One common perception of the restaurant industry is that most new restaurants fail within the first year of operation. But that is just not so…
One common perception of the restaurant industry is that most new restaurants fail within the first year of operation. But that is just not so, according to an analysis published in the August 2005 issue of the Cornell Hotel and Restaurant Administration Quarterly. The article, Why Restaurants Fail, by H.G. Parsa, John T. Self, Dvid Njite, and Tiffany King, is available at no charge from the Quarterly`s publisher, The Center for Hospitality Research Using actual restaurant statistics for independent restaurants operating between 1996 and 1999 in Columbus, Ohio, the researchers found that the failure rate for independent restaurants was 26 percent in the first year.
Not only that, but the total failure rate for the three-year period was 60 percent-far lower than the conventional wisdom suggests. While the study is limited to the Columbus market, there is no reason to believe that it is materially different from the United States as a whole. Over the three-year period, the study also found only marginally greater failure rates for independent operators (61 percent) over franchise outlets (57 percent).
The researchers also interviewed a sample of the restaurant owners to determine the factors that make for restaurant success. Surprisingly, the entrepreneurs did not point to external factors and gave little credit to advertising or promotions for their success. Instead, they said that successful restaurant operators must have a clear concept that they espouse passionately and consistently. Successful restaurateurs also must be able to commit huge amounts of time to their business and be willing to adapt to changing situations.
The article, which is now posted at TheCenterforHospitalityResearch.org, was published in the August 2005 issue of the Cornell Quarterly, the premier journal of applied research serving hospitality practitioners and scholars. The award-winning CQ is published by The Center for Hospitality Research at the Cornell Hotel School and is available by subscription from Sage Publishing.
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