If it were only that simple. Most of the time it's based on reasons such as low sales, bad inventory management, or bad management. However, the REALLY bad ones have a combination of all those things.
We think the top 3 reasons for a restaurant closing are:
1. Location Problem
2. Marketing Issues
3. Ineffective Operations
#1 - In real estate, they have a saying: 'location, location, location'. That very much applies to restaurants as well. Failure to do your proper due diligence can result in you closing your business. Knowing how many restaurants there are in your area is very important. From there, knowing how many of those cater to your clientele is even better. Is your bar easy to get to? That is important. And it could be as easy as choosing whether to open on the left side of the street or the right. Think of it as the path of least resistance.
For example, there was a restaurant I managed that was in a great location near the downtown area. However, it was location on a 90 degree turn. Most cars driving by couldn't even see the sign or know that there was a restaurant there. In the end, that hurt us badly. Location can be a funny thing. It’s not easy to pick up and move, so it's important to understand as much as you can about the area you want to be in. From there, you are looking for a spot with lots of traffic, that's easy to get to, with not too many competitors. Easy, right?
#2 - The 2nd part is marketing. Getting people in the door is not as easy as people make it out to be. A lot of it needs to be word of mouth. Make sure you are delivering on your mission - whatever that is. “To serve the best tacos anyone has ever eaten.” If you could pull that off, you wouldn't have a problem with traffic.
Marketing can be basic if you need it to be. Just try to reach as many people as possible for the least amount of money. So in this case, the thing that comes to mind is social media. But as you may already know, it normally takes a minimum of 3-6 months of social media in order to drive traffic to your restaurant. Try getting on local food websites. Or get reviewed by media in your local area. If you do a good job, that can be a very cost effective way to bring in money. Live shows, sports, and games are types of entertainment that also work too. Specials for certain cocktails or beers for happy hour is a great one. Even if you did the two above, you can't miss the third.
#3. The last piece to a successful restaurant/bar is cost control and operations. All the things such as comped meals, free drinks, over pouring, theft, inventory, and providing bad service are the holes that can sink your business. Getting these in line is very important. So here's how we would do it.
You’ll need rigorous inventory management with a Point of Sale (POS) system. Restaurant owners who don't track their sales report are extremely susceptible to employee theft. A great POS system can be extremely beneficial for your company. They can help you keep track of all of your sales, help manage your inventory, and even provide data that can be helpful in optimizing your business. This is important not only for theft but also for profitability. Here a link on how to pick one.
GOOD OPERATIONS MANAGEMENT - This also includes inventory and financial audits. What a POS system doesn't pick up, good physical inventory will. QUICK NOTE: When it comes to the bar, check the bottles for being watered down using an alcohol meter. Theft can come in many different forms. It can come from the time clock, breaks, and employee discounts as well. You should have policies and systems in place to monitor all of these things.
CAMERAS - Cameras will be able to provide physical proof that someone is stealing. Make sure your employees know you have them, but not where they are. Here is a good place to find camera systems.
OVERPOURING - Just because your inventory is off from sales doesn't necessarily mean that someone is stealing from you. It could also mean that you have a training problem. When your employees do not use proper portions for alcohol, they are literally pouring away your profits.
The Best Way To Fix Overpouring
Measured Liquor Pourers are the best fix for this. Overpouring is the #1 reason why bars lose money. If you have a bar, you should have measured pourers. Here a link for the best American made ones.
Every Restaurant that knows these things and practices them daily will have a better chance of staying in business. Ignore them and you're done in the first 18 months. The three important areas again are location, marketing, and operations.
Let's be real for a second. What happens if you're in business and you’re running everything correctly, but not delivering quality service? I don't care how efficient you are or how good your marketing is, if people aren’t genuinely pleased after coming to your establishment, then just stop right now.
Having a company mission and doing everything you can to deliver on that mission, is essential. When people have a good experience, they will talk about it to everyone. And that's the best marketing there is.
Combine all the above with a good experience, and it's really hard to fail. But a bad experience is like cancer. You able to recover from 1 or 2. But if they continue, you're done. No amount of marketing can overtake the social blowback of bad service. Operate with GREAT service everyday and fix any small issue you may have as quickly as possible.
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