Top Four Reasons Why Restaurants Fail

By: Chad Eisenhart

Published: March 22, 2013

I have been in the corporate restaurant business for over 20 years. Corporate restaurants do have working systems. As long as management follows through on executing those policies and procedures consistently, the restaurant is highly likely to succeed.

About one in four restaurants close or change ownership within their first year of business. Over three years, that number rises to three in five.

While a 60%, failure rate may still sound high, that is on par with the cross-industry average for new businesses, according to statistics from the Small Business Administration and the Bureau of Labor Statistics.

The most important point is that your business needs to be better than the person next door. Word of mouth is the number one way to advertise, and best of all it is free advertisement.

Too many restaurant owners do not have a working system in place such as:

- Labor and food cost control.

- A Training Program

- Systems and Procedures.

- Well trained managers who consistently follow procedures, give direction and do follow ups.

These are just a few working systems that successful restaurants need to prosper. Statistically the cost of a restaurant's food and labor should not exceed 60% of their sales.

Labor And Food Cost Control - What is labor cost? The cost of labor is the sum of wages, benefits, and payroll taxes. If you pay too much then you lose money. If you pay too little, then you lose employees. You have to have the right balance based on your sales. Sales include all your food sales and include beverages.

The formula: cost of labor/total sales (x 100%) For example, if you sell $5000 in a day, and spend $1400 in labor for that day, your labor percent would be 1400/5000 = 0.28 (.28*100%=28%).

The labor percent for restaurants should be from 25% - 35%. This percentage depends on your restaurant style and mix of sales. Fast food restaurants may have labor costs as low as 25%. Restaurants with table service may have 30% - 35% labor costs.

Food Costs - Food cost is the percentage of total restaurant sales spent on food products. So this means you need to keep track of your food inventory and how much you paid the vendors for that food. This varies based on what type of food you sell, the costs of food in your area, and how much you buy locally. Food cost is typically in the range of 28% to 30%. A steakhouse will have a higher food cost--30% or higher. You must accurately track your inventory and food costs to determine the total profits for the restaurant.

Training Program - There are restaurants that fail every day in the industry because of poor training programs or no training. Training is a part of our lives from birth on. Sometimes training may be by example. But for the food service industry, it needs to be much more than just an example. You need to make sure that your employee's understand the importance of sanitation, food safety, portion control, cooking temperatures, storage temperatures, and more.

Your service staff needs to know the menu, the style of your restaurant, and the customers you serve. They need to know how to sell the menu--meaning upselling and suggestive selling. They need to know how to Wow the customers. They need a friendly demeanor, a positive attitude and a personality where they can focus on the guest's needs. Employees do not typically walk into your restaurant with all these skills. They need to be developed and trained properly. They need to be shown the right way, time to practice their skills, and a focused management to help them stay on track. The managers need to be well-trained in each area of the restaurant. The management also needs to know how to motivate staff. They should know what each employee should be focused on throughout each shift -- what to do when it is busy, and what to do when it is slow.

Procedures and Systems - In order to succeed every business needs systems and procedures. Procedures are the plan on how things should be done, a documented way of supporting policy directives. Systems are the combination of procedures that should take place, who, what, when and where it is done and the result that the system accomplishes.

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Peas, beans and lentils are known as pulses. They are the seeds of plants belonging to the family Leguminosae, which gets its name from the characteristic pod or legume that protects the seeds while they are forming and ripening. With approximately 13,000 species, the family Leguminosae is the second largest in the plant kingdom and it is very important economically.

Different kinds of legumes provide us with food, medicines, oils, chemicals, timber, dyes and ornamental garden plants. Legume products include carob, senna, gum arabic, balsam, indigo and licorice. Pulses are valuable because they contain a higher percentage of protein than most other plant foods.

Pulses have been used as food for thousands of years. The lentil was probably one of the first plants ever to be domesticated by humans. Most pulses prefer warm climates but there are varieties which grow in temperate regions. They can be eaten fresh or dried and come in a great number of varieties with a range of colours, flavours, and textures. In spite of its common name, the peanut or groundnut is also a legume rather than a nut.

All pulses, except for soya beans, are very similar in nutritional content. They are rich in protein, carbohydrate and fibre, and low in fat which is mostly of the unsaturated kind. They are also important sources of some B vitamins. Fresh pulses contain vitamin C, but this declines after harvesting and virtually all is lost from dried pulses. Canned pulses however, retain about half their vitamin C except for canned, processed peas which have been dried before canning. Canning doesn't affect the protein content, eliminates the need for soaking and considerably reduces the cooking time compared with dried pulses. Frozen peas will have also lost about a quarter of their vitamin C content.

Pulses are usually eaten for their high protein content. A typical nutritional breakdown is that for haricot beans which are used to make baked beans, contain, per 100g dried beans: 21.4g protein, 1.6g fat, 45.5g carbohydrate, 25.4g fibre, 6.7mg iron and 180mg calcium.

The nutritional quality of the soya bean is superior to that of other pulses. It contains more protein and is also a good source of iron and calcium. The nutritional breakdown of soya is per 100g of dried beans: 34.1g protein, 17.7g fat, 28.6g carbohydrate, 8.4mg iron and 226mg calcium. Dried soya beans are lengthy to prepare because they need at least 12 hours soaking and 4 hours cooking time, boiling for the first hour, but nowadays a large number of soya based foods including tofu, tempeh and textured vegetable protein (soya mince or chunks) are available.

One advantage of dried pulses is that they will store very well for long periods if kept in a dry, airtight container away from the light. However it is best to eat them as fresh as possible. Pulses toughen on storage and older ones will take longer to cook. Allow about 55g dried weight per person, once soaked and cooked they will at least double in weight. Most dried pulses need soaking for several hours before they can be cooked, exceptions are all lentils, green and yellow split peas, blackeye and mung beans. Soaking times vary from 4-12 hours, it is usually most convenient to soak pulses overnight. Always discard the soaking water, rinse and cook in fresh water without any salt, which toughens the skins and makes for longer cooking. Changing the water will help to reduce the flatulence some people suffer when eating pulses, also reputed to help is the addition of a pinch of aniseeds, caraway, dill or fennel seeds.

Consumers should be aware that it is not safe to eat raw or undercooked kidney and soya beans. There is no need to avoid them as long as they are thoroughly cooked.

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