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Why is it so hard to maintain the quality of a restaurant? (moved from Quebec board)

NOTE-- This digression was moved from the Quebec board, in response to the question "any opinions on why it is so hard to maintain the quality of the product? Is it the responsability of the chef, or are there outside influences that play an equally important role?" at http://www.chowhound.com/topics/38371... -- THE CHOWHOUND TEAM

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I worked in the restaurant/catering industry in MTL for nearly ten years, I now live and work in the US. First, no matter where you are it is a tough business: 1 out of 5 restaurants fail within the first 6 months of operation and 9 out of 10 are gone after 2 years. Look around and try to assess how many restaurants have been around for more than 2 years or are as good as they were originally...you'll see burger joints, Chinese/Viet dives and chain restaurants...

Margins are always low and the amount of effort required to keep a business afloat is truly grating and exhausting. In Montreal, the situation is compounded by a reluctance of the city to properly and fairly manage permits and sanitary conditions, so completely unsanitary and below standard dives are permitted to operate next to spotlessly clean and impeccably run operations these last are more expensive to run but compete for the same customers as the dives. Montreal although a big city has a huge number of restaurants per capita, there are simply too many for the actual size of the economy, and so, many go out of business/deteriorate very quickly so many in fact that no bank in MTL would ever give any amount of financing or even a credit card to a fledgling restaurant/caterer.

Finally, there are the large proportion of patrons who are not willing to pay for quality, I was once asked why my all you can eat menu was priced at $15.00 when a neighbouring Indian rathole restaurant had an all you can eat buffet for $9.99...I replied fresh, locally grown and organic produce, extra virgin olive oil, no cans, etc...I got a blank stare and a reply that that didn't matter. My margin was less than $1.00 per person...working 7 days a week, 18 hours a day...making a profit of $100/day....before paying myself and before Quebec/Canada income tax! I liquidated everything and changed careers...

That is why so many good restaurants don't last very long quality wise or just disappear.

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  1. I've never owned a restaurant.
    It seems to me that very often I go to a new place and it is pretty good- good prices, great food, reasonably good or great service...then I go back and over the next six months the prices creep and creep up until I don't want to go anywhere, because although it is an 'ok' joint, it ain't a 'great' joint...obviously that is not all cases, but I do see that happening often enough to mention it. It's as if the owners didn't properly assess their costs. Lee, tabule, Goldfish (a few years ago) - these are places I can think of here in T.O. that have had a sig. price jump fairly soon after opening that sort of turned me off. It almost would have been better for them to START at the higher prices, so that it didn't figure into my original appreciation for the resto. Not like I"m a big cheapo or anything, but no one likes feeling 'gouged'-

    4 Replies
    1. re: nummanumma

      I suspect what happens in the case of price creep (happens in every city) is that restaurant owner have underestimated their costs initially. Once they realize they aren't covering them, they have to raise prices in order to survive. I think that's what happens (sadly) when you have an overly optimistic vision for your restaurant.

      1. re: Kbee

        And I've noticed that that 99% of all so-called conservative estimates are still in the realm of fantasy.

        1. re: Blueicus

          That's certainly true, Blueicus. It also doesn't hurt that more customers will be attracted by the initial lower prices.

          1. re: Yongeman

            Very noticeable in Florida where many many restaurants do early birds in the afternoons, presumably to put butts on seats in the quiet time and as a marketing tool. They can't make much profit on those early birds. Also common to see coupons for a dollar or two off, free glass of wine etc, again to get people in.

            Alternatively a lot of restaurants are closed in the afternoons, which lowers staff costs.

            I think running costs for restaurants have gone up hugely this year and many more will close.

    2. actually your quotes for restaurant failures are outdated. failure rate is roughly equal to any other private venture -- roughly 60% after 3-5 years. daunting, but working for yourself can be very worthwhile.

      and i'm sorry, but if your profit was $100 a day before paying taxes and salary, your model was flawed. i have no doubt you provided good quality product, but most people going to buffets aren't that concerned with wholesome, they just want ALOT. it's disingenuous to blame your failure on patrons, sorry.

      restaurant failures are usually due to not enough capitol, or, as in your case, owner burn-out. but expecting to make a long-lasting go of it, with those hours and that profit margin, was trouble from the beginning.

      11 Replies
      1. re: hotoynoodle

        Thanks hoytoynoodle...but my estimates were acurate for Montreal, Canada 5 years ago and probably still are.

        The economic situation in the US is quite different as many people actually have real disposable income to spend in restaurants or at least access to credit. Canadians on average make less money and pay more taxes than people in the US and this translates directly into to higher leisure spending hence better opportunity for restauranteurs.

        And you are right, in retrospect, there was trouble from the beginning, and we could have probably adjusted our strategy earlier without having burned out. The great thing is that I ended up in the US...

