blog banner

5 Reasons Why Restaurants FAIL To Survive | Small Business Advice Cafe Restaurant Management 2019


Hey guys, my name is Wilson. Today we’re going to be talking about the
top five reasons why restaurants, food and beverage industry has failed. These are the five common pitfalls which you,
if you know, can avoid. More than 60%, okay, of restaurant owners
within the first year of operations fail. That means that six out of 10 people that
run restaurant that has a beautiful idea, who wants to be able to bring their dreams
into reality, fail within the first year. And a lot of the reasoning behind why they
fail can be avoided if only they know about these five common pitfalls. Make sure you guys stay tuned and paid attention. The number one reason why businesses fail
is because of location, okay? What I mean by that is location in terms of
not understanding the difference between destination location and high traffic location. If you guys have an opportunity, definitely
check out this video where I break that down in terms of what they truly mean. In essence what high traffic means is not
a lot of people walk by and in turn has the potential for more customers and whereas destination
is someone that actually has to drive over specifically for your restaurant and having
a really high intent. A lot of people mistaken the fact that, “Hey,
you know what? I want to pay $10,000 in rent and in turn
I’m going to be making $100,000 in revenue because I’m paying so much money for rent
and this high traffic place.” High traffic only means higher potential for
customers coming into restaurant. Does not equate to more customers. You still need to be able to do the work. You still need to have a product market fit. You still need to have high visibility for
your food and beverage restaurant. It doesn’t make sense for a lot of people
who actually pay super high rent and have this expectation that their business would
survive just because they have a lot of foot traffic. Now, on the other hand, if you are running
a destination location, people don’t understand that you need to do the right amount of marketing. You need to be able to appeal, and market,
and bring your food offering in front of your core and the ideal customers minds and eyes
in order for you to be and actually entice them to come over here to your destination
location. Which at the end of the day, if you understand
the concept between the two and understand the different variables and elements that
come into play, whether it be visibility, crime rate, accessability, then you’re going
to be able to prep yourself much more for success and you’re going to avoid much more
pitfalls. So if you guys have not had the chance, definitely
check out this video where I talk specifically on these elements of two different types of
locations. Second reason why fail within the first year
is because of the fact that they don’t manage their team properly. What I mean by that is first of all, you need
to make sure you hire people that has the same aligned values, okay? Because if the way you do things and the ways
that they do things don’t align, then you’re in big trouble because you guys are not speaking
the same language and you guys are always going to butt heads. Okay. And they’re not going to have that accountability. They’re not going to have that common sense
which you expect from them. And in turn you guys can not work towards
a better and the vision that you’re trying to create. In this video we talk about how do we actually
train, how do you retain, how do you create the right culture in order for you to be able
to bring in and build an all star team. Now a lot of people also neglect treating
your staff like humans. And what I mean by that is giving them a fair
wage, giving them proper schedules so then that way they can actually do things outside
of work. Especially in the food and beverage industry. The schedules are so whack. Whenever there are holidays, they’re working. Whenever it’s happy hour, they’re working
and they’re basically working hours that a lot of people don’t. And at the end of the day, we as owners need
to be able to take care of them because at the end of day, if we do take care of them,
they are going to be able to take care of our business. And in turn it helps us out, right? So in this video we talk about the five different
ways in order for you to be able to train them properly, in order for you to be able
to align with them, and in turn have them run your business for you and not have you
being able to run your business day in, day out, and getting burnt out. Some of the poor examples that I see with
an initiative is that owners treat their employees like trash. And what I mean by that is giving them minimum
wage, always cutting on the benefits, not giving them development opportunities, not
trusting them, always looking over their shoulders and micromanaging them and in turn, just think
about it. If you’re on the other side of the table,
how would you feel if you’re not treated with respect? How would you feel if you’re not empowered
to take actions? How are you actually able to actually take
any accountability if there is no trust in you, which is a reason why we need to empower
our staff. For us at 720 Sweets, we have a $10 rule. And what that means is anything below $10
our staff has the ability to void, to comp, to actually give out products for that amount. So then that way they can actually bring a
pleasant experience for customers. And on top of that, our staff feels like that
they have trust, that they have power, that they can make a decision, they don’t need
to go through us and in turn allows them to be much more accountable for our business,
treating it like their own, right? Now, for those of you that think that, oh,
you know what, what if that stuff ends up abusing this $10 rules? And I can tell you that for a fact that people
do abuse it, but those people, they don’t align with us because their values are different. They’re not high in integrity, they are not
high in empowerment. And because of the fact that we, whenever
we hire has this really strong sense of alignment in terms of values, we know and we already
vetted 90% of those bad apples away from us, which is the reason why this $10 works very
well with us at 720 Sweets. And hopefully by me sharing some of these
strategies with you, you’re going to be able to actually bring back to how to treat your
team properly, to empower them, and to actually give them proper training. So then you can build an all star team who’s
going to be able to take care of your business while you’re away traveling, taking care of
your family. The third reason why restaurants fail within
the first year is because of ego. And what I mean by that is it’s okay if your
food sucks and that there is room for improvement. It’s okay that your customer service is not
the greatest. It is okay because customers are willing to
give you a chance if you have the right attitude, if you’re willing to improve. And if you’re putting in the resources for
development and constantly creating and nurturing that relationship and molding your offering
until it fits your customer’s palate, okay? People are okay with that because we’re all
human. We all understand that if you’re genuine and
putting in the work and actually improving your food offering, then people are much more
likely to support you along the journey. Why a lot of people fail is because of ego. And what I mean by that is if I’m given a
