Why do restaurant businesses can not survive?

By Leaf Creations | July 16, 2021

Many people had come up with the thought of opening their restaurant at least once in their lifetime. sometimes we fail to open the restaurant because of some circumstances or sometimes the restaurant doesn’t work well due to many external reasons. Some people also think that restaurant is a source of passive income. The money will come automatically after opening the restaurant without planning.

But facts suggest that 60% of restaurants are closed in their first year of opening and 80% of restaurants are closed within 5 years of starting. We will discuss some major factors which affect the restaurant business and things you have to keep in mind before starting a restaurant business. So if you are someone who owns a restaurant or you are determined to open a restaurant business this blog is for you. First, I want to get your attention to why the restaurant business fails.


Location is the most important factor. Restaurant owners fail to choose the location where people like to come, where the footfall of the customer is high. There are some restaurants which are located in the streets but still, people prefer to go there and have a meal because these restaurants are famous now. But you are new and nobody knows you so you need to open your restaurant where people usually come and try out your recipes. So location is the most important factor for a restaurant.

Another important thing is the type of cuisine you are going to offer. If you are thinking of selling Chinese, Italian, fast food or something else then the location should be suitable for your food. Therefore, always choose the location according to your food. For example, if I am going to sell any foreign cuisine, I wouldn’t go to any local area.


The second most important thing is not taking responsibility. The restaurant’s owner thinks it is a source of passive income and because of that, they don’t need to put in hard work. One thing that you need to understand is you have invested the money so you need to work in your restaurant and nobody can understand your business better than you.

The restaurant is a type of liability business. It’s not like you open the restaurant and will start to make money from the first day. To make it the source of passive income, you can start the franchise model and chain models like Wow Momos and Dominos but for this, you need to work hard to make your restaurant a full-fledged business as well as your priority for it to succeed.


The third reason is that your management is not up to the mark. As you all are aware of the fact as an owner you can’t be available at the restaurant all the time. Suppose you expand your business to 50 restaurants so you can’t be available everywhere, right? So, for that, you need a good leader who can manage your restaurant whenever you are absent and this is necessary if you don’t choose a good leader then he won’t be able to handle all other employees. Due to a lack of good leadership qualities employees will not sustain themselves at your restaurant soon.

I personally saw this thing in my life to many restaurants owner. The next thing is customer service; customer service means helping your customer as soon as they enter your restaurant. Here, your communication can become a deciding factor in your restaurant’s success. For example sometimes what happens is you give your customer burnt food and he gets unhappy at the service but instead of listening to him, you are avoiding him. If this behaviour worsens or increases with time, the customer will spread negative word of mouth and in the end, you will get a negative response from the market. For this, as restaurant owners, you have to build a solid feedback system.


The biggest problem is the accounting problem. Most people don’t know how much money they need to start or run my business for the next 8 months or 10 months until it becomes profitable. People just consider the one-time investment and don’t think about the extra cost. They came only keep a minimal amount as extra which they don’t want to spend in initial days and as a result, they don’t spend on marketing, additional dishes, and staff.

  1. Only a few audiences will come to our restaurant because we have already skipped so many things. Less audience means fewer sales and automatically the restaurant will be at loss and unfortunately, it will eventually be closed soon. Poor accounting is one of the reasons why many restaurants failed. They make mistakes and miscalculations about how much time and money do they need to run the restaurant. In many cases, it will easily take around 4-6 months for any restaurant to become profitable so it is safe to calculate the expense for 6 months.
  2. The second calculating mistake people do is they don’t calculate the proper cost of their product which is a poor skill once you are in the business. You should know the exact cost of your product or service to avoid miscommunication or a bad reputation in the market. In metropolitan places, some people do reverse calculations. They calculate the number of sales do they need to earn a certain profit on behalf of that stats they set their daily sales target. Similarly, you also need to set a daily sales target like 5k or 10k etc. If the target isn’t achieved you can also run some offers to achieve that offer.
  3. The next problem is related to finance is which I have seen in many restaurants that they usually hire unnecessary staff. According to my, if any of your staff is waiting for work so it means we don’t need that worker. So, there is no need to hire extra staff because if you do your overall expenses will be high and ultimately you will be at loss. There was a restaurant which was located nearby my house and their food were good but it was expensive because due to unnecessary staff overall cost was increasing.

Compromising with Taste:

Instead of selling every food item try to sell a few ones that are of good taste and quality. In the initial days try to sell only a few things just focus on one or two dishes and then try to increase more food items according to your specific industry.

Don’t ever try to compromise food taste because of the price. Nowadays people are ready to pay the extra price for food but the taste should be worth the amount. For example – as well all know “chole bhature” of Delhi is famous. Back in the day, its price was around 20rs but today many sellers are selling it for Rs 60 to 8 and are still profitable just because of the maintained taste and value. Many makers are adding Cottage Cheese (paneer) and cooking their dishes in different cooking oils so it is up to you.

What’s important is that you do not compromise with the taste. You might become the cost leader by selling more units at less price but you can’t stay in the market for long using these tactics. Customer satisfaction is a must. And if you want to become a renowned brand in the food industry, you have to offer delicious taste in your food, now let’s move to the primary aspect and that is marketing.


The main point which is deep and also a reason for the failure of most of the restaurants and that is Marketing. Restaurants fail because they don’t do proper marketing. Marketing is a very big problem and opportunity as well. The restaurant business is a perfect competition if you cannot cope up with the market and competition, it’s very hard to survive.  One thing you can adopt to get ahead of your competition is the proper marketing plan. Restaurant marketing is basically the way you introduce and present your food business to the rest of the world. It includes all parts of your food business from the interior to the exterior.  It is reasonable to say that your new food business has slim chances of survival without restaurant marketing. Restaurant marketing includes:

  1. Digital Media Marketing: Most of the customers are smart and search online before going to a good place to eat. Every business should have a good Website which tells you a lot about the restaurant. Website is not enough; your SEO also matters a lot. If your website is top in the google algorithm you half of the marketing is done organically. You can also go for paid marketing called SEM which is an easy and fast way to grab customers.
  2. Social media marketing: Your presence in social media is very important as is an easy and fast way to get more attention from the customer. Your one viral content can get you more customers than any other mean as everybody heard about the Maharaj thalli restaurant where if you eat their maharaja thali in one hour alone can get a Bulletin prize. Instagram and Facebook for the post, Twitter for handling your customer complain and YouTube for more reach through videos.
  3. Social Media Optimization: Social media presence is not enough you have to optimize your social media sites. It’s used to increase awareness about new products or offers, and to engage with customers.
  4. Guerilla Marketing: In Guerilla marketing, you placed something interesting in front of your store so more and more people will stop there and some of them will notice you and come to you. McDonald’s is doing the same thing to their restaurants. These types of unique things usually attract more people. They don’t about the price or taste but still try because of that unique thing.

For more information, tips, creative ideas and many informative strategies, do check our Leafcreation’s website www.leafcreations.in to make your business grow faster.

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