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Top 5 Reasons Why Restaurants Fail - #1 Being Lack of a POS System

- March 18, 2017



Top 5 Reasons Why Restaurants Fail - #1 Being Lack of a POS System

If your restaurant is not profitable, it will not be worth your time and efforts and thus will not last for long. But, why do restaurants fail? Yes, the restaurant business is competitive. But that is not the main reason why restaurants close their doors. The main reason a restaurant fails is that inexperienced owners and investors make many avoidable mistakes in this business. Here are the Top Five reasons why restaurants fail, go bankrupt, change hands and close the shutters:

1. Lack of Inventory and Staff Control.

Staff management and inventory control is an important task of every manager or owner of restaurant and bar, which must be carried out regularly to prevent theft and reduce unnecessary costs. Pay special attention when creating ingredients list for inventory items. It is important that you specify correctly amounts that are required to prepare dishes before cleaning, shaping, freezing, etc. to have an accurate insight into the requirements of goods and to have proper stock control. Various systems can assist with Inventory and Staff Control. Restaurants need to adapt with the times. One example? A POS system. This computerized system allows business owners to track sales, cash flow, food inventory and can help simplify your bookkeeping enormously. Restaurant POS systems typically offer front-of-house and back-of-house features in one integrated solution. With tools such as these, restaurant operators can monitor sales reports to see what menu items are selling, which items are generating the most revenue and which customers are purchasing them, both correctly and demographically.

2. A Bad Location.

Many restaurant owners fail to consider the various factors that make an area successful, largely because they lack the knowledge. Visibility, accessibility, and parking are key location factors restaurant owners must consider. The number and the density of competitors in the surrounding area can also affect a new restaurant’s potential for business. The busier the area, the more potential customers you may have, but the stiffer the competition as well. Consider also the culture of the neighborhood. Does the cuisine you serve have a market there?

3. Lack of Money.

It is always about the money isn’t it, but not just about the money that is for sure. But a lack of capital is one of the main reasons why the restaurant does not succeed. Reason – If you don’t have enough cash to cover your first year operating cost we may say that your restaurant is on a right road to fail. It’s important and necessary is to have enough cash in reserve for the first 12-16 months to make sure that you have enough capital for all the uncertainties you are going to face in the initial period of operation. This is crucial because in the first year you cannot accurately predict the course of your financial operations.

4. Poor Customer Experience.

Customers come to your restaurant for more than the food. They come for an experience. And if their experience offers more negatives than positives, you could be headed for trouble. Your customers may have a poor or average experience due to the following: Disengaged staff – not smiling, no energy, or obvious lack of comradery with coworkers. Unclean or disorganized restaurant or small details overlooked – bathrooms not stocked, dirty windows, or soiled menus. Poor food quality – dishes take too long to prepare, or delivery to table is slow Food is easy; Being courteous, kind and well-mannered to every one of your guests, every time is not. Great concepts understand this and build hospitality into their core. It’s something every concept must execute for every guest.

5. Menu.

Having too large of a menu is a VERY common killer of independent restaurants. Large menus create several problems within an operation:

  • Large menus lack focus.
  • Large menus take longer to order from.
  • Large menus require more inventory items.
  • Large menus require more equipment and personnel to produce.

When you try to be all things to all people, you end up being very little to very few. Keep your menu focused. Menu engineering is also an important thing!You have to do market research and tap into the local pulse. Just because Grandma had a good meatloaf recipe, doesn’t mean you should you put it on the menu. Plus there are complex psychological factors that come into play on a menu and visual placement of items make a dramatic difference. Everybody wants their restaurant to succeed. But the cold, hard truth is that many restaurants are failing in their infancy. While nobody can tell the future, by avoiding these common reasons behind restaurant failure, you’re stacking the odds in your favor to be one of the establishments that rise above and not only survives but thrives.