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Why do restaurants fail?

Restaurants in my city seem to come and go with the seasons, chefs change around like they are on a Merry-Go-Round, and the service here is considered lackluster in places where it should shine. I have seen well placed, visible rooms dissolve quickly and they chalk it up to the economy or the clientele; though my personal experience with some of these places is the overall experience they deliver is mediocre. I have also seen out of way rooms absolutely flourish, coincidentally, their product is tighter and more polished.

I think some restauranteurs suffer from a lack of clear vision. Maybe they want to open a white table cloth room, but they also provide loud music and allow loud customers to create an overwrought mess of a dining experience for the table cloth crowd. Then, when they go out of business, the owners blame everything, from the economy to the weather, but fail to take a hard look at their business strategy.

OR, same scenario, white table cloth room, the owners hire inexperienced staff, throw them on the floor without training in basic service rules or menu knowledge, so the staff delivers a mediocre show, and again, the room fails.

I worked in restaurants for 10 years. I saw rooms fail for such dumb reasons, DUMB reasons! Hello, owners, when you come in with 10 of your friends, 30 minutes before closing, stay for 3 hours ordering drinks and food, all of which is comped, your bottom line WILL fail. I also saw rooms grow vibrant because the owners had such a clear and precise vision of the experience they produced. A fine dining room was a fine dining room. Men were not allowed to send single female diners drinks with sexual names. The staff did not rally around for annoying birthday songs. Ladies and Gentlemen were not to referred to as "hey guys."

What is your opinion? Why do restaurants fail in your city? Why do restaurants succeed in your city?


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  1. restaurants fail because the margins with which they operate are razor thin, and sometimes, bad things happen.

    4 Replies
    1. re: plaidbowtie

      A lot of good info went into this thread so I wonder why so many people go into this business and/or just invest when the margins are so thin.

      1. re: Jake70

        I think it comes down to a fantasy of what having a restaurant is like, rather than a realistic idea.

        1. re: Jake70

          Everybody thinks they have the perfect idea for a restaurant in the same way everybody is convinced that their life story would make a perfect novel.

          1. re: Kalivs

            Many of us could come up with a few dishes that we think would go over well - I have had this thought many times.

            I'm old enough now to know that the restaurant business is also about crabby customers, unreliable employees, stopped up toilets, 16-hour days, unending cleaning, and on and on...never a break from the treadmill. Can't EVER get sick....

      2. If you have worked in restaurants for 10 years, you know they fail for a variety of reasons. Reasons for success are similarly varied. No single answer.

        1. I don't know why restaurants fail. Reasons are many. Almost too many to list here. Not enough bandwidth.

          But 99 out of 100 times a restaurant does *not* fail because of the food.

          13 Replies
          1. re: ipsedixit

            I don't don't know, I have found that quality / consistency of the food is often a major issue. When an owner / MGR / chef like Ramsey / is standing next to the window making sure every meal goes out properly cooked and hot there seems to be a line to get into the place. When these same people are out on the floor hobnobbing with guests rather than monitoring the quality of what people are there for (Good Food) the quality seems to suffer and the crowds dwindle.

            Purveyors will also tell you the time to pull back on credit is when the owner's start shopping key ingredients to the lowest bidder compromising quality and consistency in the process. Bankruptcy usually follows soon and you don't want to be the salesman who has to tell the District Mgr. they are into us for 25 grand.

            1. re: Tom34

              Spago (Beverly Hills) does just fine without Puck around. Batali is hardly ever at Babbo. Keller doesn't spend much of his time at either Per Se or The French Laundry (not cooking anyway). But really, using anecdotes like those or the one you bring up with Ramsey is just pissing in the wind. Get's us nowhere, and doesn't move the needle in this discussion.

              The sobering truth is that a very small, small percentage of the dining population actually picks a restaurant for the food. We, here, at Chowhound tend to have this myopic and distorted view of the world where people actually care (and I mean really *care*) about the stuff they put in that orifice underneath their nostrils. Most people are not so inclined.

              Many people go to a restaurant because they're courting the opposite sex, and asking for sex before eating is just so gauche (even in the internet age we live in). One needs energy to go at it like rabbits!

              Some people pick a restaurant as a meeting place (e.g. to conduct business or whatever).

              Some people pick a restaurant simply as a place to meet friends and gossip about how their last date asked for sex before dinner. EGAD!

              Then there are those who go to a restaurant simply because it's close to where they live or work.

              Others, like parents, will go to a restaurant because they ran out of birth control (but not self-control) and now they're stuck with a tyke that loves french fries and gloppy sandwiches.

              So given those demographics and, oh yeah, those that actually care about food, a restaurant's viability turns on many many varied a factor -- most of which are very independent of actual food, or quality of cooking.

              Having grown up in the restaurant business, and having worked in the restaurant business while going to school, and now dabbling indirectly as an investor in the restaurant business, I can tell you that food (or the quality of it) was, and is, not a tell-tale marker of restaurant sustainability, popularity, or much less viability.

              For example, if a pastry chef came to me and said, "I am God's gift to the tongue, I can make the best fucking apple pie in the world, and I just found the perfect location for my bakery at 188 Spring St. NY, NY 10012! Will you fund my venture?" I would just as soon wipe my ass with $5 bills and blow my nose with $1 bills ...

              1. re: ipsedixit

                I brought up Ramsey because he hawked the window and sub par food didn't go out of it, period. An owner doesn't have to be there, but a MGR who is 100% accountable does.

                I have been in the business too & your right that people patronize different restaurants for different reasons. Having said that, it has been my experience that family run restaurants in the right location that are properly managed (Everything Bagel Man 01 stated) with good servers placing good quality properly cooked food on the table make money and become staples in their community.

                I think the biggest problem is that to consistently serve a good product in a professional manner with a given % profit requires much more work & hours than most people realize. In recent years the ability to pass on a 100% of the rising costs of doing business has also hurt many owners.

                1. re: Tom34

                  Good food, at best, increases profits.

                  It does not guarantee sustainability or viability.

                  1. re: ipsedixit

                    There is only one guarantee in life & yes the chains have their fans and often times the reason is there is nothing better in the area, but gimmicks, gadgets & doohickeys only go so far in the long run.

