share your experiences in the restaurant industry
• Introduce your menu
• Transparent business – Shoot a video about your ingredients. Take the camera to the market and introduce your purchases.

It is compulsory to be active on all social media by 2022. 86% of customers view food-related content online and try new restaurants. So keep your online presence a priority.

Lack of Traditional Marketing

Traditional Marketing is an important aspect of reaching a local audience. Consumers want to choose businesses that interact more with them. Traditional marketing deals more with customers on an individual level.

Traditional marketing includes

• Print 
• Broadcast
• Direct mail
• Phone
• Outdoor advertising like billboards, etc.

In the absence of traditional marketing, you are losing a large section of the audience.

Not Following Your Customer

It is essential to follow the customer when marketing. You need to know which area to focus on, who the customers are, their tastes, and their lifestyle.

The main reason many restaurants fail is that they do not follow the customers. Your goal should be to understand the changing customer tastes and move the business forward accordingly.

Lack of Competitive Analysis

Competitive analysis is an important part of marketing. By analyzing your competitors you can understand their marketing strategy, menu, pricing, and business practices. It will be easier for you to apply marketing strategies accordingly.

Include these in your competitor analysis

• Competitor features
• Market share
• Pricing
• Marketing
• Differentiators
• Strengths
• Weaknesses
• Geography
• Culture 
• Customer reviews

You can know the strengths and weaknesses of your opponent through the analysis of opponents. This will help you to improve your business strategy.

The customer has not tracked

By customer tracking, you can know who your loyal customers are, their favorite dishes, the day they visit the restaurant, the ordering value, etc.

For example, a customer named Jack likes Beef curry, If he mostly orders that item you can use platforms like social media, email, and SMS to Market to him other beef-related dishes. Of course, Jack is more likely to order and try it

You can also use a lot of loyalty techniques by understanding your loyal customers. You can focus on more personalized marketing.

Service

In this 2022, businesses need to place a lot of emphasis on customer service. Evaluate quality restaurant service not only based on your menu. Every service you provide must be customer-satisfying.

“Treat the customer as if you are the customer“

Bad service is often the main reason why restaurants fail. No business can succeed without satisfying their customer.

The most common service problems in a restaurant

• Food and beverages served at an unsuitable temperature
• Unclean utensils or a soiled table
• Restrooms that are unclean or ill-equipped
• distractive and noisy ambiance
• Tables that are too close together aren’t a good idea.
• Before the customer finishes, the server removes your plate or beverage.
• Servers with a sloppy appearance or poor hygiene
• Impolite and condescending servers
• Food does not look or taste as described in the menu
• Not enough nutritional information is available
• Inaccurate calculation of checks by server
• Servers don’t bring water until asked
• Diners nearby talking loudly
• Meals are not what you ordered
• Server confusion about who gets which meal
• Poorly situated table (near door, kitchen, etc.)
• Table not ready more than 15 minutes past the reservation time

Let’s take a look at the problems with restaurant services and how to protect your business from them.

Consumers are not preferred

Not listening to customers

Not responding to customers

Employees are not properly trained

Employees not getting bonuses or compliments

complex menu

Not asking for feedback

Not hiring good employees

Does not focus on your uniqueness

Not providing online delivery

Consumers are Not Preferred

Consumers should be given priority. The customer is always king. Make sure you focus on your customers. Then give solutions to their pain points. There should be a reason why customers choose you.

Build strong relationships with your customers. Identify what you can offer more than your competitors.

Not Listening to Customers

As I said earlier, customers are the priority. Listen to what they say, what do they want? What do they expect from your business? Businesses need to find answers to many questions.

It is imperative to know the tastes of your customers. Listen carefully to their complaints. Find a solution for it. Remember that a good customer experience comes from better service.

Not Responding to Customers

Many restaurants often do not respond to customer messages from social media or other online platforms. They do not even think that Inquiries will come from those online platforms.

Online platforms need to be addressed in this digital age. You will get a lot of queries through Google My Business, Instagram, Facebook, and other social media. It is important to respond at the right time otherwise they will rely on your competitors.

Employees are Not Properly Trained

The restaurant industry employs 15.1 million people in the United States.

Employees play an important role in providing a premium service. They face customers directly. Customers may have different personalities. Hence managing those customers is crucial. but if anything negatively happens, it will affect your restaurant business.

They must be prepared to treat customers with any kind of personality with dignity. You can train your employees for that. train them to manage difficult situations.

Employees Not Getting Bonuses or Compliments

Good employees are the asset of any business. The quality of work depends on how happy they are with the work they do.

