Emerald Coast

Three Reasons Why Restaurants Fail: Key Mistakes to Avoid

For many people, starting their own restaurant is a lifelong dream that very few are lucky enough to see become a reality. However, oftentimes restaurant dreams can quickly become stressful, money-bleeding nightmares as expensive restaurant investments fail to spin profits. 


Whether or not a restaurant succeeds or fails can almost seem like pure dumb luck to the uninitiated. Even restaurants with incredible chefs, fine decor, and fresh menu ideas can fail to turn a profit and wind up dead in the water only a few months later. So, what does it take to start a successful restaurant?


One of the most important things you can do when starting a new restaurant is to make sure you don’t fall into the same traps as thousands of other new restaurant owners before you did. Here are three of the most common reasons why restaurants fail — and how you can avoid them.


Choosing a Poor Location


One of the first major decisions you need to make as a new restaurant owner is where you want to establish your restaurant. Unfortunately, this is where new restaurant owners commonly make mistakes. The location of your restaurant doesn’t just depend on things like visibility or real estate value. You also need to keep in mind who your restaurant is for. 


For example, an extremely expensive upscale bistro is probably better suited to a busy commercial district in the downtown area of a city rather than a suburban neighborhood composed mostly of retirees. Another consideration when purchasing a location for your new restaurant is the demands of the local clientele. A restaurant in the suburbs might need more parking space than one in a downtown area. 


Doing your research on the demographics, traffic, and habits of the local customers will help you avoid fatal mistakes right out the gate when starting a new restaurant.


Having a Wrong Menu


Once you’ve decided on a location and constructed your shiny new restaurant, the next major decision you need to make is what food your restaurant will be serving. It might be tempting to create a giant menu and fill it with different food options to maximize the chance that your customers will find something appealing. 


Or you might want to try to put really exotic food combinations and dishes on the menu in order to differentiate your restaurant from others in the area. In practice though, adding tons of menu offerings usually just means that the restaurant staff can’t focus on simply creating a small set of good, quality dishes.


Instead, they’re forced to handle a large variety of requests, usually producing subpar food instead. Trying to create unusual menu items can also put off customers, unless designed exceptionally well, since most restaurant-goers are put off by flavors that differ too much from their typical palate.


Mismanaging Finances


Even with a fantastic location and delicious menu, restaurants can still fail if they’re unable to effectively manage their finances. Some restaurant owners end up investing too much into the restaurant upfront, resulting in defaulted loans before the restaurant can establish itself long enough to spin a profit. 


Other times, wasteful kitchen practices can cause costs to become too high, resulting in unbalanced finances. In order to run a successful restaurant, be sure to plan ahead for money problems and ensure enough overhead to absorb minor or even major losses. 


If you’re looking to start a restaurant, it’s important to not only focus on these three major considerations, but also on the smaller ones, too. By doing your research, and speaking with the professionals here at Emerald Coast Restaurant Brokers & Consultants, you can help ensure your restaurant business is a resounding success!