EMILY STARBUCK CRONE
April 24, 2015
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The myth that it’s nearly impossible for a restaurant to succeed started with a TV ad about 10 years ago, says Greg McNally.
McNally is a former restaurateur who runs Restaurant Profit Technologies, a consulting business in Los Angeles. The infamous ad he remembers had a celebrity chef claiming that 90% of restaurants fail within their first year. And even though no facts backed it up, the statistic stuck.
The restaurant industry has a reputation for frequent failure, but McNally says every industry has a substantial failure rate, and some (like the furniture industry) see businesses fail more often. McNally concedes that many restaurants do shut down in the first year, but the failure rate decreases the longer a restaurant is open. Well-capitalized restaurants typically have a high success rate, he says, since the root cause of most failures is business problems rather than food or service issues.
Christin Fernandez of the National Restaurant Association says that every year, around 60,000 restaurants open and about 50,000 close. While that illustrates churn in the industry, she says, not all of those closures are failures. Sometimes the owner is ready to move on or wants to change locations.
Despite overblown failure rates, the truth is there are common mistakes that contribute to many restaurants shuttering each year. Here are four ways to overcome the most common mistakes McNally sees, with advice from successful restaurateurs who have been there.
4. Know what you’re getting into
Experience is key for restaurant success. McNally is often approached by people who want to open a restaurant but have no experience. He likes to ask them, “Why would you like to enter this industry? What makes you believe you would be successful?” Just because someone has been successful in another type of business doesn’t guarantee that those skills or successes will transfer well. Running a restaurant isn’t a job, he says; it’s a lifestyle requiring extreme hours and commitment. McNally has found that a strong management team can help an inexperienced restaurateur succeed, but those going it alone are likely to struggle.
“Mother’s wasn’t an overnight success. I had the idea in 1992, and everything I did for the next eight years was getting ready to open this restaurant. I had the idea while working for Weight Watchers; I knew a lot about cooking and did catering on the side. I knew I was going to get laid off, so I decided to go to cooking school so I knew the way of doing things. I paid my dues. You have to pay your dues and know every job in your restaurant; you can’t open a restaurant or get into the business without knowing how to wait tables, do some work in the kitchen or bartend. I can do any job in the restaurant; if a server doesn’t show up, I can wait tables. If the cook is out, I’m on the line. I’ve heard of restaurateurs who don’t even know what’s on their menu. Be a cook, waitress or bartender first. I did those before opening. Know what you’re getting into.”
— Lisa Schroeder, chef and owner of Mother’s Bistro & Bar in Portland, Oregon, since 2000