26 – 9 Common Reasons why Restaurants Fail

Date: 05-08-2016

Restaurant Podcast

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We look at the reasons why restaurants fail.  To many Restaurants close, but we aren’t talking about that kind of failure.  We are talking about the Restaurant owner or chef who don’t have a Restaurant that is meeting the requirements of their personal plan.

  • They are working too many hours.
  • They aren’t making enough money.
  • They don’t spend enough time with their family.
  • They can’t take time out from the Restaurant for a holiday.

That isn’t good enough.  Running a small business is hard and stressful and running a Restaurant is one of the hardest and most stressful types of businesses.  Let’s look at ways that can cause failure and ways that you can avoid failure and start being successful.

1. Cashflow, leases, cashflow, understanding the P+L and the profitability hospitality metrics that you need to focus on.

2.  How to be objective about your Restaurant.  How can you use open and objective information about your restaurant to make it better.

3. Lack of innovation.  There are so many things that can be done in the Restaurant, POS systems, marketing, ingredients, Menu.  If you aren’t continually innovating, you will appear dated when compared to Restaurants uses the latest techniques and technologies.

4.  Fitout.  What is the ROI of the fitout?

5.  Poor marketing.

6.  No marketing.

7. Poor Culture.  Culture is a soft topic, it isn’t reported in the P+L, so a lot of the time it doesn’t get the attention that it deserves.  It impacts you, your team and your customers.

8.  Menu Engineering.  We look at some great Menu Engineering ideas and how it works in a real Restaurant, like www.noisyoyster.com.au, where the menu is costed, the wait staff know wait to recommend.

9.  Poor or no concept or Restaurant USP.

10. Burn out.  It is a really tough game.  It takes a toll.  What can you do to get the spark back and the passion that will shine through in bring the customers back in?
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  • chefjas

    Hey Mate!
    Had a great time in Chi-town bro.Let’s do it again. I LOVED this episode and am sharing with a couple clients. I have one who just can’t seem to get past the “culture” issue.He complains staff sucks and that nothing will motivate them. In addition, he can’t find people.I offer solutions and he shoots them down, one by one. Sad, I want to share something with you and get your feedback. I’ll hit you soon.
    Cheers!
    James

    • Gerald Richards

      Perhaps you are giving him the ideas, rather than him coming up with the ideas. Often what happens is that when you give people ideas it can be seen as telling them what they should do. On principle some people reject this. Also, when you tell people what to do there is no commitment on their part to agree or follow it through. Am a big believer in the Socratic method of learning, whereby one acknowledges that the other person has the information it’s just a question of teasing it out of them. The hypothetical question is great for achieving this. For example, “If you were to have motivated staff how would you know that they were motivated?” and/or “if you were to have motivated staff what would you have to do to bring that about?”
      Open questions may help, such as “What is your definition of motivated staff?” And/or “What action or behaviour would you want to observe to indicate that staff are motivated?”

  • Gerald Richards

    Some very useful tips and advice. One of the “takeaways” for me was the importance of the financials and menu costings as well as a “hero” item on the menu. It’s amazing how many people open a restaurant (or retail shop) then expect customers to magically turn up. One should learn from the Big Boys like McDonald’s and Bunnings. Everyone has heard of them, but they still aggressively promote.
    Perhaps one of your podcasts could be on LAN – Local Area Marketing