You can encourage them with a bonus and reinforce the praise for their work. make a better working environment and give them opportunities for growth.

The best employee can be selected based on job performance. and may give them rewards. This will inspire other employees as well. In addition, it enhances the quality of your service.

Complex Menu

The restaurant menu should be simple and descriptive. In addition to printed menus, digital menus are reluctant to be used by many restaurants today. Digital Menus have several benefits when compared to printed menus.

It is very difficult to print menus due to changing menu items. In addition, the printing charge and the designing charge are much higher.

In the case of a digital menu, you can make changes to the menu anytime, anywhere in real-time. It’s just that you need a browser and internet access to the cloud.

This will reduce the interaction between the customer and the staff in pandemic situations and give the customer a better experience.

The quality of the printed menus is likely to be lost as the menu touches everyone. But in the case of a digital menu, each customer scans the QR code with their phone. So the contactless ordering system has no such problem.

You need to make small changes in the business and turn it into an innovative or technologically advanced business. Keep in mind that customer tastes are changing day by day.

Not Asking for Feedback

Based on what, determine if your current service is good or bad. Of course, you need to check if the customer is satisfied with your service. It’s important for business growth.

Collect customer feedback and make changes to the business accordingly. This is the best way to find out what the customer expects. One of the reasons many restaurants fail is because they do not collect feedback and use it properly.

Not Hiring Good Employees

As mentioned earlier, you need to have a clear idea of who the employees of your restaurant are. How skilled are they and Do they need employee training? Make sure everything is perfect.

It is important to hire good employees. When you have a highly skilled chef you will have fans for the meal.

Related blog: How to Survive the restaurant labor shortage

Not Focusing on Your Uniqueness

One of the reasons many restaurants fail is because they do not understand their uniqueness. In a restaurant business, you have to be different from your competitor. Why should the customer choose you if you only offer services or dishes provided by your competitor?

Find uniqueness that others do not have but is present in your business. It can sometimes be a dish, a service, and so on.

Not Providing Online Ordering

46% percent of diners have ordered from a restaurant’s website or mobile app.

Online ordering has become very common today. Online delivery services have helped so many restaurant owners in the pandemic situation.

Customers will have a higher likelihood of purchasing from you if they have the option for delivery or curbside pickup. 67% of Millennials also choose restaurants that offer delivery options.

You can scale your online business by integrating with third-party online platforms such as Uber Eats, Zomato, Swiggy, etc, or your website. For that, you can use integrated POS software.

A customer relying on your competitor because you don’t provide a service (even if it’s a small one) can lead to the defeat of the restaurant.

Technology

The significance of technology in the restaurant business is increasing day by day. As mentioned earlier, customers want it too. in fact Managing restaurant operations is a huge task.

But an integrated POS software can make difficult tasks easier. You can manage your entire business from anywhere using POS software.

POS software allows you to easily manage activities such as inventory management, employee management, report & analysis, and payment. You cannot manually manage your entire business operations.

With the help of technology, operations like expenses‌ can be reduced, which can be a huge boon for restaurants. The reason many restaurants fail is because of unrecognizable expenses.

Not having inventory management software

Reporting and analytics

Types of payment methods

Not Having Inventory Management Software

Inventory management is one of the most important aspects of the restaurant business. Restaurant service is often affected by the inefficient inventory management.

If you invest in inventory management software, you can track the stock of products and their components.

Stop the constant hassle of ordering more products or worrying that you have too much on hand. If the preset level reorder points are set, you do not have to worry about stock shortages again.

In short, the entire inventory can be managed with the help of software.

Reporting and Analytics

Data is essential for the growth of your business. you can analyze the current performance of your business. you can identify your best and worst selling items by analyzing your sales report. It will help you to manage expenses and food waste.

With the help of POS software, you can track each of your items and identify the most popular and non-popular items.

Data can be checked with the help of a browser and the Internet, even when you are not at the restaurant. It also has the advantage of being able to easily manage tax reports, sales, and purchase reports.

Types of Payment Methods

As mentioned earlier, customer satisfaction plays an important role in the success of a business.

“82% of Americans use digital payments.“ The widespread use of digital payments in the United States is a testament to how easy and convenient they are.

Mobile wallets are very useful for hotels and restaurants that want to introduce mobile payments to customers. By using already existing popular systems like Apple Pay or Android Pay, businesses do not have to develop their apps which can be costly and time-consuming.

You need to be able to provide payment methods such as UPI, card, and QR code when requested by the customer.