                    I know of family run restaurants (not necessarily white table cloth) that span several generations. What keeps people coming back is homemade soups, sauces, & good quality fresh ingredients cooked properly by people who actually care and served by people who care. Its not just their restaurant but their life and if they didn't love it they damn well wouldn't be there 70 + hrs a week.

                  2. re: Tom34

                    CORRECTION: In recent years the "Inability" to pass on a 100% of the rising cost of doing business has also hurt many owners.

                  3. re: ipsedixit

                    "The sobering truth is that a very small, small percentage of the dining population actually picks a restaurant for the food. We, here, at Chowhound tend to have this myopic and distorted view of the world where people actually care (and I mean really *care*) about the stuff they put in that orifice underneath their nostrils. Most people are not so inclined. "

                    And this point is verified by the surprising success of places such as Chilli's, TGI Friday's, Ruby Tuesday's, et al. It is my considered opinion that these type of restaurant-bars thrive because the young twenty-something crowd consider them "hip" and "gourmet".

                    1. re: PotatoHouse

                      And they can actually afford to dine in them:)

                      1. re: PotatoHouse

                        Yes, good point....maybe they think they are "hip" but also likely to choose them because.....they are on the way home from work, predictable food, plenty of free parking, everyone can order something to their preference, easy to share plates, they have a coupon, short waits or no wait in the bar, lots of specials and special pricing, huge mixed drink list, comfy chairs and easy atmosphere to talk, tell jokes, be a bit loud, etc, etc. tons of reasons people choose big chain places.

                        I adore food (all kinds) and consider food exploration a "hobby" but even * I * go out to restaurants for many different reasons, it is not always about exploring glorious food. I suspect "non foodie" types do so even more than I do.

                      2. re: ipsedixit

                        188 Spring Street? Oh that brings up a memory. There is a restaurant just down the street from that address. Very successful now for many years. I know the chef/owners. When they were looking to open it, I got their business plan. Very well thought out. But the space they were going into was one of those haunted spaces that had seen a new restaurant come and go every year or so and nothing would stick despite the location. I hemmed and hawed on the proposal for a while then passed on investing and told them that I loved them, loved their cooking but was concerned about a near 6 figure investment in the restaurant business in NYC at the time. They raised the money without me and opened with a lot of sweat equity. Next thing I know, its packed every night and you can't get a reservation within a month unless you knew someone. Everyone knew I knew someone so I got calls all the time if I could help get a reservation at 8 on a Saturday. They we're always happy to accommodate me even though I had not invested. But they got all the right ingredients. Great food and location. Polished and professional service. Warm atmosphere. I still kick myself for having passed on what turned out to be a real winner. But no way to know that for sure going in.

                        They might want to hire your pie maker.

                        1. re: ipsedixit

                          Yup, exactly. Some people go out to get a senior discount and big portions, or because it is on a bus line, or because they have friends that work there, or, or, or......

                      3. It is my opinion that restaurants either fail or suceed based one one thing only;

                        Management is responsible for everything, capitalization, real estate, decopr, menu, employees, purchasing, hiring/firing/training.

                        2 Replies
                        1. re: bagelman01

                          Unless by "management" you mean "owner" the management usually is not responsible for capitalization. And, really, they shouldn't be if the restaurant is of any notable size.

                          1. re: ipsedixit

                            Line managers (employees) are merely part of the management team. Management, CAPITAL M are the owners/investors and staff managers such as CEO, CFO, COO and they definitely are responsible for capitalization, real estate, initial fitting out and budgets. Line managers execute Management's plans and directives, but ultimat responsibilty rests with Management. To quote Harry S. Truman "The Buck Stops Here"

                            Line managers may lose their jobs if the restaurant falters, not their capital investment.

                            If you put your money at risk, you are ultimately responsible for the sucess or failure of the business venture...this is direct ownership investment, not the buying of stock in a traded company.

                        2. I'd say that about 80% of it is that restaurants have a very, very thin margin of profit, and very high levels of competition, so any one of a wide variety of problems can be enough to push them down. The owners can do things right and be sensible, and still fail.

                          And there are tradeoffs - hiring experience staff or hiring inexperienced staff and training them extensively will cost much more than hiring inexperienced staff and giving minimal training (and are harder to replace). So they could fail because the cost of staff is taking up too much of the budget, but raising prices to pay the staff more will drive customers away - you don't get high quality, best of everything for free.

                          I will note that you seem to be talking specifically about higher end restaurants - chefs, visions, etc. The majority of restaurants, at least where I live, are small, often family run operations that make food for people to eat - the closest they get to a vision is which news channel they have on the TV screen.

                          1. I've noticed that many of the ones where we've suffered poor service (or no service at all and walked out) folded within 2-3 years.

                            Also, ones that are in a location that's difficult to get to or without parking (we love our cars here) struggle even if they were previously successful at another (smaller) location.

                            1. let's see.
                              the restaurant business is one that:
                              has high capital costs
                              has high labor costs
                              has high fixed costs
                              has high variable costs
                              has extremely perishable inventory with very volatile pricing
                              has a fickle customer base that often feels entitled to "free"/ comped food/drink and table-camping.

                              often landlords will only give good lease terms to restaurants that are part of a large well-funded corporation, with the remaining owners having to suck it up and agree to 10 year triple net leases with personal guarantees.

                              can't imagine why such businesses might fail.

                              10 Replies
                              1. re: westsidegal

                                It seems like everyone is saying "it's a very competitive business and hard to make a profit". Which I don't disagree with. But then the bottom line question becomes, why do so many people go into it if it is such a crappy business, so as to make it so competitive and difficult? There becomes your answer: too many people go into the restaurant business without the proper background or motivation or skillset.

                                1. re: DGresh

                                  It's astonishing the number of people that say to Mr S and me, your food is so good, you should open a restaurant. Except neither of us know anything about running a business. Just because I formerly worked as a cook and he still does, doesn't mean we could take it on ourselves.

                                  And I like weekends and holidays off.

                                  1. re: Sooeygun

                                    We hear the same thing but like you know better of it. :-)

                                  2. re: DGresh

                                    I think Tony Bourdain's take on that angle in Kitchen Confidential is pretty entertaining.

                                    1. re: nocharge

                                      Loved that book. I wonder what happened to that Tony on the way to the set of the Taste? Perhaps he fell victim to the lure of easy money and compliments as thin and uninteresting as canned consommé at a cheap diner.


                                      1. re: JuniorBalloon

                                        I think Tony knows what he's doing. In a good way, I mean.

