Restaurant Profitability Blog

7 Common Mistakes Restaurants Make that Doom Them to Fail

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Failure.

Yeah, it’s pretty common in the restaurant business.

We all know the damaging stats… 60% of restaurants fail their first year and 80% fail after 4 years.

But you’ve survived… and maybe even thrived.

And you want to keep it that way.

So how do you avoid the pitfalls the vast majority of restaurants make that doom them to fail?

Well, we’ve got you covered.

After talking with thousands of restaurant owners and managers about successful and unsuccessful restaurants, we put together the 7 common mistakes that lead to restaurant failure.Avoid these at all costs.

#1. Poor Location and Lack of Marketing

Location, location, location.

We all know it… a good location is everything when it comes to a successful restaurant.

The closer you are to consistent and heavy foot traffic, the easier it will be for business to come your way.

Certainly, if you’re guaranteed foot traffic at breakfast, lunch, and dinner, success is just about the execution of the menu and guest experience.

But if you’re not, business can be much tougher.

Maybe you opened your new location on a quiet street or moved out to the burbs. Now you realize that while the rent may be good, the location isn’t helping you.

So restaurants that find themselves in a bad location – off the beaten path, tucked away in a corner, away from foot traffic – well, the odds are against you.

And if there’s one thing that exacerbates a poor location, it’s a lack of marketing.

Marketing your restaurant creates a loyal following… customers who will come back and spend their money with you time and time again.

Here’s the type of marketing we’re talking about:

  • An updated and user-friendly website
  • Active social media sites where you post often and engage with followers
  • Events like live music, family night, date night, the big game, trivia night, and our personal favorite karaoke night… these keep people coming back every week
  • Email address collection on site so you can communicate and offer rewards and discounts
  • A rewards program for the regulars

You have no choice…

If you want to avoid failure, your restaurant must have a good location and outstanding marketing.

#2. You Don’t Manage the Financial Side of the Business

Okay, okay… so you make the best burgers and steaks in town… you’ve been on the cover of all the important local foodie mags and won the reader’s choice awards… but is fame alone going to bring in dollar bills other once the launch party has faded?

We don’t think so.

Sure, having a delicious menu is important for a restaurant.

But it’s not going to carry you… culinary genius doesn’t pay the bills… you’re looking to serve financial delight too.

Restaurants who don’t understand that a restaurant is more than a place that serves great food… that it’s a business with financial needs… are doomed to fail.

There’s no way around it… you have to run your restaurant as a business.

Why is this so important?

You need to pay rent, you need to pay your employees, and you need to pay for your food.

This means it’s imperative you understand your food costsprice your menu properly, and calculate your prime cost regularly.

It’s the most painful mistake we see restaurants make… and many have closed their doors because of it.

Don’t be one of them.

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#3. You’re Slow to Address Lazy or Incompetent Management

It’s no coincidence thriving restaurants run like a well-oiled machine.

From front-of-house to back-of-house… owners, chefs, servers, managers… they all act as a support system for each other.

And they all understand the importance their roles play in keeping the restaurant functioning and profitable… whether it’s a kitchen manager taking inventory or a bartender making sure they don’t overpour.

Don’t have this type of culture at your restaurant? You can most likely point your finger at your managers.

And being slow to address lazy or incompetent managers dooms your restaurant to fail.

Signs of poor managers include:

  • They don’t dedicate time to training and retraining staff
  • There are constant problems with shift scheduling – you’re often over or understaffed
  • They have poor communication skills, ignoring staff feedback and interaction
  • They mishandle or avoid guest complaints
  • They have no interest in the business side of running the restaurant including important operational tasks such as accounting, inventory, and reporting.

Managers who display these characteristics can hurt your restaurant.

If one is plaguing your business, it may be time to say good-bye… and sooner is better than later.

#4. You Don’t Listen to Customers or Pay Attention to Online Reviews

A huge mistake in the hospitality industry is… well, not showing hospitality.

This means listening to customer feedback… and restaurants who don’t do this are destined to fail.

Most restaurants who flop in this area do so because they think review sites are the enemy.

And rightly so… after all, it’s been shown competitors leave false reviews and trolls concoct tall tales about imaginary restaurant sins all the time.

While these things may be true, there are also legitimate complaints and compliments.

So restaurants that ignore reviews – good and bad alike – risk missing valuable customer feedback that could save their restaurant from taking a hit down the road.

Reviews give you the opportunity to create positive PR for your restaurant.

You can use a bad review to your advantage by making the situation right (even if you actually weren’t in the wrong) with a discount or freebie… and possibly earn a good review in return.

