1851

When you launch your restaurant concept, you plan to be in it for the long haul. You really can&rsquo;t go into it any other way.

But with an <a href="http://journals.sagepub.com/doi/abs/10.1177/0010880405275598?utm_source=1851franchise.com&utm_medium=article&utm_campaign=1851-unhappy-franchisees-six-reasons-why-restaurants-fail-2704562" target="_blank" rel="nofollow" target="_blank">estimated 60% of independently-operated restaurants failing in their first year</a>, this is one topic that needs to be tackled head-on.

And if that news wasn&rsquo;t unsettling enough, some studies claim that number is as high as 90%. If you look further out, 80% fail in the first three to five years of operation.

So why so many failed restaurants? Here are 6 reasons we see all the time.

1. Location, Location, Location

Just like when homeowners are searching for the perfect home and location, you need to follow suit when selecting your retail space. I&rsquo;d even say you can&rsquo;t be too picky when it comes to this make-or-break decision.

Because if you don&rsquo;t look at a prospective location from all angles, especially a patron&rsquo;s viewpoint, you&rsquo;re liable to wind up with one or more of the following problems:

<ul>
	<li>Poor visibility</li>
	<li>Insufficient parking</li>
	<li>Limited foot traffic</li>
</ul>

Solution: Start out with the end in mind. <a href="https://www.sba.gov/business-guide/plan/market-research-competitive-analysis?utm_source=1851franchise.com&utm_medium=article&utm_campaign=1851-unhappy-franchisees-six-reasons-why-restaurants-fail-2704562" target="_blank" rel="nofollow" target="_blank">Complete your market research</a> before you begin searching for a space. Map out your ideal customer and your competitors, so you know where your customers are and how other restaurants have fared before you. And if you&rsquo;re unfamiliar with the area, working with a real estate professional can be invaluable.

2. People Problems

I&rsquo;ve always said, &ldquo;My business is people.&rdquo; And when I counsel restauranteurs, I encourage them to embrace this same mantra.

Your team &ndash; your people &ndash; represent you on the front lines. If you&rsquo;re having &ldquo;people problems,&rdquo; it could be due to a whole slew of reasons:

<ul>
	<li>Ineffective hiring &ndash; Hourly vs salary ratio.</li>
	<li>Being consistently understaffed.</li>
	<li>Lack of focus on proper training &ndash; i.e. operations, customer service, leadership.</li>
	<li>Unclear workplace culture.</li>
</ul>

Solution: The upside of having people problems is that you can initiate significant change, just by acknowledging the issues. Oftentimes, it&rsquo;s not that your staff is &ldquo;bad,&rdquo; it&rsquo;s that you haven&rsquo;t set the expectations properly.

And once you&rsquo;re aware of this, things can only get better. For example,

<ul>
	<li>Get creative in your recruiting. Think beyond Craigslist. Contact trade schools, use social media, LinkedIn, hiring fairs, etc.</li>
	<li>Hire tough! This doesn&rsquo;t mean you have to be cutthroat, but you do need to be impartial. Create interview tools, <a href="http://restauranthrgroup.com/wp-content/uploads/2014/10/Screen-form-1.pdf?utm_source=1851franchise.com&utm_medium=article&utm_campaign=1851-unhappy-franchisees-six-reasons-why-restaurants-fail-2704562" target="_blank" rel="nofollow" target="_blank">like screen forms</a>, to make evaluating and comparing candidates easier.</li>
	<li>Define and &ldquo;sell&rdquo; your vision and purpose. Pinpoint it, and then live it and breathe it. Your enthusiasm will be contagious and your team will be excited about being part of it.</li>
	<li>Hire managers and leaders who have similar visions, values, and goals.</li>
	<li>Identify ideal candidates for each position. Do you need someone with a flexible schedule, management background, or a culinary education?</li>
	<li>Don&rsquo;t rush the hiring process. Finding quality candidates takes time.</li>
	<li>Ditch the complex manuals and create simple, easy-to-understand operational and customer training materials.</li>
</ul>

3. 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. &nbsp;

Your customers may have a poor or average experience due to the following:

<ul>
	<li>Disengaged staffed &ndash; not smiling, no energy, or visible lack of comradery with coworkers.</li>
	<li>Unclean or disorganized restaurant or small details overlooked &ndash; bathrooms not stocked, dirty windows, or soiled menus.</li>
	<li>Poor food quality &ndash; dishes take too long to prepare or delivery to table is slow.</li>
</ul>

Solution: This is another area you have a tremendous amount of influence over. Set the precedent and expectations early on by:

