Preparing for When Your Restaurant Has a Business Setback

By Noah Rue, Contributor

There is no greater feeling than owning your own business and having a sense of freedom. You have worked hard to get to this point and the last thing you can imagine is having your restaurant fail. When you are ill-prepared for the worst, you become part of the statistics of restaurants that close within the first one to five years.

Things will not always go smoothly, but it is important to know how to rebound after a major setback like bad publicity or an angry review. A bad location can often lead to lower sales and a failed restaurant. It is important to plan for these things and have a contingency plan in place, so all of your hard work and investment does not fall to the wayside.

First, Why Do Restaurants Fail?

A closed restaurant shop front, with metal shingles over the door and windows.

There are many reasons why a business can fail including inexperience, bad management, high rental, and theft. The moment you become a business owner, your entire world changes and you need to put in more time and energy than you did when you first started planning the business.

The top reasons a restaurants fails include:

  • Overly complex menu

  • Poor management

  • Inexperience owner

  • Theft

  • Customer experience

  • Poor allocation of resources

  • High rent and/or poor location

  • Lack of marketing and advertising

  • Lack of owner involvement

  • Poor reporting and analytics

You may also experience bad publicity and structural concerns. A business may be forced to close due to legal policies not being followed and even critters make their way into the establishment. It can be a one-time occurrence that can quickly spread through social media channels and utterly ruin your business.

Risk Management Solutions

A restaurant manager training a bunch of restaurant servers in front of a table.

There are various risk management solutions that you can implement to combat and avoid these issues. You can do some of the following:

  • Train restaurant employees on safety, alcohol service, and customer service.

  • Use technology like a security camera, anti-virus, and password protection.

  • Clean the facilities like the kitchen, bathroom, and the outside. Keep things clear of clutter and take precautions in the winter.

  • Equipment maintenance is essential.

  • Follow health and safety codes.

  • Get the right licensing for your business.

  • Provide nutritional information, allergens, and dietary information.

Using some of these tips will help you to avoid business closures and keep customers coming back. Training is one of the best ways to avoid any potential issues. If an associate is appropriately trained they are more likely to take care of customers effectively and not have any mishaps. As a restaurant owner, you should be involved in all of your day-to-day operations and major business decisions.

The Pandemic and the Service Industry

A restaurant employee putting up a ‘Closed Due to COVID-19’ sign in a restaurant window.

During the pandemic, the service industry was one of the hardest hit. No business could have prepared for this circumstance. There was no way to keep restaurants open when lockdowns were being mandated. Owners had to get creative to keep restaurants open. Some turned to delivery services just to keep the lights on.

This, of course, was nowhere near the amount of income they made before the lockdowns but was a way to still have some income. Many restaurants are still recovering with some restrictions being lifted. However, some were not able to stay afloat and had to shut down completely. They now face a decision to try again or cut their losses and move on.

Teamwork is Essential

A team of restaurant employees, including the manager, standing together, smiling.

Having a team is crucial to the success of any business. You will need to ensure that your team is working for you and working together. A struggling team can create a toxic work environment. It can also lead to a business failing. Some of the most common reasons a business fails related to team management are:

  • Poor management or leadership

  • Missed deadlines

  • Lack of communication

  • Inadequate training

  • Not enough employees

  • Insufficient resources

  • No clear or defined roles

When a team doesn't have a clear and defined goal or role, they will do the bare minimum or begin to turn on each other. To help your team accomplish its goals, ensure that the schedule provides an adequate number of employees for each role. If there is a lapse in coverage, get your hands dirty and help out your team. Your employees are more inclined to stay motivated and go out of their way when they see leadership and management taking an initiative to help out.

You should also reward employees for a job well done or when they go above and beyond for the company.

The Community Cares

Restaurant workers hugging a guest.

As we have seen in the media and over the years, the community comes through when one of them is facing a struggle. You should be involved in your community and do some community outreach to ensure the community around you supports you and your goals, and vice versa. If something does happen to your business the community may be understanding and help you get on your feet. You should make sure your business addresses a community need and that you understand the people in your community.

Your business may face a setback at some point and you will need to be prepared for the worst. There are many ways to avoid a business failure but setbacks can happen to anyone. Make sure you have risk management strategies in place to bounce back quickly.


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