feedback that my food sucks and I just take it personally and I think that, you know what? These guys don’t know their stuff. These guys just don’t understand my offering. Well, if one person tells me that, it’s not
a problem, but if 10 people tells me that my food sucks, then I should better take action
to improve and tweak it. But a lot of business owners, their ego gets
into place and the ego gets into their own way and now they think that everyone is picking
on them. The world is not fair and they’re not willing
to adopt and change because they have this idea about their recipe is amazing. Well, that’s the reason why they fail. Same thing with customer service. They can take it personally. They think that, you know what? My customers are picking on me. You know what? My process, this is something that I’ve been
doing for the last 20 years. It’s okay because it’s been working for the
last 20 years. Well, sad to say it. This is the reason why they’re failing because
their ego is in the way of them improving, delivering better customer service, better
food offering. So if you want to succeed, make sure your
ego is not in play. Make sure you’re able to take in that constructive
criticism and actually do something to improve upon it. And that way you’re going to be able to actually
bring your customer along the journey with you for this whole development and in turn
create an amazing experience for your customers. The fourth reason why restaurants fail is
because they don’t know their numbers. And what I mean by that is, do you really
know the costs of goods sold for your restaurant? Are you keeping tabs on the percentage that
you’re actually spending on labor? And do you know how much rent actually accounts
for your total revenue? If you don’t know these numbers, these golden
metrics and these golden margins, you’re not going to be successful. Because if you don’t know the numbers, how
can you know if anyone is stealing from you? How can you know how much you’re making? How can you manage your cashflow properly
for expansion? You can’t do any of this if you don’t know
your numbers. At end of the day, numbers would allow you
to actually manage your food costs properly. So for example, if you’re throwing away tons
of food because they go rotten, because they get stolen, then at the end of the day, you
know this. I’ll give you an example. If your costs of goods sold. So for example, the burger costs $3 to make
and you sell it for $10 and all of a sudden your cost of goods sold raises to $5 and you’re
selling it for $10, you know for a fact that somewhere in between something is wrong, okay? Either you have been throwing away and wasting
a lot of ingredients because you’ve just over ordered and now they’re expired. Now you have to throw everything away or someone
is stealing from you because you’re buying let’s say $500 worth of burgers, but in turn
you only have $400 worth of ingredients. What’s going on? That’s the reason why you need to know your
numbers. So that way you can actually work on, you
know what better delivery system to ensure least amount of spoilage. Or you can work on, hey, you know what? Are people stealing money away from me? These are all things that you need to work
on and that you can work on if you know your numbers. Same thing with scheduling. Are you working at the most efficient labor
force, right? Can you stagger the amount of people that
comes in? Are you maximizing the amount of revenue that
people can bring in? And if you don’t know your labor costs, you’re
not going to be able to control any of these elements. Which is a reason why a lot of businesses
fail. They do not understand their golden margins. So if you want to be successful in the restaurant
business, make sure you understand and know your golden margins. In this video we talked about how do you run
and open a successful restaurant, check it out here and understand your golden margins. The fifth and final reason why restaurants
fail it is because they keep running promotions. And what I mean by that is we see someone
being super successful running promotions. Our competitors are having lineups around
the block because of their big promotion. It’s buy one, get one free. And then in turn, you run the same promotion
and as you’re running that promotion, people are buying yet you’re not making money and
you’re like, “Wow, I can’t survive if I keep running this promotion, but yet my competitor
is doing it.” So that’s why you copied them. And in turn, you’re running yourself to the
ground because you don’t understand why they’re doing the promotion. At the end of the day, you need to really,
truly understand the foundations of your business before you run any promotions at all. And what I mean by that is if you’re running
a promotion, what’s the objective? Why are you running it? Is it to gain awareness for your business? Some franchise stores, they have the budget
to run these promotions to gain the awareness. It is a marketing cost and they’re okay with
it. But for your small business, is this something
you can afford and is this a strategy you want to employ for your business? Whereas if you’re running a promotion for
the sake of gaining profit, then the type of offering would be different, completely
different from a buy one get one free. It could be an upsell. So for example, if you create a meal bundle
and push it out to the market, then you can actually optimize the amount of people that
are buying from these things. So at the end of the day, having an understanding
the foundations of how you run your promotion is key when running it. Do not just go blindly in offering copy of
competitors just because they’re offering something that you’re not. So there you go off the top five reasons that
you should absolutely avoid when it comes to running your restaurant, okay? The first one is bad location, not understanding
the fundamental of choosing the right location for your offering. And second is mismanaging your team, not aligning
with their values and not incentifying them, not treating them like human beings, okay? Then third, your ego and make sure that your
ego’s in check, be receptive with people’s suggestion. And fourthly, we are talking about the numbers. Know your numbers. So then that way you know which lever to throw
in order for you to maximize the amount of profit that you can make. And finally, blindly following what your competitors
are doing and running promotions without understanding the fundamentals. Make sure you avoid all these pitfalls so
then that way you can run a successful restaurant business. If you guys want to learn more about how we’ve
started our business to now we’re becoming an international food chain, make sure you
check it out in the link below because that’s where I share with with you all the resources
that we’ve learned throughout the last 10 years. We’re talking about finding the right location,
negotiating free rent, finding and assembling the right team, understanding what our customers
want, offering them what they want, knowing the numbers, crazy marketing strategies, raising
funds, all these types of information are all on the link below, check it out in the
link below. I really hope you find value in this video. If you do, just smash the like button. If you want to show some more love, comment
in the section below. Otherwise, subscribe along the journey for
weekly videos that is going to help you improve and start an amazing restaurant business. I’ll see you guys next week.

Leave a Reply

Your email address will not be published. Required fields are marked *