Location

Choosing a location for your business should be considered carefully.

Not enough customers

no parking facility

Not for a family or kid-friendly restaurant

Not a healthy atmosphere

High rent

Food Waste Management

No visual experience

Not Enough Customers

When stepping into a business you have to do proper research. The study should include what location you choose to target and whether there are enough customers there.

Many restaurants fail because they do not have enough customers. Initially, it was a huge success but later the restaurants were closing down. Therefore, the business location should be chosen very carefully.

No Parking Facility

Some 276 million vehicles were registered in the US in2020. moreover most customers want to travel in their vehicle. Therefore, adequate parking space is inevitable for restaurants.

Of course, businesses that do not have adequate parking facilities will not be selected by consumers. One of the reasons many restaurants fail is the lack of parking facilities.

Not for a Family or Kid-Friendly Restaurant

“According to FMI, 84% of parents agreed that family dinner was important, but only 50% of family dinners were eaten together.”

The restaurant should offer table-side servicing and dishes that can’t be disposed of easily, but still, keep the menu affordable. The atmosphere of a family restaurant can make for a more comfortable and inviting experience.

Many families choose Kid-Friendly Restaurants. In fact kid, friendly restaurants are very lucrative.

Children can play an important role in parents’ purchasing decisions. Children have more freedom in choosing the food they like. Therefore, you can include the following foods on the menu.

• Peanut Butter and Jelly Sandwich
• Pizza
• Macaroni and Cheese
• Chicken Nuggets
• Hamburgers
• Hot Dogs
• Grilled Cheese
• Chicken Noodle Soup

Also include various offers, High chairs & booster seats, Charging rooms (Rest Rooms), and play areas & arcade rooms (entertainment options). This will help a lot to get the attention of the parents.

Not a Healthy Atmosphere

Creating a healthy atmosphere is important for a restaurant. In food-related businesses, consumers always want hygiene. But the condition of most restaurants is deplorable.

Lots of problems like dirty restrooms, dirty tables or utensils, server unhygienic can be found in many restaurants. You need to be able to give customers healthy food and a good atmosphere.

Personal Hygiene For Food Safety

• Avoid slippers and bare feet – Wear clogs and safety shoes
• Don’t wear torn clothes – The clothes should be repaired or replaced
• Long and painted nails – Nails should be short and clean
• Opening and bleeding wounds – Cover all wounds
• Dirty clothes – wear neat and clean clothes
• Hair coming outside the cap – Hair should be properly tucked inside the cap

High Rent

High rent is a major issue facing many businesses today. Rent is the main consideration when choosing a location.

Having to pay more rent than your business can afford can lead to loss

Rent is not the only problem, it is also important to approach a good building owner. While the Corona Pandemic caused losses to many businesses, many building and landowners reduced their rent by half. So rent plays an important role in all restaurants.

Food Waste Management

Food waste is one of the biggest problems facing restaurants today. the food waste is exacerbated mainly due to various factors such as bad weather, processing problems, overproduction, and volatile markets.

Avoiding food waste can prevent an environmental disaster. Food waste deposited at the landfill site will decompose and release methane, a powerful greenhouse gas.

Ways to reduce food waste

• Use POS software – With POS software analyze which product is most popular and how much sales you are getting on each product, prepare food accordingly, and reduce food waste.
• Use the self-ordering system – Give customers complete freedom to order food and the order will go directly to POS and KDS. So there is no possibility of misunderstanding (use self-ordering KIOSK)
• Buy only what you require.
• Food that is about to expire should be used as soon as possible
• Make a grocery list and a menu together
• Control and monitor the temperature in the refrigerator
• Changes to Digital – Use Digital KOT and Receipts (minimize paper waste)
• Compost food waste

Many restaurants are subject to various complaints and closures due to a lack of space to deposit food waste.

No Visual Experience

For a restaurant to not only provide their customers with good food but also to provide an unforgettable experience.

That’s where a restaurant becomes successful. Decorate the walls with dynamic digital screens and encourage guests to share photos of their food. Share and curate user-created content, and capture customers’ attention with a good ambiance, ambient lighting, utensils, and music.

93% said the right song has the power to change their mood or make their day.

Why not try something like that? 83% of customers are likely to return if there is live music.

Why do restaurants fail: The answer to the question ends here. Businesses cannot be broken if they can capture the mind of the customer. Remember that you may fail but take it as a Stepping Stone to Success.

GOOD LUCK…

Related: How to become successful in restaurant businesses