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Old 03-06-2008, 09:37 PM   #1
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Why do restaurants close?

Everyone on DC has seen restaurants come and go.

Went on the web and it does not seem to be too much of an overestimate that 50 percent or so of all new restaurants close in the first three to tive years. And from the stuff on the web that may be a conservative estimate.

I am just curious as to why some restaurants seem to make it and others do not.

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Old 03-06-2008, 09:44 PM   #2
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There are too many reasons to list, but here are just a few...

Bad location
Bad food
Bad service
Wrong type of food for the location
Bad parking
Word of mouth after a bad experience

and many many more.
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Old 03-06-2008, 09:53 PM   #3
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There really are dozens of reasons. IMO the number one reason why any business fails is because the entrepreneur does not really know what they are doing. They think they do.
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Old 03-06-2008, 10:11 PM   #4
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I think burnout and unrealistic expectations by the owner starting the business can be a factor. I definitely agree about poor location and poor food. Of course, there's always the health factor; there was a place here that kept giving everyone food poisoning and, as you can imagine, I think they were ordered to close.
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Old 03-06-2008, 10:33 PM   #5
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I have heard the failure rate for new restaurants is in the the range of 90%.

Sometimes a great chef is a bad businessman.
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Old 03-06-2008, 10:38 PM   #6
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That is what I have heard as well, Andy.

Poor pre-planning (IE doing your homework first to understand your customers and their needs) seems to be another major factor in restaurant closing.
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Old 03-06-2008, 10:42 PM   #7
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GB, UB and CM covered most of the basics. Something else is management and having sufficient financial capital to see you through the first 2-3 years to get established.

And, then, you have stupid stuff like a great little BBQ joint over in Dallas is suffering thorugh, a showstring operation that has good food and location, but copper theives had hit them about 4 times in the past year .... and that has shut them down for a month or two each time.
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Old 03-06-2008, 10:49 PM   #8
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Quote:
Originally Posted by Andy M. View Post
I have heard the failure rate for new restaurants is in the the range of 90%.

Sometimes a great chef is a bad businessman.
You are so right. A very good friend of mine was the personal chef to Donald Trump. He was making $250,000 a year!

When the time came to re-new his contract, he said no and went in business for himself. In his restaurant he had pictures of all the great people he cooked for. Presidents, celebrities, sports players, and yes, Donald Trump.

He was in business for about 10 years. Everyone thought he was doing fine. Then one night he burned the place down. Now he lives in Italy because he knows that if he comes back, he is going to jail. turns out that business was only good for the first 3 years or so. He started going on long vactions and letting his business fail. He tried to rebound and borrow some money but by then the business already had a bad name. He could not recover.

My point is that no matter how good you are, business can always go south for whatever stupid reason, but you have to stay on top of it. This I think is the main reason so many restaurants go out.
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Old 03-06-2008, 11:10 PM   #9
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PastaKing - that brings up another problem ... which goes back to poor kitchen management - when the chef becomes a "celebrity" and spends more time out in the front of the house smoozing with the ladies than managing what is going on in the kitchen!

The first two names that come to mind are Gordon Ramsey (he admits it) and Rocco DiSpirito (he denies it).

Another problem is "theme" restaurants that go out of style. There was a fantastic Polynesian restaurant in Dallas back in the late 1960's called "Ports O' Call" (maybe it was Ports Of Call) that was riding on the popularity of Polynesian drinks - Mai Tai, Piña Colada, etc.
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Old 03-06-2008, 11:15 PM   #10
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GB, UB and CM covered most of the basics. Something else is management and having sufficient financial capital to see you through the first 2-3 years to get established.
Exactly!! I think that is the main reason. Then the rest play a factor as well, but all are correctable if you are really trying. I see it happen all the time around here. I have seen one location become 5 different resturaunts, I always wonder exactly how long they will last and who will be the next in line to try. It's a tough business to break into and be successful in.
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