                                        1. re: coll

                                          I think he's grown and mellowed and knows what's best for Tony. And I mean that in a good way. But I would love to see Young Tony do a verbal take down of Old Tony in the same vein he skewered Emeril, very unfairly I should also add.

                                          Still it would be entertaining.


                                          1. re: JuniorBalloon

                                            Now there's an interesting idea! Although he does occasionally take a jab at himself, which is part of his charm to me.

                                    2. re: DGresh

                                      Exactly! Everyone who can cook thinks they can open a restaurant. Dead wrong! It seems to me that if you're running the business you shouldn't manage the food. Hire someone. And vise versa. You can't effectively do it all unless you are using sub-par pre-made products which is already putting you behind your competitors. Of course there are many reasons you may fail but I believe that lack of knowledge of the business and how to manage it is the top reason.

                                    3. re: westsidegal

                                      "often landlords will only give good lease terms to restaurants that are part of a large well-funded corporation, with the remaining owners having to suck it up and agree to 10 year triple net leases with personal guarantees."

                                      Not how it works.

                                      You named standard lease terms that shouldn't effect the success of a healthy business.

                                    4. Several reasons, I reckon:

                                      Profit margins too low.

                                      Poor marketing, etc - so too few customers

                                      Poor management - owners with insufficient experience/skill in the industry

                                      Owners not appreciating just how hard work it is

                                      Wrong location

                                      1. some of the "finer" restaurants that I know all have the "chefs change around like they are on a Merry-Go-Round"

                                        the reasons I'm told are because 1) the "chefs" are expensive and once the hacks in the kitchen get the recipes, the "owners" just get rid of the expensive "chef" and "keep an eye on things" until they start to sour and then get another "chef" to go the "Merry-Go-Round". 2) this is a for-profit industry. whatever gets the money in the register is what most will cater to, like you stated.
                                        you also stated you "saw rooms grow vibrant because the owners had such a clear and precise vision of the experience they produced."
                                        yeah. if they care about the food industry and don't just see it solely as a business for-profit, like most. as in any business, if you care about your business it will flourish.
                                        3) many cities just can't handle more than 1 or 2 "white tablecloth" restaurants. people just aren't up for that much quality. McDonalds, Olive Garden, Applebees, etc. get the masses. The few that know about food and care for what they eat aren't going to fill a city full of fine dining restaurants.
                                        and my last point is that if a restaurant chooses to serve above-par fare, the prices usually are above budget for most people to dine regularly and the restaurant fails. I still see no reason why an accessible, not too fancy restaurant cannot serve above-par fare at a reasonable price. In my area we pay too much for a buttered roll, let alone a fancy restaurant that serves crap at a really high price.

                                        1. I doubt the reasons have changed much. The business is highly competitive and margins are low. A restaurant which stays in business a long time does so because one owner or a small group of owners has found a concept which works and kept an eye on the business. I worked in a restaurant 50 years ago, owned by a couple who both worked hard it. He looked at the financial side of the business, she was the hostess (and bartender when it was slow). They also had a chef who had been there a long time and had a local reputation. When they all retired, it didn't last much longer.

                                          Fast forward to recent years. New restaurants often fail because the concept never takes hold. A small restaurant opened in my neighborhood which tried to replace what had been a casual neighborhood place with a more upscale dining experience. I would go to the bar there once in awhile for a drink and a "small plate" and chat with the owner/chef. It was a nice place, but not one I would have dinner at very often. The owner wanted to do something which just couldn't work at that location, and he didn't want to do something down-market.

                                          1 Reply
                                          1. re: GH1618

                                            Similar thing near to me. Long standing family owned "fine dining" restaurant, albeit catering to a ageing customer base, with long standing chef. When the owners retired, the business went up for sale. Seemingly no takers, even as a going concern or a new venture. Two years down the road, place is still empty.

                                          2. the main reason for failure of most businesses can be summed up in two words: CASH FLOW

                                            1. Steve Zimmerman, who claims to run California's largest restaurant brokerage, has a list of reasons.

                                              1 Reply
                                              1. re: nocharge

                                                In addition to Steve's list of possible contributory factors (which I find very plausible), I'm reminded of a conversation I once had over late-night drinks at a restaurant industry hangout in San Francisco. A much tattooed veteran of many restaurant kitchens was telling war stories about places where he had worked. He claimed that a well-regarded restaurant in the city's Marina district failed simply because the chef/owner was doing too much coke.

                                              2. 1. Location, Location, Location
                                                2. Bread Service is not unique.
                                                3. Build out of restaurants are enormously high.
                                                4.Cannot keep their COGS at around 50%
                                                I would never invest in any kind of restaurant except the MacDonalds franchise

                                                6 Replies
                                                1. re: Jake70

                                                  Location is important. Probably most important for a McD type of place.
                                                  But: I have noticed restaurants in the oddest most off the beaten path locations that survive year after year while places open nearby in better locations that fail time and time again.
                                                  So many other factors.

                                                  1. re: Motosport

                                                    Franchises often put some pretty impressive research into where to locate new stores, and they have a level of experience and funding for research that an independent restaurant can't match.

                                                    1. re: tastesgoodwhatisit

                                                      Exactly. The likes of McDonalds, Subway, or Starbucks are essentially applying a well-rehearsed formula to locations where they have demographic information as well as who knows how many other parameters they use based on the experience of having opened tens of thousands of restaurants. Still, you would expect some small percentage to fail, but I would bet that McDonalds could give you the probability of failure for a new location down to a very precise precision. That, of course, is very different from a budding chef trying to open the independent restaurant of her dreams based on some quirky concept in a strange location.

