Published September 8, 2021
Restaurant Risk
Are you looking to open a
restaurant and make millions? It’s a very risky venture but it’s not the
90% first year failure rate that is often cited. If that statistic were
true, the restaurant industry failure rate would
mean virtually no business for anyone. In fact, restaurants are in
growth mode due to an influx of money.
Money is pouring into restaurants from private equity groups. Private equity groups own many of the largest restaurant chains, or they have significant investments in them. The quick-service and casual-dining segments of the sector are attracting the most attention especially after the well know success of local restaurants Sweetgreen and CAVA.
Multiples are rebounding for these segments in both the public and
private markets.
According to A recent Cornell University study showed
the number of restaurants failing in the first year is closer to 60
percent, and while this may still seem a high, statistics need to be
examined in context to be fully understood. Restaurants are no more risky than any other new business according to the U.S. Bureau of Labor Statistics.
Don’t give up your dream of owning a restaurant without taking a closer
look at the restaurant industry. There are many steps you can take to
increase your chances for success. According to celebrity chef Robert
Irvine, and host of business make-over show “Restaurant: Impossible,” the top reasons why restaurants fail include
bad people management skills, spotty customer service, terrible food
and poor accounting.
Many entrepreneurs who want less risk but still
like the restaurant business sign up to be a franchisee. Franchisees do
not need to create their own brand or concept and can often benefit
from the buying power and marketing campaigns of the franchisor.
However, franchise ownership comes with its own pitfalls and each potential franchisee should thoroughly research
the franchisor and their business model before signing a contract.
In
the restaurant business, knowledge, realistic expectations and passion
are powerful attributes.
