What’s the Real Reason Most Restaurants Fail?

In the restaurant industry, success can be elusive. Here, stories from spots that didn’t make it, and the lessons learned.


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Illustrations: Ashlee Fujimoto

 

Jill Owens seemed to have everything in place to open and run a successful restaurant in Hawai‘i.

 

She had the experience, having worked in both the kitchen and as management in restaurants for more than a decade, including Indigo, Ocean Club, the concessions at Aloha Stadium and Bistro on the Go. She had the training, honing her skills in culinary school. She had a strong business plan, a great concept and financial backing. And she had passion, that magical, intangible thing that turns the grueling job of running a business into something more meaningful.

 

In 2013, Owens signed a 10-year lease on a spacious 3,600-square-foot restaurant space on Beretania Street near UH and invested hundreds of thousands of dollars in renovations and upgrades. It had great parking, it was right in town. Everything was lined up.

 

And then Owens found out she was pregnant.

 

“Yeah,” Owens says. “It was bad timing.”

 

She was eight months pregnant when she opened Holoholo Bar & Grill that November. The restaurant had a simple mission: Serve tasty and affordable local-style food in a friendly atmosphere. It was a place you would meet your friends after work for draft Guinness and Portuguese corn-dog muffins, a place where your family would celebrate a birthday, a place to hang out and linger for hours.

 

“Everybody used to joke that it was like Cheers,” she says. “It was true: Everybody did know your name.”

 

A month after opening, she had an emergency C-section to deliver her daughter, La‘akea, then went back to work 10 days later.

 

Owens worked 80 hours a week at the restaurant, scheduling herself in the kitchen and on the floor. Revenue was steady, but it wasn’t keeping up with the rising cost of running a restaurant in Hawai‘i.

 

Finally, on Feb. 13, 2016, after two years in business, Owens made the heartbreaking decision to close.

 

“I was burned out, I’m still burned out,” she says. “I get offers all the time [to work], but I just don’t want to. I’m not ready.”

 

It’s a fact: Running a small business, let alone a restaurant, is tough. According to a national study done on failed restaurants by Cornell University in 2006—outdated but still useful—27 percent don’t make it past the first year, half fail in the second and 60 percent close after three. It may be even tougher in Hawai‘i, where costs are higher and competition is greater.

 

“Owning a restaurant is the ultimate dream occupation because it covers so many bases,” says Jo McGarry Curran, commercial real estate adviser and founder of MoJo, a consulting company that works specifically with restaurants. “Restaurants are social, they’re theatrical, they’re full of excitement, they’re expressions of not only food but what we believe in … But the problem is that people don’t get all of it, everything it takes.” 

 

In the past year alone, there have been several notable closures in Honolulu, including Hale Ōhuna in Kaimukī after three months and Kenny’s Restaurant in Kalihi after 49 years. Each one had different reasons for closing, ranging from lease issues to underperformance to owners who needed to deal with health or family issues.

 

The decision to close a restaurant is rarely an easy one. Restaurateurs have to consider everything—the financial investment, employees, the public response. And it can have a deeply personal effect for everyone, from owners to chefs to regular patrons who have come to love a particular dish, the friendly bartenders or a familiar atmosphere.

 

“It’s a volatile business,” says successful chef and restaurateur Alan Wong, who closed Amasia in the Grand Wailea on Maui two years ago after the hotel changed ownership. “When things are going great, it’s awesome. But when things are lean, it’s tough … You can’t just think, ‘If I build it, they will come.’”

 

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