                                                      1. re: nocharge

                                                        Info from a friend who wanted to purchase a McDonalds franchise a few years back: After making an initial inquiry he had to supply a full certified financial statement from a CPA to the Corp.
                                                        He then went to a meeting with two rep. from the Corp. which lasted all day. (One female and one male) At the end of the day he was invited to dinner and before/during and after the dinner the female (about thirty) repeatedly tried to get him to have a 'one-nighter' with her. He was in his middle sixties and somewhat obese. He had been happily married for forty years BTW. Later he described her as "a woman with a heart of steel'
                                                        He then received an invitation to attend a three day seminar which he had to fly to and of course cover all expenses.
                                                        There were eight other people attending the seminar.
                                                        The 'leaders' of the seminar basically spent hours trying to scare the **** out of the attendees. Everything from data sheets showing how much food the staff will ruin/steal/eat/give away to how a franchise can fail in a month from being involved in any local scandal to how many franchise owners implode emotionally and walk away and the franchise gets left in the hands of the Corp. And on and on. After the first day a husband and wife left. After the second day all the rest of the attendees left including my friend.
                                                        I post this b/c McDonalds ought to be 'the guiding light' when it comes to every aspect of how to survive or fail in the food restaurant industry.
                                                        One last thing: The fact that if you were the right 'fit' to own and operate a McDonald franchise would in time make you a millionaire was never in question. It was a 'given'. All any owner had to do was follow the McDonalds 'play-book' to the letter in every detail and success was assured. BTW before McDonalds offers a franchise they know everything there is to know about the demographics/local politics/future zoning/traffic you name it. Never ever any 'surprises.

                                                        1. re: Puffin3

                                                          thanks! that was very interesting reading.

                                                        2. re: nocharge

                                                          I wonder if the profit margins of the fast food franchises have heard up over the past few years?

                                                          In a prior job, I had several clients that owned multiple franchises.

                                                          The Subway guys did ok, the stores operated on the black but they weren't making 6 figures a year. The owners and spouses worked in the stores at market wages, it wasn't like they were paying themselves $75,000 a year. They owned 10 stores at that time. Subway seems to have few barriers to entry. I saw some methods of rolling fixed costs into leasehold improvements that did no favors for the store owners.

                                                          The Burger King owners did pretty good. I suspect the pressure from corporate to lower prices has hurt some locations. I see shuttered stores now where in the past, stronger owners would have, at corporates request and aid, picked up weaker locations and turned them around.

                                                          The mcdonalds owners might as well just put a bucket out to let people throw money in it. Those guys were rich, probably because they owned the stores since the 70s and 80s.

                                                          I worked on the sale of two very successful mom and pop restaurants, higher end with lively bars. These both showed cash flow in excess of $200,000 and that was what they were showing on the books. The owners had the right combo of food, service and a loyal following. Both tanked within one year of new ownership.

                                                          An auditor I work with now said the switch from cash to credit card transactions is having a negative impact on the restaurant and bar industry.

                                                  2. Dollars: debt, labor cost, food cost, rent...income vs. expenses

                                                    People: management skills, training, customer service

                                                    Food: menu, execution, consistency, quality of ingredients

                                                    Physical: location, parking, décor, cleanliness, comfort

                                                    ...just for starters.

                                                    A great restaurant is a magical combination of all of the above and more...

                                                    1. One reason restaurants fail is that they get mixed up with schemes like Groupon.

                                                      3 Replies
                                                      1. re: Tripeler

                                                        Actually, that's a sign the restaurant has already failed.

                                                        1. re: ipsedixit

                                                          I think of Groupon as the nails in the coffin, so to speak.

                                                          1. re: ipsedixit

                                                            I occasionally use Groupon coupons and the restaurants generally fall into two categories, new or near death. It's a good way to make people aware of your presence when just starting out. We have a decades old French restaurant nearby that was a top place in suburban NYC (Greenwich, CT) for decades. Now it exists mostly on Groupon coupons for discounted three course dinners. They've lowered the quality of food & service to justify this price point. Sad

                                                        2. Before one even begins to address the reasons given in the other posts, I've seen restaurants fail (taking with them the life savings of some hapless owner) because the owner has loved cooking all his/her life, but has no idea what the restaurant business is about.

                                                          They listen to family and friends say "you cook so well you ought to open a restaurant".

                                                          They choose a location where countless other restaurants before them have failed ... usually because no one can see it from the road, but the rent is cheap. They have no idea how to run or staff the business, or how to make a business plan (which, if done properly, would be sufficient to warn them away from the enterprise). They have never worked in a restaurant before. And they fail.

                                                          2 Replies
                                                          1. re: wayne keyser

                                                            I would suspect that the top reason, over all types of restaurants, is lack of business acumen.

                                                            They aren't budgeting properly. They're surprised by the sheer number of expensive things that will go wrong at the worst possible time. They didn't factor in waste when calculating their costs. They didn't research their market or target demographics or location well enough (a great restaurant in the wrong place can fail, while a mediocre one in a prime location can do great). They haven't saved enough capital to last until they start making money.

                                                            I think that I would back business acumen and a mediocre concept over a genius vision and great chef combined with lousy business sense.

                                                            1. re: tastesgoodwhatisit

                                                              Where I am in the world, some 30% of new restaurants fold within the first two years. That's somethng like three times to failure rate of new start-ups across the whole economy.

                                                          2. Undercapitalization. From delayed restaurant opening to simply not anticipating how much start up funds you need to keep a restaurant afloat before revenue actually starts coming in

                                                            1. Despite everything mentioned in this thread, there are still passionate newbies who just jump into the business and enjoy great success.

                                                              1. An equally good question is; why do great restaurants eventually close? How many memorable places have ch's posted to a different category?

                                                                3 Replies
                                                                1. re: mucho gordo

                                                                  Ah, the great restaurants eventually close because they're no longer great. Or, at least, the public's current trend suggests they are no longer great.

                                                                  That's leaving aside the ones where the chef/owner is intrinsic to the success and they die/leave/retire/divorce/etc.

                                                                  1. re: Harters

                                                                    I think you've got it right, Harters. Current trends and, I think, generational differences are primary factors.

                                                                    1. re: mucho gordo

                                                                      My classic example would be the place I referred to upthread. Back in the late 70s/early 80s, we used to go there for special occasion meals. However, when we were last there, maybe ten years back, we came away thinking how old-fashioned it seemed. We had moved on in our dining tastes, they hadnt. It was interesting - even though we were then in our early 50s, we were the youngest diners there, by soem considerable years. If they hadnt closed because of retirement, they'd have had to close because the cusotmer base had all died off.

                                                                2. I suppose we have to include employee theft (both food and money) as a (sometimes) contributing factor.

                                                                  4 Replies
                                                                  1. re: sandylc

                                                                    As well as corrupt city and local officials.

                                                                    1. re: ipsedixit

                                                                      Ugh, it can be an ugly world sometimes.