More importantly, you can tune into what a majority of your guests are saying about your restaurant – the food, the atmosphere, the staff – both complimentary and criticizing.

Will one customer’s opinion change how you run your restaurant, train your staff, or plan your menu?

Probably not.

But if a number of guests comment on one thing – say the lack of gluten-free options on the menu or the loud music – you can make simple tweaks to improve the guest experience.

And these small changes will keep you from driving away customers.

#5. Not Taking Hiring and Staffing Seriously Enough

Hiring is hard.

This is especially true for restaurants… you can’t offer staff a high wage or consistent hours.

That being said, hiring hard-working, committed staff at your restaurant isn’t impossible… in fact, the most successful restaurants do it all the time.

And they take the time and effort to do it so they don’t have to worry about the guest experience… they can count on it always being exactly what they want it to be.

On the other hand, when your hiring process and staffing don’t reflect the image or experience you want guests to walk away with… you’re dooming your restaurant to fail.

Often poor hiring decisions come out of desperation.

You need a spot filled quickly and take the first warm body who volunteers.

But let’s face it… many restaurant workers see their jobs as transient… they’re high school and college students trying to make a little extra cash or folks who are in their second careers.

So when you don’t take hiring and staffing seriously, it can backfire on you…

The person doesn’t show up on time – or at all – or if they do show up, they have a lackluster attitude that’s far from hospitable.

This hiring debacle isn’t representative of the vibe you want to create at your restaurant.

In fact, it so damages the guest experience that people don’t come back.

And without paying guests, your restaurant can’t survive.

Successful restaurants manage food costs... compare supplier pricing and always get the best deal.

#6. Quality Isn’t Job 1

The devil is in the details, and the details are all about maintaining quality.

It’s simple: Restaurants who prioritize quality will thrive. Restaurants who don’t… will suffer.

What do we mean exactly when we say quality?

It means anything that turns customers away and makes them not want to come back…

  • Lack of cleanliness
  • Slow service
  • A long wait for delivery
  • Marginally unique dishes, both in variety and taste
  • An apathetic guest experience.

These may seem like no big deal… tiny issues that wouldn’t cause your restaurant doors to shut.

But the truth is, many first-time customers never come back to your restaurant because of these “minor” mistakes.

You may think they’re nothing to get worked up about… but your customers don’t feel the same way.

#7. Not Paying Attention to a Changing Business Climate

Brace yourself… we’re going to use the “M” word.

Yes, we’re talking about Millennials.

They’re the generation that’s influencing culture and business right now… including restaurants.

Millennials are dictating new restaurant norms… changing how the industry does business. In fact, they’re leaning towards fast casual, quick service and do-it-yourself models.

They also have a passion for all things technology… and the restaurants that embrace it.

From online ordering to delivery services – even time and attendance software for millennial employees – there’s so much technology available today for restaurants to take advantage of.

The truth is, trends and technology change constantly.

You have to stay current with these changes… incorporating technology into your business… or you’ll lose the customers who embrace them.

Download 50 free apps for restaurants.

A Mistake-Free Way to Stay on Track

We won’t argue with you… managing a restaurant is no walk in the park.

There’s a lot that can go wrong, and avoiding common mistakes can seem like a tall order.

That’s where Orderly comes in. It helps you avoid some of these common mistakes… providing operational efficiency, freeing up time, allowing you to manage your business… and helping you track and reduce food spend.

After all, a third of your budget is spent on food… wouldn’t it be nice to track it in real time? And wouldn’t it be nice to know you’re not overpaying your suppliers?

That’s exactly what the Orderly app is designed to help you do.

It tracks all your food spend… at every location… and gives you a handy dashboard right from your mobile phone, to see what you’re spending.

Even better, it provides a national & local view of price trends on over 100 of the most popular ingredients restaurants are buying.

You can see your prices compared to real prices other restaurants are paying their suppliers…

So now you’ll know if you’re overpaying for eggs, onions, ground beef and other items.

And you’ll have the hard data you need to negotiate better pricing with suppliers.

And this, my friend, is a winner… because it translates into more savings, more money, and more profits for you.

And profitable restaurants don’t fail.

So look at the list above. Make sure you’re avoiding these common pitfalls. They are the surest way to fail.

And while you’re focused on it. Take a step in the right direction to better manage your food spend and supplier pricing

The Orderly app is the industry’s first guide to prices restaurants are paying for their supplies.

The best part? It’s free.

So, download the app, check your pricing, and make more money.

Paying too much? Now you'll know...

Orderly7 Common Mistakes Restaurants Make that Doom Them to Fail

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