Why do restaurants fail?

Posted on: February 27, 2018 Posted by: massterkey Comments: 0

Why do restaurants fail?

The success story of a restaurant business depends upon the strength of its concepts, planning and their execution. Fabricating services which people talk about and willingly recommend to others is paramount for a restaurant success. But, this is easier said than done. Unfortunately, many businesses get confused in planning this most essential workable restaurant model.

Mumbai rooftop restaurant fire kills 14 – December 29, 2017– CNN

7410 structures fires in eating and dining joints out of which 32% were large fires-2010-2014 average (US)- NFPA

Among franchised chains, the failure rate is 57% over the three years -HVS- Feb 4, 2008

60% of Restaurant/Hotels close or change ownership in the first year. – H.G. Parsa, author of the study and associate professor of hospitality management at Ohio State University

80% of Restaurants/Hotels shut down before their fifth anniversary – Ohio State University

I suffered from mission drift. When things didn’t work, I would try something else, and eventually, there was no “concept” anymore. —A failed restaurateur. (Cornell Hotel and Restaurant Administration Quarterly AUGUST 2005)

Why do projects fail
Restaurants/Hotels trails certain stages during its tenure. At any point and time, there are many pitfalls that can drown projects. The longer a company is in business, the less likely it is to fail but the newly opened properties are more vulnerable because they survive on limited resources which hampers their ability to be workable and also to adapt to changing conditions, which is why the highest proportion of businesses that close are relatively new.

“Some are in it for glamour, some for a quick ticket to fame or recognition. And then reality hits. The
conditions are tough and the regulatory environment is very complicated. If you see any of these best
restaurant lists from a year like 2010, out of 20 of them, 15 do not exist anymore. If the quality ones
are shutting down, then ordinary restaurants don’t stand a chance” -Riyaaz Amlani (president, National
Restaurant Association of India (NRAI)) – source: economic times

Here at MassterKey we have tried to jot down major reasons for what goes wrong in a project which can lead to demolish it:

1) Inexperience in scope and complexity
Lack of communication and not breaking down development into phases or steps is one of the major complexities in restaurants. People underestimate prioritizing operational activities, objectives and thus, inadequate business plan out turns in letting down ‘unrealistic’ expectations, the time required and set-up costs.

2) Lack of Communication and Allocation of work
The dilemma in identifying the decision makers lacks in relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees. Poor contact with senior management and not being able to resolve conflicts marks ineffective project team integration between clients, the supplier team, and the supply chain.

3) Failure to define objectives 

Restaurateurs often get imprecise in pricing their product or services. They do not tend to address potential risks due to inexperience, thus, putting an inadequate control system in place for measuring and tracking results and not estimating, monitoring, or controlling expenditures upshots an incomplete or vague project work plan.

4) Project Management Problems
Failing to clearly and completely define the requirements, result in building the wrong features or gaps in the features needed. Staff often lacks contact with senior management which outcomes in inefficacious project team integration between clients, the supplier team, and the supply chain. The conflicts remain unresolved and there aren’t adequate resources due to under/overestimation of work.

5) Technical Issues
Changing requirements in the operations and continuing change requests are the major cause of the project drift. Poor initial testing techniques make baffled owners start using new or state of the art technology which again causes unanticipated problems. Also, using technical components that do not fit together as designed and does not allow for modification is not scalable.

Author: Harsh Bansal

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