The oft-cited stat that 90 percent of restaurants fail in their first year is one of the big reasons I haven’t tried to open a little place of my own (that, and the oft-cited fact that most restaurants put their owners deep into debt). But according to hospitality management professor H. G. Parsa, who tried to track down the origins of the 90 percent figure back in 2005, it’s a load of bunk: The real failure rate is about 60 percent, the same as the nationwide, cross-industry average for new businesses. Parsa’s research made a huge splash in trade journals, but why won’t the myth die among the general public?
Bankers may have a lot to do with it, Parsa told BusinessWeek (via Grub Street):
Because of the belief that restaurants are high-risk investments, he says, many banks won’t lend to restaurants at all. Typically, the ones that do require would-be restaurateurs to pay sky-high interest rates or put up significant collateral (say, a house) to mitigate the perceived risk. … Ironically, Parsa’s research identified lack of sufficient startup capital as one of the major elements that contribute to a restaurant’s failure—making the myth a self-fulfilling prophecy of sorts.
The media also keeps the dubious stat alive by quoting experts who parrot it and then not bothering to fact-check those experts (BusinessWeek counts itself among the guilty parties here).
Plus, the number just seems correct to many people, given all the spots that open and close each year, but that’s actually because opening a restaurant “has such low barriers to entry and exit,” the article explains.
Really? Low barriers? See ya—I’m off to start that café.
yes its high risk , it effects with the mood of the customers , somtimes up and down , its hard work to manage with the employees , if they aren’t well qualified and dishonest , its risk with the row materials specially specially if it slow moving items and many other things , also dealing with guests and looking after them and cheking their comment and making correction to reach certain standered that is challenging job, any way if you love runing restaurants you should be ready to fight fo success.
mostafa Egypt-London
mostafamoussa@yahoo.com
The percentage of failures would be even lower if it weren’t for all of the “Gee, I’ve always wanted to open a little restaurant” idiots who have never even worked a day in the business. I’ve opened five restaurants for first-timers, and spent so much time arguing with them about things that every restaurauteur knows by heart!
Think that you’d really like to own & run a restaurant? It’s not about walking around in a new suit, chatting up all the people that you’d like to know whom you don’t know now: it’s work. Real work. Work that takes brains, know-how and lots of hours. Work in one first. Really. It may save you all of your money, your marriage and your self-esteem.
and how do you work in a restaurant if you need income and don’t have professional experience?
I’m one of your “idiots” that would love to work in the food business — I love to cook and everyone loves my food. But at middle age I can’t go be a prep cook & pay the mortgage.
any positive suggestions?
Good on ya, NYchowcook. I guess to some people ‘ambition’ is synonymous with ‘idiocy.’
Go be ambitious, and keep on truckin :).
You have a day off or have evenings off? Apprentice your services to a local chef whose work you admire. A few days in a real kitchen will either convince you that you absolutely *must* change your life to work in restaurants or it will get you over all your romantic ideas about what life in a kitchen really is like.
It looks like starting a catering business would be the way to go, Nychowcook. There’s no entry-level restaurant job that allows you to pay any bills.
Plus there’s a lot of wonderful things you can make at home that may not be feasible to adapt to serving the public day in and out.
From what I’ve read, people who want to do it a little later in life do well attempting catering.
But a restaurant, that’s a second marriage.
“But a restaurant, that’s a second marriage.”
That may well be the best definition that I’ve heard. Nice one, therealbigtasty.