Toll Free 1-877-877-5655
Se habla español 877-877-5491

How Not to Fail at Running a Restaurant

How Not to Fail at Running a Restaurant

After you open your restaurant, things are no doubt looking up. You are on track to achieving your dreams, you have a strategy in mind and your recipes are great. However, none of this guarantees a successful operation.

The truth is, the restaurant industry is notoriously risky. A study from H.G. Parsa et al in Cornell Hotel and Restaurant Administration Quarterly shows that about a quarter of restaurants fail within their first year of operation. That number almost doubles by year two.1 Although there are nearly a million restaurants in the United States,2 the restaurant industry faces an alarming failure rate. Even though restaurants are not the only businesses facing adversity within the first few years of opening, restaurants specifically are plagued by a multitude of internal factors that add massive barriers to the already rocky path to success. Any number of things can go wrong, and ill-prepared managers are often at fault. Learn how to better prepare for success as a restaurant owner or manager with the following suggestions:

Prepare for Long Hours
In the restaurant industry, success requires intense commitment. Restaurant managers have been known to put in 90 hours a week or more on a regular basis, simply to run the daily operations.3 Restaurant success requires an initial commitment and steadfast dedication. This means putting in the time even after your establishment has opened — day-in and day-out, morning and night, weekends and holidays.

In the Manager's Shoes
A typical restaurant manager's morning might look something like this:
a clipboard listing manager duties
After only a few hours, the manager comes across a few unexpected bumps in the road. A restaurant manager should have procedures and policies in place to prevent problems like this, but at the same time, he or she must be prepared for anything.

Work Hard
Running a restaurant is no stroll in the park. In fact, managing a restaurant involves downright dirty, dramatic, draining, difficult work. When employees drop the ball, managers pick it up. When one of the employees does not show up for his shift, the manager works for him. When the grease trap is clogged, the manager is often the one to clean it out. The manager is the one who works the most hours. He or she works every job in the restaurant, from janitor to host to line cook to accountant. Make a successful restaurant by employing a culture of hard work, with the manager setting the example.

Know Your Financials
Restaurants typically require prior experience or knowledge of basic restaurant accounting. Achieving the appropriate numbers required for profitability does not happen magically. Running a restaurant is no different than running a business. Without the initial capital and the necessary know-how, the restaurant may not make enough to stand on its own. Sufficient experience and preparation in budgeting, purchasing and managing the hefty costs that come with the territory are essential. An experienced, prepared restaurant manager will have a plan and will take responsibility for the overwhelming goal of achieving profitability. If you manage a restaurant and do not know how to prepare or analyze financial reports, take the time to learn how as soon as possible, for the good of your business. » More on Basic Restaurant Accounting

Manage Risks Effectively
Operating a restaurant involves dealing with all potential hazards, from minor employee training issues to major liabilities. Even small problems can have disastrous financial repercussions. Manage risks in the restaurant by incorporating safety procedures into all operational tasks and processes, as well as by protecting your establishment with insurance against injuries, accidents and damages. » More on Managing Operational Risks in Your Restaurant

Have a Passion for the Business
Alongside the need for intense work hours is the passion required for the job. Passion drives managers to press on through the long hours, the multiple crisis situations that seem to arise every day, problem employees and the hard work that is involved.

Evaluate Your Competition
Chances are that there are other restaurants in the same general location as yours. Even if there is currently no direct competition with your concept, stay aware of any restaurants that pop up as the months go by. New restaurants pop up all the time, and some of them may try to absorb your customer base. Always maintain strong distinguishing characteristics to set your restaurant apart from the rest.

Mind the Economy
The economic system most definitely plays a part in restaurants' success. Although it is an external and therefore uncontrollable factor, decreased revenue from economic slumps can lead to disastrous conditions for large part of the restaurant sector. Restaurants owners should keep a sharp eye on their financials, anticipating cost inflation and reducing losses wherever possible.
» More on Managing Your Restaurant Through a Tough Economy

Maintain Strong Management
Parsa's research found many sources in agreement upon one thing; the most significant ingredient for a restaurant's success is management. The manager must be willing to put forth the effort and performance to lead the entire team to success. Conversely, frequent changes in management often lead to differences in vision or leadership tactics which can disorient employees and even disrupt the restaurant's mission. Without a manager who is experienced, committed, passionate and adaptable, the path to success is arduous and littered with roadblocks. » More on Restaurant Management Tips

The restaurant industry offers numerous opportunities for success. New restaurant concepts are developed all the time, and success stories turn up even in the most remote locations. However, studies show that one in four restaurants fail within the first year after opening, indicating a significant risk involved with owning and managing a restaurant. Keep to these basic guidelines to reduce the risk of failure after opening your restaurant.


1 H.G. Parsa, John T. Self, David Njite and Tiffany King "Why Restaurants Fail" Cornell Hotel and Restaurant Administration Quarterly 46, no. 3 (2005):304-322.
2 Mark Gaskamp, "Food Service Risk Management," BNet, http://findarticles.com/p/articles/mi_qa3615/is_200610/ai_n17196385 (accessed December 3, 2008).
3 Micheline Maynard, "Love Food? Think Twice Before Jumping In," The New York Times http://www.nytimes.com/2008/08/27/dining/27fail.html?_r=2&pagewanted=1&ref=dining (accessed December 3, 2008).

Become an FSW Insider

Contact Information

ON THE FLY WITH FSW

Information & Inspiration for the pro

AT HOME WITH FSW

Information & Inspiration for the home cook