According to recent restaurant failure rate statistics, a restaurant is most likely to shut down in its first year of business, while others don’t survive after their fifth year.
This information may be familiar to seasoned food restaurant owners, so it’s worth understanding the factors that affect business longevity.
Fortunately, many technologies today can help restaurateurs manage their businesses, run operations, and serve customers more efficiently. And you’d be surprised to know they are affordable.
They can invest in restaurant management software, QR code menus, POS systems, and other high-functioning and well-reviewed tech in modern restaurant handling.
Learn the restaurant survival rates and other details — like how many restaurants fail in their respective niche — to stay on top of your operations and deal with the challenges head-on.
Businesses fail in their first year: Fact or Bluff?
The claim that 90 percent of restaurants fail in the first year of business is false.
“So, how many new restaurants fail?” You may ask.
According to recent restaurant industry statistics, three out of five new restaurants won’t survive a year, while four out of five will most likely fail in the next five years. These numbers provide a huge difference from the 90% failure rate.
That means 60% of businesses in the restaurant industry will struggle in a year, and 80% will continuously have difficulty surpassing challenges in the next five years, which may lead to them closing down.
However, these estimates should not discourage everyone from wanting to break into the restaurant industry. Learning from seasoned entrepreneurs and carving your own brand is still best.
Using affordable restaurant tools will definitely help you stay on top of your day-to-day operations.
Restaurant failure rate statistics and success rate
According to the latest statistics and data from the National Restaurant Association (NRA), 20% of restaurants can succeed in the market.
That means one in every five food and beverage businesses will move towards long-term success and profitability.
However, succeeding in the restaurant industry is not a walk in the park. There are different reasons why these sectors need help to keep themselves on their feet.
If you’re in the food and hospitality industry, educating yourself on the common causes of restaurant failure can help you boost your restaurant survival rates.
Addressing low profit margins, high labor costs, and other financial and operational challenges can help you assess which tools your business needs to stay resilient.
For instance, integrating the latest restaurant technology can help businesses stay on top of these challenges.
Why do restaurants fail?
Most business owners find it hard to open a restaurant because there are so many things to think about, and making rash decisions contributes to the outcome of their start-up restaurant.
And it’s only smart to ask the percentage of restaurants that fail these days and how to avoid these instances.
You can learn from the most common reasons why restaurants fail to assess your own business and see or anticipate where it might fall short:
Bad restaurant location
According to the Dining Trends Report 2022, 55% of diners decide where to eat based on location. That’s equivalent to five out of nine patrons opting to dine in at your establishment if you have an open restaurant.
If you don’t know how to choose a restaurant location for better profitability, here are a few effective things you can do:
- Choose a safe area with ample space to cater to your target customers.
- Provide ample parking space.
- Select an area with good internet reception for your Wi-Fi services.
Poor inventory and staff management
Studies show that due to poor inventory and staff management, businesses lose about 20% of sales due to theft, spilled drinks, and unrecorded expenses.
The business course of your restaurant depends on how productive and maximized the internal workflow is.
That is why 92% of restaurants now use tools like a QR code menu to streamline their services to customers and avoid these financial incidents.
Unreasonable menu pricing
According to a 2024 TouchBistro report, 45% of Americans, 47% of Canadians, and 35% of Boomers say that menu price hikes impact their ordering decisions in a restaurant.
That is roughly half of the patrons determining the failure rate of your business.
Ensure that your menu prices are reasonable in order not to prevent customers from ordering. You must consider your menu psychology, gross profit margins, and other pricing techniques.
By making the appropriate financial cuts for your equipment, utilities, labor, ingredients, and other expenses, you will be able to maintain your budget.
Weak marketing strategy
A recent Dining Trends data analysis shows that 41% of customers research a restaurant’s social media before choosing it.
Meanwhile, four out of every seven Gen Zs in the US have visited a new restaurant based purely on favorable online reviews.
In addition, eight out of ten diners check out a restaurant’s website before visiting a different one.
A weak marketing strategy will prevent your restaurant from succeeding in the industry. Without any social media presence or an accessible restaurant website, you cannot cater to and address your customers in the online market.
Hence, this will decrease your chance of maintaining a good reputation for customer loyalty.
Lack of technology use
Seven out of 10 restaurants implemented QR codes during the pandemic. And 97% of restaurants use at least one online ordering platform in running business operations.
Not investing in technology like digital menu apps, restaurant tools, and POS integrations hinders your restaurant from streamlining your business operations.
This contributes to the increasing failure rate in the restaurant industry since problems may arise on any given day.
For instance, customer traffic decreases when your restaurant lacks consistency in providing quality food and service. This may be due to overworking your staff, understaffing, or order mistakes that you could have easily avoided with the right technology.
Reliable tools like MENU TIGER QR code menu software provide ease for restaurant and bar owners as they can invest in a low-cost but effective digital menu that quickly takes orders and payments even on the busiest days.
How to save a failing restaurant
Comprehensive financial assessment
Go beyond basic bookkeeping and analyze your financials thoroughly. This includes pinpointing hidden costs like food waste during preparation or overstaffing during low periods.
