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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(page 3 of 3)

WHEN IT DOES WORK

Dishes from Hale Ōhuna. 
Photos: Steve Czerniak 

 

But even as some restaurants fail, thousands more are still in business—and thriving.

 

In some cases, it’s hard to understand why.

 

“I think anybody who drives down Wai‘alae Avenue every day has to always marvel at the success of W&M [Bar-B-Q Burgers],” Curran says. “Who would have ever thought you could open up a little place like that and people are reversing in and out of your parking lot? It’s a whole culture on just how to park there! I love it.”

 

In real estate, location is everything. And that’s true for restaurants, too. But there are lots of examples of restaurants that have thrived despite seemingly challenging storefronts.

 

The Pig & The Lady is one such example, says Curran, who worked with the Le family to open the restaurant in Chinatown.

 

“We essentially put them in a very dark space that people had been walking past every day for years and nobody even saw it as a restaurant space,” she says. “But we knew it would draw people wherever it was. We could’ve put them on the top of the Occidental Building with no parking and people were going to come. Sometimes it’s not so much location as it is who you are and what you’re doing.”

 

Wong admits his friends thought he was crazy to open a restaurant on the third floor of an office building with no parking and no ocean view. But, in 1995, he opened the 88-seat Alan Wong’s Honolulu to rave reviews, earning the prestigious James Beard Award the following year. Now, his restaurant averages 175 covers a night.

 

Before he opened it, though, Wong did a lot of planning. He estimated the average check, including beverages, would be $38 (about $60 in 2016 dollars)—a very conservative figure for a fine-dining restaurant.

 

“We wanted to be conservative because we wanted to exceed the expectation, so we set it low,” he explains. “We were under no illusions of making plenny money.”

 

Setting reasonable expectations while planning for slumps in business is important for any restaurant, Wong says.

 

“You have to plan for the what-ifs and the just-in-cases,” he says. “Sometimes good restaurants have a great concept but not enough money or resources to make it work. And then you gotta pull the plug.”

 

Wong suggests that anyone who’s considering opening a restaurant—or even expanding an existing one—seek help and guidance. You need to know the costs, the problems that may arise that you aren’t considering.

 

“One misconception is that, when you have a full restaurant, you must be a millionaire,” Wong says. “When, actually, in restaurants, it’s very, very hard to make a profit.”

 

Despite enjoying some much-needed time off—and spending much of it with her 2-year-old daughter—Owens hasn’t ruled out starting another restaurant in the future. That despite still paying rent for a space she’s not using and knowing she’ll never recoup her financial losses.

 

“Would I do it again?” she asks herself, staring off in the distance, her mind already envisioning a quainter space, a smaller menu, a more focused plan. “Maybe. But it’s a very small maybe.”

 


 

So You Wanna Open a Restaurant...

Jo Mcgarry Curran. 
Photo: courtesy of jo mcgarry curran
A lot of people daydream about starting their own restaurant—maybe a cute brunch spot, a burger joint or a neighborhood wine bar. Well, turns out the path to restaurant success is tougher than you might think. We asked restaurant consultant/foodie Jo McGarry Curran for tips on how to avoid disaster.

 

don’t freak out

Find your identity and stick with it. If sales are slow on your American Bistro lunches, resist the temptation to add chicken curry or pad thai as specials. Confused menus are the last bastion of a restaurant struggling to find its way—and the first sign that things are not going well. 

 

no vacations?

If there’s one thing that’s certain in the restaurant business, it’s that you’ll be working when everyone else is enjoying a day off. Think of all the family holidays you enjoy now, and then imagine heading to work on each one of them from the day you open up.

 

Good Food Isn’t Enough

It’s important for a restaurant to serve good food, but business smarts are also essential: A strong lease can be the difference between success and failure. Compounded base rents can become unrealistic over just five years, so read the details carefully and do the math first. Also, consider how long the term of the lease should be. A longer lease is often the smarter way to go, as long as the rent increases are stable. Figure in the cost of starting your business versus the amount of rent you’ll pay over the period of the lease, and then calculate the potential returns.  

 

the fine print can kill you

Check out the clause that mentions “additional charges,” and really understand what they mean. Some common area maintenance fees are almost as high as the base rent and if the building needs a new roof, it’s likely a share of the costs will be passed onto the tenants. 

 

know where the exits are

When opening a restaurant, selling is the last thing you think about, but it’s an important detail. Before investing your life savings, think about how you’ll get out of the business, if the time comes. Some landlords will ask for a percentage of any premium you realize if you sell your business, and it’s important to be realistic about how drastically depreciation can hit.

 

READ MORE STORIES BY CATHERINE TOTH FOX

 

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