“Failure? Does it Exist?”

Were you upset when your favorite restaurant was closed? I know I was when Todai, a buffet restaurant, closed in Daly City and Concord. I remember my favorite experience at Todai was eating those delicious sushi and colorful crepes. If I want to eat at Todai, I have to go to other franchises in California that are located in San Jose and Orange County, but these locations are too far away.

You may be wondering why some restaurants closed their business. One of the common reasons that most people believe is the recession because they believe that as the economy changes, businesses also change. This may be true, but Lorri Mealey points out that some restaurants in the past have failed even before the recession. In Lorri Mealey’s article, he lists ten reasons that restaurants fail within their first three years, but I will point out five of them.

Can you see me?

The first reason that restaurants fail is the location which is a big decision that owners have to make when starting a business. According to Mealey, this is really important because a bad location has an impact to the restaurants’ future. “Poor visibility, no parking, no foot traffic, or maybe being cursed are just a few of the problems associated with a bad restaurant location.” I agree with him because owners have to choose a location that can create customers’ awareness of the restaurants. For example, the location is supposed to have no trees or building blocking the restaurants, so customers can see them when they are on the road or a mile away. Also, I want to add that the owners have to be aware of the competition around the restaurant’s location because they have to compete against other restaurants for the same customers. For example, there are two Chinese restaurants on the same street and they both serve similar foods, so this creates competition. When finding a property to open a restaurant, owners should do some research on the property by making sure there is no barricade or competition around the area.

The second and third reasons are that restaurant owners hire poor managers and the owners do not work. Mealey emphasizes “if you want to own a restaurant, but not work in it, then don’t expect to get paid.” It sounds like he is angry because he knows some owners take advantage of their own restaurant by not putting their hearts and soul into it. They may let their managers do all the work, and get all the credits and money from the managers’ hard work. Even though an owner hires a manager, the manager may not know how to operate the restaurants properly. Sometimes the manager may not know how to lead the employees, and solve problems on their own. For instance, in one of my posts on Kitchen Nightmare, the restaurant was not successful because the three owners lacked management skills and could not solve their problems, so they had to rely on Chef Gordon Ramsey for help and advice. The solution to these problems is that owners should take more responsibility for their restaurants and should hire managers who have work experience in the restaurant industry.

Travis Rodgers Now!

The fourth reason is owners do not watch their cash flows and it may result in closing the restaurants. It is a risky business in operating a restaurant because owners have to rely on the customers to come and spend their money on foods. Without customers, there is no cash flow coming in the restaurants for the owners to pay their bills and taxes. If the owners do not pay their taxes, the government has the right to close their business and probably sell it. “It can also cause the state or other local government to shut down a restaurant completely if taxes aren’t paid.” The solution to this problem is to make sure to keep an accounting book, so the revenues and expenses are balanced. Mealey’s suggestion is to “make sure you have enough cash to cover big expenses, like food orders and payroll, every week, along with all the other bills that come with a restaurant.”

The fifth reason is that bad customer service can cause the restaurants to lose potential customers. From my previous post about my interview with my professor, he says that customers’ satisfaction is important because this results whether or not the customers may come back. Mealey also explains that bad customer service causes customers not to come back, even if the foods taste good. “And they don’t bother return to restaurant they think have bad service.” The solution to this is to train employees to maintain high quality of customer services, so the customers may feel welcome and comfortable within the environment.

When starting and running a restaurant, it is a complicated business because owners and managers have big responsibilities daily. They have to remember to maintain high quality of service to exceed customers’ expectations, maintain high quality of foods that are appealing and delicious, keep track of cash flows, and hire experienced managers with leadership qualities.