Deciding to own and operate your very own restaurant is an incredibly rewarding business decision to make. Unfortunately, it’s common for fresh restaurateurs to overlook some of the most important qualities of the industry, resulting in 60% of independently-operated restaurants failing within their first year of business. These statistics further increase to an intimidating 80% failure rate for restaurants in their first 3-5 years. With unrealistic goals and poor planning, it’s easy to get caught up in a whirlwind of complications while trying to get your restaurant off the ground. Fortunately, all it takes is a little research and business planning to prepare you with some effective business strategies to optimize your restaurant’s potential for success!

BUILD IT by Design has prepared a list of the top 3 reasons why restaurant businesses fail, along with with some great tips on how to prevent them:

1. Location

Selecting the right location for your restaurant can be just as difficult as finding the perfect place to live. Although the checklist may be a little different, there are so many important qualities to consider! For example, a restaurant located in an area with insufficient parking, limited foot traffic and poor street visibility will see much fewer diners than a restaurant that is conveniently accessible. Selecting a neighborhood that does not match the brand, style and price points of your fare may also prevent your targeted crowd from becoming loyal regulars.


  • Work with a real estate professional that understands the restaurant game to help identify which neighborhoods are best suited to your brand.
  • Learn about your competition – Who are they? Where are they located? How are you going to stand out?
  • Identify your “niche” – Pay attention to what your target groups are ordering and adjust.

2. Finances

Overspending is a common trap for new restaurant owners as it’s very easy to get carried away with shiny design and super high tech equipment before you have even had a chance to open your doors. In addition to the cost for aesthetic, it’s not uncommon to find restaurant owners burdened with unrealistically high rent prices or improperly managed budgets. Without enough cash on reserve for the first 12-16 months of business, restaurants run the risk of gambling their reliable cash flow.


  • Consider the benefits of leasing equipment, you can write it off.
  • Consult a real estate agent that will work with you for competitive rent opportunities.
  • Clarify/construct a working budget with an accountant or financial advisor.
  • Work within your budget, and communicate that to your desired designer so they don’t overspend on shiny things.

3. People Skills

Perceived interpersonal skills also have an incredibly large impact on a restaurant’s ability to succeed. Neglecting to carefully hire, train, and support your restaurant staff will not only create tension, confusion, and disengagement over time, but it will also directly impact the quality of service your patrons are exposed to. With restaurant review websites rapidly gaining more and more attention, it has become more important than ever to ensure that your restaurant is able to maintain a positive reputation throughout the entire dining experience. First impressions can determine repeat customers, and customer retention is much more cost-efficient than customer acquisition alone!


  • Provide your carefully selected staff with the proper training and support they need to excel in their roles.
  • Set a strict standard for customer service expectations.
  • Interact with your customer – Be willing to accept constructive criticism and identify opportunities for improvement

With resources at our fingertips, restaurant owners are at a great advantage for acquiring the knowledge and insight they need for success! Alternatively, feel free to reach out to our BUILD IT by Design experts at (905) 696-0486 or for more insight and inspiration. Happy Planning!

This entry originally appeared on the BUILD IT by Design blog.

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