With an estimated 60% of independently operated restaurants failing within the first year and furthermore, 80% failing in the first 3 to 5 years of operation, here are my top seven reasons for why Restaurants and Cafés Fail.

As owner-operator of Copper Pantry Restaurant consultancy firm, I come across a lot of struggling Restaurants and Cafes. Almost all of them fail, are not maintaining strong businesses or are not continuing to grow, for the reasons I mention below.

These are the fundamental and most basic of rules that must be thoroughly researched and accounted for. Assuming the answers will almost certainly result in failure.

 If you are unsure of any aspects of the task at hand you must certainly seek professional advice from a Hospitality Consultant specialist. To roll out the clichés, ‘A failure to plan, is a sure plan to fail….’ and ‘prevention is better than cure…’ are a lot more poignant when facing an owner who has raced in head first with rose tinted glasses on. Don’t be another statistic.

Restaurant business equals people business

Embrace this concept. Your vision is not enough, it is your ability to activate your team to execute your vision, and your business is people, both customers and staff alike.

Are you a People’s person? Are you a leader? Are you effectively hiring the right people? What is the workplace culture you have developed? Have you focused correctly on proper training, customer service, leadership and operational procedures, all with the customer in mind? Are your staffing levels correct?

You cannot blame your staff for this; have you set your expectations properly? Do you understand yourself what standards are expected to soar in this industry?

Solution 

Be tough when hiring, create a system that allows you to define your values and vision and then sell it with purpose. Create question templates, separated in interview stages to break down and find essential traits you feel necessary to execute your vision. This will be the ethos of your Restaurant and you must live and breathe it. Your enthusiasm will be contagious. You must drive to create a culture that you will be known for.
Be creative. Once you narrowed down the values and have established the correct candidates you believe have the expertise, attitude and most importantly references you require. Talk is cheap. Actually, make a part of hiring a head Chef, the necessity to cook, explain and present a mystery basket to showcase her or his talents. Do a mock table setting and see your wait staff’s reaction to you struggling to understand a menu or response to a particular dietary requirement.
Do not rush the hiring process. Find quality candidates and be impartial in deciding if they have what is required to execute the vision and values your Restaurant stands for.

Location

Just like when purchasing a property you will determine what aspects you require.  You will have a checklist and you will follow accordingly to suit your needs, transport accessibility, parks and schools for kids, surrounding amenities, shops, gyms etc.
Similarly, you need to choose your perspective location from every angle, especially your customer’s viewpoint; you need to consider the visibility, sufficient parking, and accessibility to foot traffic. Of course, budget and previous success or failure is in this chosen area

Solution

For this, you should work backwards, map out your ideal customer so you know who and where they are, why and how other Restaurants have worked or failed before you. What is the market rent for this area? If you are unfamiliar with the area seek professional advice as this may make or break the future success of your venture. It can be as simple as the wrong side of the right street. Choosing a cheap rent will be an option you may face but you may end up spending more energy and money trying to market the wrong location.

Uniqueness

Don’t be a jack-of-all-trades. The most successful Restaurants and Cafes know their concept, understand their niche and then execute it with clear vision. If you fail to stick to your unique identity or speciality you will encounter the following problems.

a) Overly complicated menus with too many items. This will create confusion for your customers while also creating a stock control and turnover nightmare, limiting job satisfaction for your staff.

b) No talking point for your customers to spread word of mouth.

c) More reading, more time, less turnover of tables = less revenue.

d) More cooking, more washing, more gas and electricity

e) Inability to cook multiple orders = slower more complicated service for kitchen staff.
 

Solution 

Simplicity is the hardest thing to achieve. Identify a niche, know who you are and always be the best at what you are doing.

Educate wait staff on the finer details of your dishes by allowing them to witness and taste the preparation and cooking. This will create harmony with the kitchen and front of house.
Correctly train your staff down to the last detail; obviously, this will be easier with a shorter menu. The devil is in the detail. Properly test your menu ideas and items and then execute with precision, accept criticism and feedback.

Overspending (Pre-opening)

Most Restaurants or Cafes tend to fall behind before the doors even swing open so it’s very important to plan your budgets correctly and allow your cash flow for add-ons. Things don’t always go as planned. These might include construction delays, additional cost from councils, design changes.