                                                                    2. re: sandylc

                                                                      Where I worked, employee theft was built into the budget at 2% (they called it shrinkage, but I don't think they were talking about throwing anything away). It was a big chain so I guess they know what they were talking about! They had it down to the last penny, and management was ultimately responsible.

                                                                      1. re: coll

                                                                        I worked in retail for a giant chain clothing store. We had to stay every night until we were balanced down to a few cents.

                                                                        After one really busy day (lines at the registers), we were off by $50.00. We stayed until 2 am trying to balance. We finally gave up and decided that one woman who paid for hundreds of dollars worth in cash and kept changing her mind had pulled a fast one on us with a $50 bill.

                                                                        To this day, I think they thought one of us stole it.

                                                                        I'm just sorry that they thought we were that stupid.

                                                                    3. In my area they seem to fail due to poor food and or poor service. One little Italian place was always packed, so they moved to a larger location, only problem was they didn't expand the kitchen staff and with more seats and the same food output, the wait to get food was insurmountable. They went out quickly. Another place that started small and moved to where the Italian place closed did great until the guy sold it and the new owners evidently didn't have a cook. Food quality suffered and they too closed quickly. We had a really nice high end place with a fantastic location, really fantastic location, a building that's truely one of a kind. The waitstaff was inept and about 10 of us went to dinner there one night and the only steak that wasn't well done was the guy who ordered well done. They lasted a couple of years, but only because of the location. A number of other places have come and gone, some before I even had a chance to try them out. There's a little steak place in town where I've yet to have a good meal and won't go back because of an experience a coworker had there, I can't figure they will be around much longer. Another place spent a lot of money fixing up an old building, but the food and service were both inconsistent and subpar most of the time, they too didn't last long.

                                                                      If you don't have good food and good service, you're not going to be around very long.

                                                                      1 Reply
                                                                      1. re: mikie

                                                                        Q: What's the best way to make a million dollars in the restaurant business?

                                                                        A: Start with 2 million dollars.

                                                                      2. While there are myriad reasons for failure, it seems that if a restaurant is not loud enough, younger folk see it as not a "happening place," and that can spell doom. Gotta' be so loud, that one cannot yell above the noise level, and then the lighting should strobe to some level.

                                                                        The food, the service, and the location are totally immaterial, as they are not used to judge the quality of the restaurant - it is ONLY the "vibe."

                                                                        Just my observations.


                                                                        21 Replies
                                                                        1. re: Bill Hunt

                                                                          Except for high-end restaurants that target diners that want a hushed environment, being too quiet could be a vicious cycle for a restaurant. I mean who want's to eat at a place that is dead? Not much energy and the place is probably dead for a reason. Likewise, there is the opposite virtuous cycle for places that appear vibrant. That's why restaurants tend to skimp on noise dampening features. Not only do they cost money, but the lack of them may make the restaurant seem vibrant even when 50 percent full. If it makes the noise ear-shattering when the place is 100 percent full... well, a restaurant that is 100 percent full, even if loud, is not a bad problem to have for the owner.

                                                                          1. re: nocharge

                                                                            One of the most salient points on this thread was posted by the member who said debit cards/credit cards are a main reason many restaurant fail.
                                                                            When the owner takes two hundred dollar bills into his office you can be assured not all that money ever sees an account ledger.
                                                                            You may be surprised to learn how many small/busy 'ma and pa' restaurants that always knock 10% off the bill if they know you will always be paying cash and leaving a cash tip for their daughter the server. Pretty common around these parts.

                                                                            1. re: Puffin3

                                                                              What parts do that?

                                                                              If they have to run a cash business something is wrong.

                                                                              Like you hinted to, they're not showing that cash and conducting business on the up and up. Eventually that will catch up to them when they need a line of credit and can't show the business making the profit it does, or they inevitably get hit for paying back taxes.

                                                                              If they don't have a point of sale set up, or running that thin of margins, they're probably not capitalized to begin with.

                                                                              1. re: sugartoof

                                                                                There are tens of thousands of small 'ma and pa' family owned, sometimes for one or two generations that appear to be just ticking along. Steady local customers. Not too busy or loud or too slow. Never any big menu changes. Parked behind the restaurant you'll see the new BMW the daughter drives. She just finished her MBA and she's worked in the restaurant all her life. She's about to take it over so ma and pa can do some traveling. There's the new Mercedes mom and dad drive.
                                                                                The other kids are still in university but they lend a hand in the summer and on holidays.
                                                                                Mom and Dad were able to pay cash in advance for all the kids educations. All the kids still at school have part time jobs near school.
                                                                                This is not some urban myth. This is fact for tens of thousands of small family owned restaurants.
                                                                                About ma an pa being able to get a credit card? They've always paid cash for everything.
                                                                                That 'cash' didn't all go through the books of that you can be certain.
                                                                                Good on them IMO. They've done a better job with the money they've earned through their hard work than any 'pencil-pusher' .. a ....... ..... .. .......... would have. And they have helped their local economy.

                                                                                1. re: Puffin3

                                                                                  You know, I don't see "heros" as people who work hard but don't pay their taxes. 'Cause lots of other people like teachers, doctors, firemen, and soldiers are also working hard, *and* paying their taxes, and helping to build the bridges, pay the cops, etc.

                                                                                  1. re: DGresh

                                                                                    They pay their taxes. IMO using some money to pay for their children's education who will in turn pay their taxes based on the good paying jobs they are qualified for which enrich the country in many ways as compared to those who took out student loans AKA 'borrowed from the tax payers' which statistically many never pay back. (Student loan debt in the US is about a trillion dollars today with the highest default rate in two decades).
                                                                                    Ma and pa paid cash for their house and all the kids cars. They put 'real money' into their local economy this way. They pay 'real money' to their suppliers and those suppliers in turn make sure ma and pa's order is always correct and on time and best quality. This helps everyone concerned right down to the restaurant customers.
                                                                                    As to the taxes going to build bridges etc tell that to the people of Detroit.....or Nagin's town.

                                                                                    1. re: Puffin3

                                                                                      Definitely a lot of cash floating around the mom & pop restaurants. Fists full of it change hands at Restaurant Depot, independent specialty purveyors & niche suppliers of key products like baked goods. Many times a % of in-house labor is paid in cash.

                                                                                      Even still, long term Mom & Pops pay a considerable tax burden when you add it up at the end of the year. Many kids & young adults "WORK" their way through college in them as well. Good learning experience.