<ul>
	<li>Defining what you want the customer experience to be.</li>
	<li>Training your staff in accordance. Talk about it regularly and reward for it even more often.</li>
	<li>Hiring crew that are naturally nice and genuine. Everyone will have an off day now and then, but you don&rsquo;t want your employees being &ldquo;fake&rdquo; nice. Customers see right through that. Being selective with who you hire, by conducting thorough interviews, is so important at all levels!</li>
</ul>

4. Trying to be Everything to Everyone

<a href="https://www.youtube.com/watch?v=D1vQJFF2TKQ&utm_source=1851franchise.com&utm_medium=article&utm_campaign=1851-unhappy-franchisees-six-reasons-why-restaurants-fail-2704562" target="_blank" rel="nofollow" target="_blank">It&rsquo;s not just a popular pop song from the 90&rsquo;s</a>! Trying to be everything to everyone is a recipe for disaster. The most successful restaurant concepts know their niche&hellip;and nail it.

If you can&rsquo;t, or won&rsquo;t, hone in on your specialty, you&rsquo;ll encounter these issues:

<ul>
	<li>Overcomplicated menu &ndash; too many food items, changes too often, staff unable to keep up with the new, ever-changing menu.</li>
	<li>Lack of uniqueness.</li>
	<li>Jack of all, but master of none.</li>
</ul>

Solution: Time and time again, defining a niche &ndash; and sticking to it &ndash; can pay dividends. Just consider recent successes like Chipotle and In-N-Out Burger. These widely successful, fast casual concepts have simple menus, largely because they know who they are and what they&rsquo;re good at.

<ul>
	<li>Identify your niche, know who you are, and be the best at what you do.</li>
	<li>Properly test new menu ideas/items. When added to the menu, train staff properly.</li>
</ul>

5. Overspending

Overspending is an enticing trap for newbies. It&rsquo;s easy to think if you just spend more money on advertising or remodeling the dining room, that business will boom.

Before you make that jump, consider how else overspending can creep up on you:

<ul>
	<li>Spending too much before opening &ndash; excessive remodels, updates, and other possible non-necessities.</li>
	<li>Failing to closely watch &ndash; and reign in &ndash; cash flow.</li>
	<li>Not understanding food costs.</li>
	<li>Payroll growing too high.</li>
</ul>

Solution: This can be tricky to combat. On one hand, you obviously need money to start your restaurant. On the other, throwing more money at a problem rarely fixes it.

<ul>
	<li>Develop a budget early on &ndash; and stick with it if at all possible. Meeting with other successful restauranteurs can be helpful in establishing that initial budget too. Listen and learn from their mistakes.</li>
	<li>Understand all of your numbers, including your cash flow situation. If you don&rsquo;t understand something, make sure your accountant &ndash; or somebody &ndash; explains it until you do.</li>
</ul>

6. Lack of Systems

Developing systems that are customized to your operation is vital for success in those early years and beyond. Your time is limited, so establishing systems &ndash; along with checks and balances &ndash; allows you to auto-pilot select tasks.

For example, are you spending too much time on payroll, compliance, training, and HR tasks? If so, this takes time away from running a bustling restaurant. Divided attention will hinder your development.

Solution: Fortunately, you have lots of options here too.

<ul>
	<li>Establish internal systems to help get you organized, and then train operators to use those systems in your absence.</li>
	<li><a href="http://restauranthrgroup.com/services/payroll/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=1851-unhappy-franchisees-six-reasons-why-restaurants-fail-2704562" target="_blank" rel="nofollow" target="_blank">Consider outsourcing HR-related tasks</a>. These are some of the best to outsource to professionals, because of the clarity a third-party perspective brings.</li>
</ul>

Carrie Luxem is a human resources professional specializing in the restaurant industry. In 2010, she founded Restaurant HR Group where she partners with dozens of restaurateurs to take care of their greatest assets &mdash; their people. With a career that has spanned nearly 20 years, Carrie is frequently sought out for her modern, yet simple and effective advice and has been featured in Entrepreneur, Restaurant News, and Independent Restauranteur. Connect with her on social media or learn more at <a href="http://carrieluxem.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=1851-unhappy-franchisees-six-reasons-why-restaurants-fail-2704562" target="_blank" rel="nofollow" target="_blank">CarrieLuxem.com</a>. &nbsp;

&nbsp;

1851 Unhappy Franchisees: Six Reasons Why Restaurants Fail 

1851 Franchise

Carrie Luxem of the Restaurant HR Group explains how restaurants can overcome the most common problems that cause them to fail.