Other not so obvious expenses include staff advertising, and training, opening stock, marketing campaign and launch, insurance premiums and bank guarantees which can get into the ten of thousands and then hidden borrowing and legal expenses are all often overlooked or under calculated.

If you are inexperienced in project management it is advisable to seek professional guidance and even then many professionals can add as much as 15% contingency to allow for unforeseen complications which may affect a smooth launch.

Solution

Developing a building budget early on with the help of an expert who has worked on similar projects, a proven track record and perhaps industry contacts, and then sticking to it.

Knowing that delays are inevitable therefore budget accordingly.

Understand your hidden expenses (some listed above) by carefully researching common pitfalls or seeking professional advice.

Admin and cash flow (Post opening)

Knowing your percentages. I have consulted with clients who are financial advisers while also running a Restaurant and when asked their wage percentages, they have no figure or even an estimate of what it should be. The same can go for the cost of goods; knowing the ratios within your kitchen down to the pricing of each dish and having a simple and practical system to monitor your stock control is paramount to the running of any successful food business.

Also having a guideline as to a rental percentage should be the first thing in the process of looking at a location. Total sales expectations calculated down to the weekday versus the weekends and then working backward to ensure your rent is within budget is crucial before you ‘assume’ or get emotionally attached to a location.

Understanding the difference between variable and fixed expenses and monitoring this on a weekly basis to ascertain your on-going financial position is also a must.

By having the correct systems in place and taking vital snapshot figures on a daily and weekly basis and then simply entering them into a simple formula you can then see your position on a weekly, then seasonal or annual basis. This will affect purchasing and roistering decisions.

After you get the doors open, what now? It will take some time to ramp up your business and increase sales but from day one there are high labour and food costs and this will be so for the first few months as your staff find their way. You are going to have teething problems. A Well founded sales forecast is very important and even the most professionally run outfits can underestimate the shortage in cash flow in the initial stages, so allow for a deficit of up to 2 to 3 months in cash flow ‘after’ you open.

Solution

Understanding that excess funds will most certainly be required is essential before any major decisions are made or important documents are signed. If you are inexperienced in this area and unsure in any way of the true costs involved, you must seek professional advice, which will equate to a fraction of the costs associated with falling behind in opening or worse again failing to open at all. Each project will present individual, concept specific pitfalls.

Remaining fresh

In this industry, you are only as good as your last service! Staying on top of your brands appearance, social media presence, menus, audience preferences and general marketing is paramount to longevity. With constant trend changes and fresh competition continuously evolving you need to stay sharp to maintain your brand and it’s ability to remain fresh. World famous brands continue to aggressively market so don’t think your immune.

Solution

Keep a close eye on new trends and new offers arriving into the market, read food reviews, talk openly and gauge your chef’s interest in it. Don’t be afraid to change your kitchen leadership to make way for fresh talent. This is a high burn out industry and no one likes to admit they do not have the same passion they once had, so keep an eye out for signs of this. You can ruin your image in a short period if you fail to see signs of fatigue in your staff and their surroundings. Do you still have to passion yourself for your establishment? If not, you are competing with someone who does.

Working in the business and not on it

Running a Restaurant or Cafe and managing a Restaurant or Cafe are two separate tasks.  At the beginning stage, you will like and need to be hands-on in designing, training, creating systems, customer service and overseeing the critical launch and feedback.
Your product is always the core of your business and it’s absolutely essential the product remains consistent. However, It is crucial to have systems in place that will allow you to distance yourself from the hands-on tasks like helping in the kitchen and serving tables.

In due course your focus should be more about managing the business; monitoring cash flow, evaluating your menus, marketing, admin, keeping up to speed on industry changes, briefing your bookkeeper for wages, business activity statements and associated running expenses. If you are too busy completing the day-to-day tasks of running the business, who is managing the growth and future success of the business? 

Solution

From the offset prepare for your stepping back from the hands-on tasks. Create systems and manuals, embrace technology, plan and see this as an investment to hire a replacement that you can train to control the running of your establishment. Of course, this will be a further cost but without this, your growth will be limited and your energy wasted on jobs you will soon be resentful of.

The answers are out there. At Copper Pantry Restaurant and Café Consulting, my aim is to teach you from the mistakes I have made. You are not the first to attempt this and the answers could be the difference between success and failure.

Please check out my other blogs and drop me a line if you have any queries. Good Luck.

Best Dishes

Sean McBride

sean@copperpantry.com.au