Reasons why restaurants fail
According to a report, 60% of restaurants shut down within the first year of operations, and up to 80% of restaurants close their operations in the first five years. Lack of proper information about what the industry entails ultimately leads restaurants to their failure. Getting proper information is the key area you need to focus on. The fact that restaurateurs in the industry are making mistakes they might not even be conscious of, let’s discuss the most common reasons “Why restaurants fail?”
Poor location and high rentals
Location is the very basic factor where people often make mistakes while choosing. You may be located very far from your customers, or it may be very difficult for customers to reach your restaurant and if you are paying more rent than your profits then what is the use of doing a business!
How to avoid
Ideally the location of restaurants should be in a crowded area where you can have maximum walkins or the restaurants should be located near the institutions or offices where many people visit on a day to day basis.
The rent of your location must never exceed 10% of your total revenues. If a location seems nice but has no competition around, don’t get tempted, check why there is no other restaurant similar to yours in such a good location. Speak with people and understand their interests and market
Poor customer experience
If your customer has poor experience then it's a guarantee that the customer will not return and is often one of the main reasons why restaurants fail. They may also post bad reviews on your restaurant on social media or google reviews which will in turn impact your online reputation and hence on your business
Poor customer experience can be anything which makes customers unhappy. Maybe rude behaviour of a waiter, delay in service, mixing up orders, a weird smell around, high music playing in the background etc., these may look silly to many but impact a lot in customer experience.
How to avoid
Customers should be treated like guests, and we know our indian slogan "Atithi Devo Bhava" that literally means "Guest is God". Make sure that your staff is thoroughly trained. Even if the customer is short tempered, it's important to stay calm.
Note all the negative feedback and reviews and start working on them positively, reply to all the feedback with greeting them. Analyze the average time taken to serve the food. Figure out the reason behind this delay.
Enabling online ordering system for better customer experience, start accepting orders online for best services. Online Menu is such a platform which allows you to receive orders online.
Poor staff management
Hiring the wrong people is just as bad as being understaffed, similarly, untrained staff can damage your business severely. Unhappy staff also play an important role in business management and reputation, thus leading to a restaurant shutdown.
How to avoid
Staff training is the most important step that all employees should undergo before they join the job. Conducting regular team meetings to build communication and transparency at work and to keep the staff motivated at work.
Setting goals and targets for employees which means they should complete a particular task in a given span of time, offer them incentives. This not only benefits business and also employees feel that their work is observed and making a difference in the business. He will work more sincerely next time to gain more incentives.
Complex menu
A large and diverse menu is not just confusing for customers, but it's too difficult to maintain that. Preparing hundreds of items just because you mentioned in your menu leads to undue food wastage, inturn leads to losses. As mentioned above, understanding the audience's taste and creating a menu based on audience interest is most recommended.
On the other hand it's difficult for chefs to prepare more items at a time, which may lead to delayed service and customer dissatisfaction.
How to avoid
It is always better to go with a simple and short menu. Design your menu in such a way that you use the same ingredients in several items, which increases the efficiency of preparing food and reduces the time of preparation. Having a seasonal menu is also an excellent idea to impress customers.
It's important to analyze your restaurant menu performance consistently. Remove the items which have high food costs and items which are not ordered by customers. Have your special dishes at nominal cost to attract customers.
No reporting and analytics
This is something which is to be done at the end of the day. Analyse the profit or loss of the day, if it's loss then try to find out the reason for the loss, and similarly for the profit. Owner should be aware of his daily income and work based on that.
On the other hand it's difficult for chefs to prepare more items at a time, which may lead to delayed service and customer dissatisfaction.
How to avoid
No matter the size of the business or restaurant, it's suggested to document all the transactions and maintain reports to avoid losses. These reports help in decision making over the period. You can easily calculate the ROI at the end of the year.
No marketing
Marketing is King, everyone knows the importance of marketing for any businesses, that too in this digital era. For new restaurants marketing is the life saviour, until you get your regular customers. Just think you have built a five star restaurant in a big metro city and no nobody knows about it. You can't expect the customers to come to you by the fragrance of your dishes, you need to reach them, that's what marketing is. NO MARKETING = NO PROFIT!
How to avoid
Set aside a budget for marketing. It is better hire a Digital Marketing Agency or have a dedicated in-house marketing team to run your campaigns. Marketing strategies should be planned according to your strengths. If momos are best sellers in your restaurant then create a combo offer and use SMS marketing campaigns for generating repeat visits. And again ROI is to be recorded, check which type of marketing brought you high returns, continue the same campaigns with different offers and deals. Estimate the number of walkins increased or decreased after marketing.
Not just these, there are many other reasons for a restaurant's failure. We know it's difficult to adopt these measures in one go. You can hire agencies that have expertise in managing these. You may contact us to avail such professional services.