        1. re: edumont

          you might want to check this link.:
          http://www.restaurantowner.com/public...

          several universities have done very recent studies to recalibrate the formula for determining actual failure -- factoring in normal attrition and such. if it was true that 90% of all restuarants failed, there would be precious few businesses still open after 3 years. even anecdotally, i'm sure you know plenty of places in your area open longer than that.

          1. re: hotoynoodle

            I think the figure is somewhere in between 60-90% within 5 years. The website was listing figures from the 1990s and was using data from 3 local markets. I've read its about 80% in the US for 2004 but the mags didnt provide proof.
            Why its higher than it appears is that most places re-open under new ownership. So if they keep the same name you may not know it was a failure. Any change in management or ownership is considered a failure according to that article so many failures are invisible. Plus with more chain type restaurants opening with lower prices it puts more pressure on independent places. And there is a limit on what the market will bear regardless on the quality.
            Locally, I see most do fail within a few years. Of course, I dont know the reasons.

            1. re: tom porc

              The sheer number of restaurants that fail within two years while replacements open in the same location skews the averages. One site in my neighborhood seems to be in the fourth version in less than a year (Greek, cevicheria, mixed Mexican and hot dogs including some Argentinian sausages) although the last one doesn't seem to be open any time I have passed recently.

              The trendier areas in Chicago have very few restaurants that have lasted five years even allowing for the fact that not all of these areas have been trendy for that long. Whether more will survive to five years is an open question.

              1. re: tom porc

                according to our small business consultant, working with loan industry data, failure rate for independent small restaurant businesses is 16/17 in the first 2 years. This doesn't count franchises, chains, 2nd location of a founding restaurant, etc. it is sure true that people who don't want you loitering in their waiting room in your 1st year will find time to talk about venture capital once you've celebrated your 2nd anniversary. unfortunately by the time a lot of people figure out what they're doing wrong they're already bouncing checks to their distributors, and by the time word-of mouth spreads of a great new cafe, enough to get new patrons in, the place may be in serious financial trouble.

                1. re: soupkitten

                  the main reason any business goes out is obviously financial, but i think a big part of the 2 year thing in restaurants is that's the human limit for a lot of things, and many people figure out that the biz isn't what they thought it would be at all/a lot harder than they thought, that they were unprepared, that they actually CAN"T hack it a couple of years w/o health insurance, that it's not worth the personal costs, etc. a LOT of people either can't hack it or don't want to hack it after 2 years, and keeping the quality level high takes constant, exhausting work. the folks who run the smallest places with impeccable quality are the most amazing to me.

                  1. re: soupkitten

                    Well, the health insurance angle doesn't apply here, because public health insurance is universal and mandatory.

                    But indeed, it always costs a lot more in both financial terms and those of time and energy than one anticipates.

                    We've had a tough time recently in Montréal, even though our economy is actually somewhat improved in terms of employment levels (though a lot of these are part-time, underemployment with respect to qualification, or ill-paid), because of the rise of the Canadian dollar with respect to US currency. Sure, we get more tourists from Europe than before, but not enough to make up for the loss.

                    1. re: lagatta

                      right-- sorry, forgot that this was moved off the Canadian boards. for USA, no coverage for restaurant workers seems to be what's universal :*(

                    2. re: soupkitten

                      < the human limit for a lot of things >
                      the other angle on the human limit for things is our fickleness as patrons. For a lot of people, eating out is entertainment akin to a show, movie etc. We may go a lot when it first opens, but do enough people support it in the 4th year? the 5th? for it to be a viable business long term?

            2. re: hotoynoodle

              Chow.com has a piece on restaurant failure statistics

              http://www.chow.com/grinder/2603

              1. re: Brian S

                same studies quoted in my link above.

            3. I wonder if it's some version of the Peter Principle. The Peter Principle referred to people: People tend to rise to their level of incompetence and remain there.

              If you wanted to make a case that this applied to restaurants, you could say that as a restaurant succeeds, it likely tries to move forward in some way - expanding the menus, raising prices, jazzing up the decor, enlarging the space, whatever. And whatever it chooses to do, there's a tendency to push it until it collapses.

              1. I have been pondering this issue for the last year. As a culinary student I can tell you that anyone can cook, but not anyone can run a business. A restaurant is a manufactering business pure and simple. However it seems that people go it to it when they do not qualify for this or any type business. Controling cost from the begining is key. Whaterver the menu is you cannot keep increasing prices without having some added value in the eye of the consumer.

                1. Someone on the New York board posted a detailed and insightful analysis on how those factors play out in New York Chinatown. Much of it applies to the problems facing all restauranteurs.
                  http://www.chowhound.com/topics/37767...