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Why do restaurants have the highest failing rate?


  • 10/09/2020
  • |
  • 60 percent of restaurants fail in the first year

The restaurant business is notorious for failure.

According to estimates, about 60 percent of restaurants fail in the first year, and 80 percent fail before their fifth.

Even the most renowned chefs can find themselves struggling.

Washington, D.C.-based chef Kwame Onwuachi, a season 13 contestant on “Top Chef” who was named “Rising Chef of the Year” by the prestigious James Beard Foundation and worked as part of an externship at Thomas Keller’s popular New York City fine dining establishment Per Se, was expected to be a success when he opened his first restaurant. He was a graduate of the Culinary Institute of America and also had a stint as a line cook as Eleven Madison Park, a Manhattan eatery that topped the list of the world’s 50 best restaurants in 2017, on his resume.

His background was diverse. He grew up in New York City but lived for a time with his grandfather in Nigeria, where he picked up a fresh perspective on food, which was only enhanced when he worked as a cook in Louisiana, where different influences transformed his cooking style. But when he opened Shaw Bijou in November of 2016 in Washington, D.C., his 13-course tasting menu received mixed reviews, and by January of 2017, his primary investor pulled out and the restaurant closed.

“The concept was good, we just weren’t able to execute it, Onwuachi told The Washingtonian after his first restaurant concept failed. “I think it took too long to start listening to the guests.”

In an interview with the Washington Post, he added, “It just cost a lot of money. It was a very expensive business. I’ve never quite seen that in business at all. That was new for me. The numbers were staggering.” This, from a fine dining veteran who most recently served as chef at Kith and Kin, a D.C. restaurant that merged his many food influences into an eclectic, popular menu. It is currently open, but operating under safety guidelines with a limited menu and hours due to COVID-19. Onwuachi has left his chef position there.

In 2017, celebrity chef Scott Conant closed his ultra-personal New York City-based restaurant Fusco, an Italian bistro named after his grandmother. He called the restaurant the “most special” of his career, but the costs of doing business in NYC, including rent, labor and product, made it impossible for Conant to keep his restaurant open.

Other celebrity establishments that have closed in recent years include Anne Burrell’s Phil & Anne’s Good Time Lounge, Fatbird (which was only open seven months, and damaged chef Cat Cora’s reputation enough that the Iron Chef won a $565,000 settlement against her partner, who had only consulted with the Cora, then failed to pay her for her name, likeness and recipes), and Carla Hall’s Southern Kitchen.

Location, location, location

Location is the biggest reason restaurants fail. If customers can’t find you, they can’t fill seats, as Carla Hall found when she opened her Nashville hot chicken restaurant Southern Kitchen in Brooklyn in 2016. Stunned by Manhattan rent prices, she opted for a spot in Brooklyn off the water, a 15-minute walk from the subway, ideal in the summer on a warm day suitable for walking, but out of the question when winter winds rolled in, and her clientele dropped.

It was a cruel lesson for the celebrity chef – who expected her time on “Top Chef” and “The Chew,” which had gained her 150,000 social media followers on Facebook alone, to help build a customer base.

Unfortunately, however, her followers were all over the country, and her Brooklyn spot, while more affordable than Times Square – where her out-of-state fans were likely to visit - wasn’t a great destination restaurant location.

“We got it wrong,” she told Eater.com. “We weren't big enough or established enough to be a destination restaurant. It just wasn't gonna happen.” 1

Costs – and reviews - can kill

But location isn’t the only factor that causes restaurants to fail so often, no matter how much blood, sweat and tears you put into the place.

There are myriad other factors to take into consideration to prevent your foodie venture from being a flop.

For example, Onwuachi originally opened an upscale restaurant with a costly tasting menu – dinner for two was nearly $1,000, including the wine pairings – that received mixed reviews. (A subpar review from a respected publication can signal a death knell for any restaurant.)

Washington Post food critic Tom Sietsema found some items delicious, including “sweet king crab poached in garlic butter, a luxury enhanced with shavings of sea urchin bottarga, or cured roe.”

Other offerings, however, including the “seared foie gras topped with a marmalade of shrimp and pork, a meaty marriage that might have worked had a bite not been a salt bomb,” were not so successful.

By January, when Onwuachi lowered prices and switched up the menu, it was too late.

Having a menu that’s priced to cover food costs can save you plenty of headaches, but having an overpriced menu can be a headache of a different sort.

So, while it might be easy to say restaurants fail because those running it aren’t experienced enough for the job, that’s not always the case.

Absolutely, experience is vital, because having a working knowledge of how a restaurant is run will help you operate your establishment more successfully, but even the most experienced restauranteurs can make a bad move.

Have a clear concept

Your restaurant needs a distinct personality in order to succeed.

A Greek restaurant, for example, should offer Greek food – not a mix of Greek and American items to appease all diners – because those who come for the Greek offerings will be disappointed that the rest of the menu strays away from that particular regional fare.

Make sure your restaurant concept is intriguing and interesting, but not so esoteric as to turn away potential customers.

A 2005 study from Cornell University found that a lack of a cohesive vision is one of the main reasons why restaurants fail. 2

“I suffered from mission drift,” one failed restauranteur shared in the study. “When things didn’t work,