                                                                                      1. re: Tom34

                                                                                        Yup. Their accounts are playing three dimension chess and the tax man is playing checkers.....barely.
                                                                                        I understand there must be a balance when it comes to paying one's fair share of taxes.
                                                                                        It's just when we hear of the Hell's Angels paying an expert on how to get government grants and then receiving a 200K grant so it's members can learn how to carve wooden ducks it sort of gives one pause.

                                                                                        1. re: Puffin3

                                                                                          Thats the first I heard of the Hell's Angles getting grants to carve ducks. I guess one has to give Credit to the Angles for taking advantage of our politicians never ending desire to give "other peoples" money away.

                                                                                          One other thing folks have to consider with Mom & Pops is they have to try to compete with the purchasing & advertising power of the Chains.

                                                                                        2. re: Tom34

                                                                                          "Definitely a lot of cash floating around the mom & pop restaurants. Fists full of it change hands at Restaurant Depot, independent specialty purveyors & niche suppliers of key products like baked goods. Many times a % of in-house labor is paid in cash. "

                                                                                          This is 100% true, but the situation you outlined can also describe fine dining establishments too. This is also common for both healthy or struggling businesses. I've been privy to seeing the books from some very well known establishments, and it's shocking even what goes on the books.

                                                                                        3. re: Puffin3

                                                                                          According to your script, though, the kids work in the restaurant, so it's really just an endless cycle of not paying taxes.

                                                                                      2. re: Puffin3

                                                                                        "They've done a better job with the money they've earned through their hard work than any 'pencil-pusher' .. a ....... ..... .. .......... would have."


                                                                                        Hard work is hard work, and success is success.

                                                                                        There are a lot of mom and pop businesses that don't follow the dream paradigm you mentioned, and a lot of younger generations that don't want to go back and work their family business. Frankly, none of this addresses the OP question. Please don't turn this into a political discussion.

                                                                                        1. re: sugartoof

                                                                                          In many respects it might. Back when I worked in the industry, most owners were 1st generation off the boat with nothing but the clothes on their backs. They started off 7 days a week as dishwashers and worked their way up learning everything they could. They lived in cramped dingy conditions, scrimping and saving every cent until they had a stake to buy their own place.

                                                                                          Their restaurant or diner wasn't a job, it wasn't a way of life, it WAS their life, 7 days a week, 12 plus hours a day. Usually wife at the register, husband in the kitchen.

                                                                                          I think TV has placed far too much glamour on owning a restaurant & not enough on what it REALLY takes to make it work. Major reason for failure.

                                                                                          Many Owner's children saw what it took and opted for a career with more normalcy in terms of a home life. Fortunately for them they had educational options their parents didn't.

                                                                                          1. re: Tom34

                                                                                            good points (and good job bringing the discussion back on point!)

                                                                                            1. re: Tom34

                                                                                              Sounds very romantic. Not every mom and pop is a hard working immigrant with a family business though.

                                                                                              There are great 2nd and even 5th generation restaurants, but then it's a matter of the family keeping the formula without ruining the business, or changing with the times.

                                                                                              1. re: sugartoof

                                                                                                The OP's question can be answered by pointing out why some restaurants succeed.
                                                                                                Let me preface by saying I am 'generalizing'.
                                                                                                IMO the restaurant business is unique in many ways.
                                                                                                Most business are open about 7 1/2-8 hours 5/6 days a week.
                                                                                                Most restaurant hours are much different. The restaurant staff are generally a more 'flexible' in their life styles. They need to be. Many back of house staff can not, do not want to work at 'straight' jobs. So the owner right off the bat is expecting/needing a 'straight' work atmosphere. If the owner can't find and keep loyal staff it's over. This takes a certain type of flexible owner. Many 'owners' are Type A personalities. Tough combo.
                                                                                                The owner needs ready access to hard cash many times to get the best deals from suppliers. (Your seafood supplier only has three hundred lobster today. Who is he going to send the truck to? The owner with cash or the owner who's always looking for '30 days'? Slip the driver a fifty once in a while and you'll be his first stop of the day.)
                                                                                                When you are walking around with a couple grand in cash it's 'difficult' to keep track of it. Receipts?
                                                                                                Small 'start-ups' with a couple of lawyers as business partners who fancy themselves as restaurant owners soon find out how fast 200K can be blown.
                                                                                                There are say four types of common sit down restaurants:
                                                                                                The ubiquitous 'ma and pa'. This is the most successful long term for reasons already described.
                                                                                                The 'White Moose' on West Broadway type with a Tex-Mex-Kumchi fusion theme start up funded with finite capital and a couple of 'hipster-up-talker' owners neither of which is 100% committed to or able to work 24/7 over the long term AKA years hence the endemic failure rate. They do have 'families' they must spend quality time with and when the four year old is sick some one has to stay home and it's not their life-partner b/c he/she is the only one bringing in any money.
                                                                                                From day one the book keeper and accountant and the bank from which the loan/s came from are literally watching every nickel with eagle-eyes. No one is going to the distributer with a wad of hundreds. So no 'haggling' over the price. Just make the cheque out.
                                                                                                The 'Fine Dining' type usually funded by a group of investors in many many cases looking for something to help with some tax write-offs. When 'Chez Morton' goes broke these investors can, with the help of their tax lawyer/accounting firm write off ten bucks for every dollar they invested over a period of tax years.
                                                                                                Lastly the 'Catcus Club' type. They are, besides ma and pa the most likely to last long term. Think 'White Spot'.
                                                                                                The business model is meticulously followed by all staff. Literally every penny is accounted for. Staff are given shifts on a carefully controlled bases. Hiring is done by professionals who follow the 'book' to the letter. No new hire walks into these restaurants without undergoing extensive interviews and back ground checks. Intake expert: "Hello this is Janet from the Catcus club team. I know it's six in the morning on a Sunday but I'm leaving town this morning and there a couple of details on your application I need to go over with you. Can you be here in an hour?"
                                                                                                The profit margins are razor thin. No 'free rides' or drinks or screw ups allowed ever.
                                                                                                Of course the masters of how to succeed in a restaurant are the 'fast food' chains.
                                                                                                It never ceases to amaze how many 'wanna-be' restaurant owners can't see the simple basic 'home truths' about the restaurant business. Any one contemplating starting their own restaurant ought to go work at some place like Wendy's for a year. Or in a ma and pa restaurant. Different business model completely. Then choose your poison.
                                                                                                If you want to make serious money in the restaurant industry open a used restaurant supply store. You'll never be without customers. None of which will be Chinese BTW. It's 'bad luck' to buy used restaurant equipment. Maybe they know something we don't.