1851-unhappy-franchisees-six-reasons-why-restaurants-fail

Busy Bee Jumpers

Busy Bee Jumpers Buzzes into Franchising: Three New Franchisees Signed in First 30 Days

busy-bee-jumpers-buzzes-into-franchising-three-new-franchisees-signed-in-first-30-days

Fitness Premier

Fitness Premier 24/7 Clubs Reports Strong Midyear Momentum 

Fitness Premier 24/7 Clubs Reports Strong Midyear Momentum with Revenue Gains, Record Membership, and Strategic Expansion

fitness-premier-mid-year-growth-2025

Woodhouse Spas

image of a woodhouse spa franchise buildings exterior 

Woodhouse Spas Continues Strong Momentum With Double-Digit Growth in Q2

woodhouse-spas-q2-2025-growth-expansion

Layne's Chicken Fingers

Layne's Chicken Fingers-Mountain-State-Devo-June-2025

Layne’s Chicken Fingers Eyes Expansion in Mountain States

laynes-chicken-fingers-franchise-mountain-states-expansion

ServiceMaster Restore

ServiceMaster Restore Powers Into the Second Half of 2025 With Growth and Purpose-Driven Impact

ServiceMaster Restore Powers Into the Second Half of 2025 With Strong Growth and Purpose-Driven Impact

servicemaster-restore-powers-into-the-second-half-of-2025-with-strong-growth-and-purpose-driven-impact

Buying a Franchise Masterclass

 Franchise Opportunities

Get Support Buying a Franchise

How to Buy a Franchise White Paper

How to Buy a Franchise

How to Sell Franchises

How to Grow a Franchise

Find a Franchise Supplier

1851 Franchise Opportunities

Franchisor News

Franchisor Power Rankings

FranCamp Mastermind Summit

Franchise Development Website Builder

Franchise Resources

What ALEC-Laffer's Report Means for Franchising

Website Awards

Power Rankings

About 1851

Advertise on 1851

Contact 1851 Editorial

Terms of Use

1851 Login

GROWTH CLUB LOGIN

facebook

instagram

twitter

linkedin

youtube

Wendy's CEO Kirk Tanner Steps Down - Breaking News - 1851 Franchise

Wendy’s CEO Kirk Tanner Steps Down Amid Challenges, Leaving Franchisees Facing Uncertainty

wendys-ceo-transition-kirk-tanner-franchisee-uncertainty

"Come in, We're OPEN" sign against abstract background

Small Business Optimism Dips, Raising Concerns for Franchise Owners

small-business-optimism-dips-raising-concerns-for-franchise-owners

Photo of Roof Scientist truck and trailer

Roof Scientist Expands Into Northern Indianapolis as Entrepreneur Dale Speckman Launches New Business in Fishers

roof-scientist-expands-into-northern-indianapolis

Image of Donald Trump pointing with red stripes in the background

August 1 Tariff Deadline Is Said to Have ‘No Extensions’: What This Could Mean for Franchises

august-1-tariff-deadline-franchise-impact

What June’s Jobs Report Means for the Franchise Industry

what-junes-jobs-report-means-for-the-franchise-industry

Best Franchises To Buy - Franchise Business Opportunities - 1851 Franchise

What Defines the Best Franchises To Buy in a Shifting Consumer Economy?

best-franchises-to-buy-shifting-economy

petbar Franchise Costs, Fees, Profit and Data for 2025

petbar-franchise-deep-dive

Design with outline of three houses and people working on laptops within them

Top 10 Low-Cost Home-Based or Mobile Franchises for 2025

low-cost-home-based-mobile-franchises

How Franchises Under $100K Are Helping More People Step Into Ownership

how-franchises-under-100k-are-helping-more-people-step-into-ownership

The Ultimate Guide to Selling Franchises: How To Create a Strong Incentive

how-to-build-strong-incentives-to-attract-prospective-franchisees

Hooters Leans Into Franchising With Closure of 30 Company-Owned Stores - Agg - 1851 Franchise

Hooters Leans Into Franchising With Closure of 30 Company-Owned Stores

hooters-franchise-model-company-owned-closures

Kansas Couple Revitalizes Local Childcare With Children’s Lighthouse

From Corporate Careers to Community Roots: Kansas Couple Revitalizes Local Childcare With Children’s Lighthouse

kansas-couple-opens-childrens-lighthouse-gardner-olathe

From Prescriptions to Pastries: Kari Khandelwal Creates a Comforting Community Bakery 

1851 Unhappy Franchisees: Six Reasons Why Restaurants Fail

MORE STORIES LIKE THIS