Celebrity chef Robert Irvine explains the top 5 reasons most restaurants fail
Neilson Barnard/Getty ImagesChef Robert Irvine at the 2015 Food Network & Cooking Channel New York City Wine & Food Festival.
Over the past five years, chef Robert Irvine has tried reviving 135 failing restaurants across America for the Food Network show "Restaurant: Impossible," now at the start of its 13th season.
Of these, 82, or 61%, have closed after their makeovers, according to the blog Food Network Gossip.
But that's actually not that bad of a statistic, since these restaurants were so poorly managed that Irvine and his team only took the job if there was essentially a 100% chance of imminent failure.
In fact, according to a frequently cited study by Ohio State University on failed restaurants, 60% do not make it past the first year, and 80% go under in five years.
Irvine has noticed five recurring factors from his experience trying to whip these places back into shape. He shared with Business Insider his top five reasons why the majority of restaurants fail.
The owners are inexperienced.
There's a remarkable number of people who think they can open a restaurant simply because they have a good idea for one, despite a lack of any experience in the industry.
There are a lot of people out there who think they should open a restaurant simply because they know how to make a few great dishes.
"Potential restaurateurs do not realize or appreciate the specific set of demands that come along with owning and running a restaurant," Irvine said. "Once realized, it is often way too late."
At this point, some owners bring in an industry veteran to help out. "This can be effective, but it also adds more of a financial burden to the bottom line by bringing in someone who expects to be paid relative to their experience," Irvine said.
They have terrible managers.
Bad restaurant managers often lack empathy with their workers, which results in worse service and headaches for everyone.
"Unlike other businesses where you may find yourself managing just one group of people with one specific skill set, restaurants have a ton of moving parts requiring a diverse group of people with varying skills sets, talents, and personalities," Irvine said.
He's found that the best restaurant managers he's worked with started at the bottom at a restaurant — as a line cook, perhaps — and worked their way up the chain of command.
"Managers who have walked a mile in the shoes of the people they are overseeing are more understanding, compassionate, and seek like-mindedness while providing insight into how best to relate to, approach, and motivate each member of their team," Irvine said.
The owners lack accounting skills.
Even a restaurant with good food and loyal customers can tank if the owners don't know how to manage money.
Irvine said that it's unfortunately a common occurrence for him to ask owners of a "Restaurant: Impossible" location about their food and labor costs and how their revenue and profits stack up only to receive a dumbfounded look.
Another common mistake is that there's no system to ensure that numbers are kept up to date.
"One particular owner was so proud of himself for being able to report a 33% food cost until I dug a little deeper to see that his costs were based on old figures and that the cost of ingredients had risen significantly since he last did his calculations," Irvine said.
They develop a reputation for bad customer service.
Locals will quickly spread word of bad customer service, and bad online reviews will keep visitors away.
"I don't typically give restaurants a second chance if I'm not given a great experience the first time around," Irvine said.
Everything from how customers are greeted at the door to how they are handed their check will shape their first impression, "and it is a well-known fact of business that customer retention is much more cost-effective than customer acquisition," he explained.
And bad word of mouth will crush a restaurant quicker than ever before. "As the digital era continues to grow and expand, review sites will, more and more, become the gatekeepers to customer acquisition," Irvine said.
They don't spend enough time developing the food and its presentation.
Food quality is one of the first things to slip in a poorly run restaurant.
Most bad restaurants serve bad food. Wouldn't this seem like something the owners would care about?
"It's not from lack of personal taste or quality," Irvine said. "More often it's because of a breakdown in the chain of command and quality control. Day-in and day-out food preparation and presentation becomes routine — sometimes almost a factory-like motion — and can lead to steps being skipped and key ingredients missed over a period of time."
"It's like de-evolution," he explained. "Very slowly your most popular dish can start to veer off its intended flavor profile and your cherished execution can stray from what is best for the end product."
To maintain quality, the owners and chef need to keep the kitchen's standards high.
"It's key to consistently reevaluate dishes and the quality-control measures that were set into place," Irvine said. "I also insist on regular tastings before service to make sure that the quality of the product is top notch!"
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