                                                                                                1. re: Puffin3

                                                                                                  Agree, I might add no realistic business plan and expensive property leases.

                                                                                                  1. re: Puffin3

                                                                                                    "No 'free rides' or drinks or screw ups allowed ever."

                                                                                                    Speaking of corporate policies regarding free drinks, I think banning them can be counterproductive. I once had a bar conversation with a guy who managed a bunch bars at Marriott hotels in Hawaii. He was extremely "corporate" and very proud of his system where every drop of alcohol had to measured and accounted for, whether it was poured, spilled, etc. He said he didn't mind the concept of bartenders giving away free drinks and his system had a category for that. What he cared about was that free drinks were accounted for properly, although I suspect that bartenders who gave out too many of them could get into trouble.

                                                                                                    1. re: nocharge

                                                                                                      MANY years ago Hyatt policy was to count every drop, then throw regular parties in empty suites for the middling employees, filling them up with expensive booze and food.

                                                                                          2. re: sugartoof

                                                                                            I think I was the one Puffin3 referenced about making the debit/credit card comment.

                                                                                            They didn't "need" to run on cash, they wanted to.

                                                                                            A government auditor shared his observations with me that increased debit/credit card use is having a major impact on mom-and-pop/independent operations, they are selling and/or going out of business. (it was a state sales tax agent) They simply can't put cash in their pockets and manipulate sales anymore because most of their sales now have a paper trail.

                                                                                            Through two different jobs, I worked on the sale, financing and eventual problem loan work out of four formerly very successful restaurants. All three failed spectacularly for obvious reasons - 1. the original books were "cooked" and 2. the new owner had no idea how to run a restaurant (a very general reason I realize)

                                                                                            1. re: cleobeach

                                                                                              At the end of the day, week or month there is not enough $$$$ to pay the bills.
                                                                                              New restaurants must have a huge cushion of $$$ to get thru the lean times.
                                                                                              Just having enough $$$ to get the restaurant open is not a recipe for success.

                                                                                    2. As I have stated before: Cash flow!!

                                                                                      5 Replies
                                                                                      1. re: Motosport

                                                                                        Exactly! 'CASH' flow. Not credit cards/debit cards/coupons.
                                                                                        'Cash' talks in the restaurant industry like nothing else.
                                                                                        Cash in the front door. Cash to employees. Cash to suppliers. Cash goes home with 'mamma'.
                                                                                        If there is one single factor in a restaurant succeeding or failing it's the owner dealing with cash. 'Cash' buys the best workers. Yes there are many 'back of house' employees who want the security and benefits as working for Ford. Trouble is very few restaurants actually want people who are agitating for 'straight' employee benefits.
                                                                                        Sadly I can say with first hand experience that many Hotel/restaurant chains are hiring the best they can find to 'burn them out'. It's all "If you are part of the team you will have a secure future with us" (As long as you are willing to work five weeks in a row 12/14 hour shifts and not complain".)
                                                                                        The moment one of these young 'go-getters' starts grumbling 'management' open their file of ready and willing new 'cannon fodder'
                                                                                        Anyone who has to deal with bank managers and accountants might as well forget it.

                                                                                          1. re: Puffin3

                                                                                            I worked for Hyatt Regency in middle management when I was young and (even more) stupid.

                                                                                            It was common knowledge that they "used up" 99% of their middle management employees.

                                                                                            It was the most efficiently run, professional corporation that I have seen in my entire life - those people REALLY knew how to run a business and keep their standards high; EXCEPT for how they abused their young management employees. I guess something has to give somewhere if a profit is to be made.

                                                                                            1. re: sandylc

                                                                                              At least when you're young, it won't kill you. Probably their philosophy. What doesn't kill you makes you stronger ;-)

                                                                                              1. re: coll

                                                                                                ...or more cynical. Sure beats the naivete out of you!

                                                                                                EDIT: Oh, and those were in the days when sexual harassment was common and not reported. So that made things even more fun!

                                                                                        1. From my observations business fails when,
                                                                                          the owner hires a whole bunch of college kids to run the place without him/her being there to actually manage.

                                                                                          11 Replies
                                                                                          1. re: Monica

                                                                                            A fast way to go downhill, I can't even imagine the stupidity.

                                                                                            1. re: Monica

                                                                                              Hiring only family members isn't necessarily any better. Ask a few 7-11 owners.

                                                                                              1. re: Monica

                                                                                                It doesn't matter what age group you hire, if you're not there checking the register, and checking in, showing your face, the profits will vanish, and service will decline.

                                                                                                1. re: sugartoof

                                                                                                  Bottom line. Very few people actually have the specific type of personality to own/run a restaurant. But a whole lot of people are deluded enough to believe they are the 'exception' b/c they have 'a gift' in how they make cup cakes or how to 'bring a room together' with the right decor.
                                                                                                  Ironically about the least important thing in making a lot money in the restaurant business, isn't what you are selling. Like many many other businesses: "You have to know who to 'buy right'. Sacks of potatoes or used cars. for your used car lot. If you aren't 'buying right' you can't make a profit.
                                                                                                  Bank managers and accountants don't allow any 'creativity' in the restaurant business. If you don't have the cash in hand when the purveyor calls and says: "Our truck is near you and he's got a dozen coolers of fresh King salmon your competition couldn't pay cash in advance for. If you want them for cash you can have right now for 30% off." That's how independent restaurants make money.

                                                                                                  1. re: sugartoof

                                                                                                    In addition, an owner has to be there before doors open and after they close........every day the restaurant is open......84 hrs a week is pretty much a given for the 1st year or 2.

                                                                                                    1. re: Tom34

                                                                                                      Which is impossible if you have multiple locations, or you're a celebrity chef of any sort.

                                                                                                      1. re: sugartoof

                                                                                                        Which may partially explain why so many celebrity 'satellite' restaurants fail. Ask GR. for one. Inevitably the only restaurant left is the 'flag ship'.
                                                                                                        Celebrities can' seem to fathom the fact that sooner or later the gild comes off every lilly and restaurant 'grazers' see going to the old celebrity's restaurant as sort of a corny thing to do. Like going to Disneyland.

