Around 60 percent of new restaurants fail within the first year. And, nearly 80 percent shutter before their fifth anniversary. Often, the No. 1 reason is simply location — and the general lack of self-awareness that you have no business actually being in that location, or city in general. It’s true. Now more than ever, you can gauge a city’s vitality by its restaurant scene.

No matter how lucrative the restaurant business seems from afar, running a restaurant business is a herculean task indeed. The restaurant business is not for the faint of heart ... or stomach. They have a high failure rate, but knowing why can help prospective owners avoid a similar fate. We are not here to discourage. We are here to help restaurants and small businesses succeed. Below are the top 5 reasons why restaurants fail.


The location is considered to be the number one factor that can either make or break your restaurant. While a bad location can turn fatal for your restaurant, it is important to not to overspend. You have to decide what location is best and meet in the middle between location and price. This is the backbone of your restaurant and will make it the place you want to be.


Most people think “anyone can open a restaurant”, but this is far from true. Lack of business experience and lack of financial planning among first-time restaurateurs are some of the major reasons why restaurants fail. Research, analyze and develop your plan ahead of time. If you don’t have experience, consult with someone who does to ensure and gain advice f this is the right business for you. Financial planning is a huge topic most people do not spend enough time researching.


A one-star review sends every business into a panic and can be extremely damaging to the restaurant if not taken care of immediately. A poor customer experience can almost certainly guarantee that the customer will not return and is often one of the main reasons why restaurants fail. This is why reputation management for your restaurant brand is essential. It is so important to be visible and active by always responding to positive and negative reviews to create positive relationships with customers to get them back through the door.


Data analytics are a necessity for a restaurant. Without any track of the daily business, you will not be aware if your restaurant is in profit or is going in loss. Reports also help in identifying the reason for the loss. Data can also give you insights on your menu, servers, and customers forming a full picture for day to day service.


There is a never-ending debate over this issue between legacy restaurant owners who have been running a thriving family business for years with minimal marketing and the new-age restaurant owners who believe in it wholeheartedly.  Of course, for established brands, there is little need for advertisement, but with extreme competition, and low attention span of customers, and their loyalty, marketing is an absolute must for restaurants. With such a high failure rate, you have to do something that sets you apart from the rest of your competition.