You can use cost-variance analysis to identify discrepancies between standard recipe costs and actual food costs, helping you optimize portion control and purchasing strategies.
Additionally, assess the profitability of individual menu items to identify high performers and potential menu revamps.
Customer experience audit
Instead of a one-dimensional audit, you can map the entire customer experience journey; from the moment they discover your restaurant online to the moment they leave after dining.
This will involve evaluating your online presence, service attentiveness, ambiance, and overall cleanliness.
By pointing out the areas of friction or disappointment, you can identify opportunities to elevate the customer experience at every touchpoint.
Menu optimization
Don’t just simply suggest trendy dishes.
Try to leverage data analytics to understand customer preferences, analyze food cost percentages, and ensure your menu offerings contribute meaningfully to your bottom line.
This strategy requires introducing higher-margin specials alongside popular lower-margin staples or creating combo deals to incentivize larger orders.
Targeted marketing and social media engagement
Gone are the days of relying solely on flyers or print ads. Now, you can develop a multi-channel marketing strategy that reaches your target audience across various platforms.
This might include posting engaging social media content, implementing targeted online advertising campaigns, and exploring partnerships with local influencers or food bloggers.
Building an email list and launching a customer loyalty program will improve customer relationships and encourage repeat business.
Operational efficiency review
Take a deep dive into your operational processes to identify areas for streamlining. This could involve analyzing staffing needs during different hours of the day, implementing cross-training programs to ensure staff versatility, and negotiating better rates with suppliers.
You can also explore energy-saving measures and adopt technologies like an automated restaurant inventory system to minimize waste and improve your overall efficiency.
Customer feedback analysis
Establish a system for actively soliciting feedback beyond simply monitoring online reviews. This strategy could involve implementing post-meal surveys with targeted questions or deploying suggestion boxes in strategic locations.
And responding promptly to restaurant complaints and negative reviews demonstrates your commitment to addressing concerns and improving the customer experience.
Additionally, incorporating positive feedback into your marketing efforts can serve as social proof and attract new customers.
Technology integration
Today’s tech-savvy customers crave convenience. Therefore, it’s recommended that online ordering platforms integrate with popular delivery apps.
You can equip your tables with QR codes that link to digital menus can enhance customer experience and reduce reliance on physical menus.
Self-serve kiosks can expedite the ordering process, allowing your wait staff to focus on providing exceptional table service.
How a QR code menu can help reduce the failure rate of restaurants
Failing is not an option when running a restaurant business, especially during the height of inflation and a high employee turnover rate.
That is why using MENU TIGER—a digital menu software—hinders your chances of failing in the industry. It has the best features at the most affordable price, which you can use to help your restaurant improve its services and increase customer retention.
One of the software’s facets is offering contactless and cashless services using QR codes and an online ordering system, improving the customer dining experience.
Aside from that, you can also maximize productivity and reduce order mistakes in your restaurant using the software, increasing your chances of establishing a best-performing restaurant in the market.
Increased staff or employee retention
A recent restaurant employee statistics revealed that the food services industry had a substantially higher dropout rate than any other.
When employees are overworked and feel undervalued, this transpires.
With MENU TIGER, you can provide an alternative solution to reduce laborious processes, such as an advanced QR code online ordering platform that allows clients to place orders and make payments in one scan.
You can raise the staff retention rate by paying attention to the status of your employees and providing incentives and bonuses. It is important to take care of their needs in addition to their obligations.
Augmented order accuracy and better services
Order mistakes usually occur when waitstaff fails to get the correct order or when customers don’t state their wants clearly.
On average, these can cost around $30 per order, roughly $9,000 every month, serving 20 restaurant tables. If this goes on for a year, your restaurant’s financial loss will burden your success.
Using MENU TIGER, you can avoid major financial loss since the software augments order accuracy and reduces order mistakes in your restaurant.
All they have to do is know how to scan a menu using an Android or Apple device to place orders without needing waitstaff.
Advanced ordering system
Lightspeed states that 77% of patrons still want to use contactless payment transactions even after the pandemic.
Moreover, an average increase of 14% of a restaurant’s total revenue is due to mobile orders.
Using MENU TIGER, your restaurant can offer contactless and cashless transactions that satisfy the preferences of these customer statistics. This will even allow you to increase your sales by 10% after introducing online ordering in your restaurant.
MENU TIGER enables you to use a customized interactive menu where patrons scan to order and pay while dining at your restaurant.
You can also activate their restaurant waiter call button system to quickly cater to your customers when they need immediate assistance.
MENU TIGER: The best tool for failproof restaurants
The restaurant failure rate statistics will gradually decrease as more restaurants finally learn the importance of investing in software that best fits their business needs.
Elevate customer service using today’s digital tools so you can leave a lasting mark in the restaurant industry. One you can trust is MENU TIGER’s no-code online QR code menu software.
It provides more flexible options for restaurants and caters to the more on-the-go customers who prefer a seamless way to order and pay.
Sign up for a MENU TIGER free trial today.