                                                                                                        1. re: Puffin3

                                                                                                          You're right. It's a miracle some of these people are still around.

                                                                                                          I think there's a tendency for highly touted chefs to believe their own hype, and forget that press doesn't equate business, or how they should be doing business. They think they can coast.

                                                                                                          All too common is a disdain for the customers, no respect for the landlords, or investors, or loyalty to purveyors - but if they have a book or tv deal, get a good review, acclaim, get invited to food events, get press every time they forage for dandelion in their back yard, or use a whole animal; and farm on a rooftop, they think that will translate into success. They sit around with industry, like a bunch of high school kids, gossiping and they make business choices based on that gossip.

                                                                                                          And let's be honest...most of them are charlatans.

                                                                                                          Most are bartenders who know nothing about food, but see a sexy food trend, or cooks that depend on their bar to cover their tight margins.

                                                                                                          1. re: sugartoof

                                                                                                            In addition, being successful may mean that it gets too easy to gamble with other people's money.

                                                                                                            I know a restaurateur (not a chef) who opened a restaurant in San Francisco. It was pricey, but San Francisco gets a lot of expense account dining from convention goers and others and is a dining destination for much of the Bay Area. Hence, downtown restaurants can sustain quite a high price point. The restaurant ended up being quite successful, say $9M in revenue and cash flow in the millions.

                                                                                                            He then opened a second restaurant based on the same concept in another part of the state. The area was extremely affluent, but with much less expense account dining, and it wasn't really a dining destination. Check averages were a lot lower than for the original place. The concept was also not a great cultural fit for the area and the restaurant didn't even last a year.

                                                                                                            He still opened two more restaurants with the same name and concept in less than ideal locations. Why? He didn't have to pay for them. They were paid for by developers who, based on his success in San Francisco, wanted them as anchor restaurants for their projects, in one case a new condo complex, the other a shopping mall. So he had little to lose by opening them. Of the two, only one is still around and it's not making a whole lot of money.

                                                                                                            1. re: nocharge

                                                                                                              Bingo. Much like Indie films or record labels in the 90's, you have a lot of people investing because of image, and these Chefs aren't worried about ruining their reputation. I've never heard anyone say "such and such got rich investing in Chef Woopty-Doo's restaurant empire".

                                                                                                              The trend is also to open up in terrible locations, almost as a preference.

                                                                                                              9m is a crazy amount of revenue. 1-2m is a little more common. A lot of places we talk about frequently on CH aren't cash flowing at all, because their payouts, and overhead for the stupid fur pillows, and Danish chairs, are designed to purposely obscure profits.

                                                                                                2. Bottom line for so many of the reasons noted, it's a very tough business. My son, after having been a chef for several years, was asked by me if he knew enough to open his own restaurant. His reply "I know enough not to open my own restaurant". That's when I knew he had finally reached adulthood.

                                                                                                  3 Replies
                                                                                                    1. re: coll

                                                                                                      There's myth that just b/c every one has to eat food almost any one can offer it to them and be paid for the service.
                                                                                                      In fact very very few people are endowed with the ability to be an excellent observer of local economics/food trends/social trends, and have the financial human resources to keep on top of these trends, an excellent identifier of best quality food purveyors, an ability to identify and hire and keep first class loyal staff, a personality that 'sharpens their pencil twice' when it comes to tracking literally every dime that enters and most importantly leaves the restaurant, the financial resources literally in their pocket to be able to buy those extra cases of lobster tails the previous restaurant was unable to pay cash for and ability to put the success of the restaurant ahead of any one in their life no matter if it's baby Susan's second birthday or not, the ability to work 18 hours days sometimes for weeks on end, the ability to step into a dish washers rubber apron and not bitch about it, the ability to prep food for hours b/c one of his line cooks is currently in the drunk tank, the ability to fire any one at any time for the slightest sin after the 'sinner' and potential sinners were all given fair warning when they were hired.
                                                                                                      This is a partial list of what it takes to be a successful restaurant owner. Any one missing any of these abilities are better off going to a restaurant rather than throwing their parents life savings away on 'another' fantasy.
                                                                                                      I read the above to some one thinking of opening (actually re-opening a restaurant 'Under New Management' on West Broadway Kits. His reply was: Ya but I can hire people to do those things". He LOVES his golf don't you know).

                                                                                                    2. re: bobbert

                                                                                                      Ha ha, I used to say the same thing. When I saw the best maitre' d & chef I've ever worked with open & fail within a year I knew it was more than just skill & knowledge to make a place work. They opened in a location that had several recent failures, they were under capitalized, the timing was bad because French restaurants were out of favor in our market. Beside being good you have to be lucky too. The dining public is very fickle, they're loving you one day then gone the next.

                                                                                                        1. re: wolmania

                                                                                                          And too many custom fur pillows, Danish chairs, and lighting fixtures Ikea will be selling for $4.99 within a year.

                                                                                                          1. re: wolmania

                                                                                                            Coke is a real issue in the business. The following may be a relevant link:

                                                                                                            I have my own theory about what the restaurant in question might be based on the bio of the guy who wrote the article. Not too many candidates.

                                                                                                          2. I am always watching this cycle living a neighborhood where all of a sudden everyone wants in on the action.

                                                                                                            A few weeks ago a new trend-mex spot opened in a space vacated by a long in the making and short lasting BBQ place. The space is virtually unchanged, same bar, same tables, same open kitchen. The place that closed was not awful but it just did not work on the details - never felt right and never really drew a crowd. The new place is packed - they had the benefit of having an established brand with a popular spot in the city already but the "feel" is right - it smells fantastic and they have more bar style food, stuff people can pick on sitting at the bar or mingling in groups which hits the market and works on the space better. Lots of small details = a hit or a dud.

                                                                                                            1. It would be quicker to list the reasons why restaurants succeed.

                                                                                                              It is a very tough business, and unfortunately for the average person who opens his or her own place because they love to cook, they discover that the food itself is pretty low on the list of what makes a restaurant a success or a failure.

                                                                                                              1. Wall Street looks at same store sales - how well a location maintains its sales levels from year to year. This is something the chains have figured out how to do pretty well, and the independents not as well. With places that failed, I usually sensed that it just wasn't a place people wanted to keep returning to consistently even if they didn't have an outright bad experience.