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The Most Common Reasons Restaurants Fail

Having guests over for dinner, and deriving pleasure from seeing their delight at your culinary creations; seeing the joy when they taste the wine that you specially selected; creating  a venue where people can get together and converse over some great cuisine – these are just some of the primary and altruistic reasons why people start their own restaurant.  However, although the restaurant industry is a fairly straightforward industry to get into, it is not one that guarantees success as many restaurants close or change ownership within their first few years of operation. If you are one who aspires to own a restaurant, knowing the most common reasons why restaurants fail will help you find solutions well ahead of the game. Here are three of them to guide you:

1.     Failure to Get to Know the Market and the Competition

So you would like to open your own Italian restaurant which is based on the secret recipes that have been in your family for generations?  Well, unfortunately you live in an area where there are many Italian restaurant owners who have also alleged that their restaurant menu is based on the secret recipes that have been in the family since time immemorial. Additionally, opening up an Italian restaurant in an area which has housed mostly Italian restaurants is unlikely to appeal to your potential customers who may be craving for something different. Without a competitive edge and something that sets you apart from other restaurants in the market, there are only a few ways to get customers on your doorstep – usually involving a reduction in price, which means a reduction in profit for you.

2.     Inability to Match Your Culinary Vision with Running a Business

Many chefs which have mastered the culinary arts opt to open restaurants rather than work at an existing restaurant. Conversely, businesspeople that have never been professionally involved in the food and beverage industry believe that they can run their own restaurants. Then there are people who have had little to no professional experience in both business and the culinary arts but have the capital and the legal permits to start their own restaurant. Although restaurants are essentially businesses, they are a special type because they necessitate a deep understanding in an art form that is usually not an elective choice at most business schools. Food is that art form that may set your business apart from the competition.  Equally, chefs cannot expect to make their edible creations without knowing how to run a business and therefore make profit-dissolving decisions on their staff, prices, and advertising. An understanding in these two mutually exclusive crafts, therefore, is necessary.

3.     Hiring People Without the Background

Hiring the right type of people that understand your vision and can marry the arts of food and business is crucial for your business.  You delegate immediate decisions to your management, and servers are the ones that have direct interaction with your customers, making them highly important to the functioning of your restaurant. Therefore, in addition to the crafts of food and business, your staff must be on board with you in the art of customer service.

4.     Adequate Financing for Tough Times

The restaurant business is full of ups and downs. When the economy is struggling it is likely that many customers are struggling. Difficult economic times make regular customers opt for dining at home more often in an effort to build up their financial reserves. This behavior can turn a restaurant’s operating budget upside down. In times like this you need a reputable source that offers loans for restaurants at reasonable rates. Borrowing money during those slow times can help maintain the quality of your restaurant, keep all of your employees happy, and leave room for maintenance and inventory requirements. As in any business, it is critical to be prepared financially for the difficult times.

The overall goal of a restaurant owner is to create a unique culinary experience for his or her guests. But without knowing the market, understanding how to run a business or the culinary arts, or not employing the right staff to support your vision, the opportunity to please the taste buds of your guests may come at a great cost to you. It is also essential to be financially prepared for those unavoidable economic woes. Keeping all of these tips in mind will help you when building a successful restaurant.

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