Failed Food Businesses! Yes, restaurants face the challenge of failing as well, no matter how good the food you’re producing. Did you know that restaurant businesses have the highest rate of failure with 60% restaurants failing within the first year of business and close to 80% failing within 4 years of the establishment? No, we never associate this high a failure rate with restaurants. But this is the grim reality of the restaurant business. Well, it’s no guarantee that if you survived or even thrived for more than 4 years that you will continue to dominate the market. We know that it only takes a few seconds for an empire to fall, you are still running only a restaurant. There are many mistakes restaurant businesses make that can end up hurting and ultimately failing the business. Let’s look at a few of these so you can keep your restaurant up and running for years.
Look at High-Profit Food Business Ideas


  1. Licensing and Non-Compliance
  2. Poor Location and Marketing
  3. Financial Mismanegment
  4. Not Adressing Incompetent Employees
  5. Online Reviews and Not listening to Customer Demands
  6.  Staffing and Hiring
  7. Quality Management
  8.  Responding to changes in Business Environment

1. Licensing and Non-Compliance

In order to even start and run a food business successfully, a restaurant has to be certified by the statutory regulatory of FSSAI (Food Safety and Standards Authority of India). Many times, restaurants either do not register for a FSSAI License or do not comply with the regulations of Food safety set by the authority. Not only does it amount to heavy fines but it ends up hurting the reputation of the restaurant. Frankly, who would keep visiting a restaurant which has been declared not to hold appropriate licenses and has unsafe food practices. I know I for sure won’t!
Check out: How to get FSSAI License Online

Also Read: Documents for Getting FSSAI license

2. Poor Location and Marketing

2.1 Location

Location! yes, it is as important as anything to run a successful restaurant. Location is one of the major factors influencing and shaping the volume of business that a restaurant attracts. You don’t expect just because you have excellent food people will come to your inaccessible restaurant tucked away in a corner of an isolated place of an offbeat path do you? There are plenty of restaurants with as good food as your restaurant’s in densely populated areas where most of the city hustle is going on. People would much rather go to an accessible restaurant than a one where you literally work hard to get to.

Targeting high footfall areas and paths near and about the high footfall areas should be ideal and every restaurant has to identify which high footfall area they should set up shop in according to their target audience. If a restaurant carefully places themselves in areas with high footfall during meals hours, all that is left to do is set up a customer experience and delivering quality on the plate.

2.2 Bad Marketing

if there is one thing that exaggerates a poor location is a bad marketing strategy. Because let’s be honest if your restaurants are marketed and recommended well enough by influential people, location no longer remains an issue because loyal customers always come back and spend time and have food at your restaurant.

So sorry if you do not like marketing, or believe that your “food will speak for itself” but any business has to be well promoted, marketed and recommended to even have a shot at making your name in this highly competitive market.

Here’s a marketing checklist which outlines general items that should be included in the marketing strategy of the restaurant.

  • Accessible and User-Friendly Website.
  • An active Social Media Account across platforms where you post frequently and also interact with customers.
  • Host special events like game night, family night, ever famous Bollywood night, this establishes a culture within the restaurants that generate a loyal following among many consumers.
  • Collect e-mail addresses through the website to offer special discounts
  • Introduce the concept of rewards for your regulars

3. Financial Mismanagement

Did you notice the word business when we say food business? Managing your finances is a big part of managing a restaurant. The food side of the restaurant cannot alone keep the restaurant afloat and neither can marketing strategies save u the important task of managing the finances. This is something restaurants owners have to get organized about with budgets and expenses and ensuring positive cash flows.

Understanding Maintenance, Cost of raw materials and food ingredients, Employee payments and performance, Taxations like GST and GST Returns, Appropriate Menu pricing, Calculating your prime costs all come as part and parcel of ensuring your running restaurants remain a running restaurant. It’s just something you have to do or employ someone to do. This remains one of the major problems restaurants encounter and many great restaurants have fallen prey to poor financial management. Financial Mismanagement is basically one of the most crippling mistakes restaurant businesses make

4. Not addressing Lazy or Incompetent Employees

Restaurants have to get a lot of things right to please customers because let’s face it, good food isn’t scarce anymore. Restaurants have to be run many times like a Fortune 500 company to even register an impact on your customers. So, getting everything done is of critical importance in a food business. In order to accomplish anything, however, everybody in the restaurant from backroom staff, maintenance, chefs, waiters as well as managers have to be working in a coordinated fashion like a well-oiled machine.

Sometimes, however when you can’t figure out your customer retention is low it might be due to a hindrance in one of your processes due to an underperforming employee or management staff.

Here are some signs that indicate that you have a not-so-great management staff.

  • No dedication to continually train and help improve employees.
  • Shift scheduling issues. Always being understaffed or overstaffed
  • Inadequate Communication Skills, Ignorance towards staff interaction, feedback, and involvement.
  • Mishandling the complaints and feedback of customers
  • Showing very little to no initiative to help out or have interest in business side of running the restaurant like accounting, inventory, reporting and other operational tasks.

If any employee like this is still in charge of any operation in your food ‘business’ it’s time to bid them goodbye and bring in something who can steer the ship well out of troubled waters. Keeping on a management employee who has the above-stated characteristics thus, contributes towards mistakes restaurant businesses make.

5. Ignoring Customer Demands, Not caring for Online Reviews

If you’re running a restaurant you’re in the hospitality industry. Hence, one of the deadliest sins would be well, to not be hospitable. A basic understanding of a business will yield the fact that customer demands are at the forefront of driving a commercial property towards success. So listen to your customers give them what they want without overly high expectations, provide real-time value to the consumer if you want to have any chance of being on the radar of people looking for “good” places to eat.

In addition to this, today’s the world of the Internet. Every person in today’s environment will first look at online reviews of a particular place like a restaurant and they would have judged your outlet even before they have ever set foot within your premises.

Not only do good reviews help you, but bad reviews also do too. If a customer has a problem with something they see in your restaurant that is troubling, you can get to know these little nuances and tweak them to better fine-tune the most comfortable dining experience for guests.

Thus, providing real value in accordance with customer needs and demands will only contribute to better reviews and more people searching and willing to pay for valued service your food outlet will provide to them. It is one of the most prevalent mistakes that restaurant businesses make.

6. Making Careless Hires, Not Paying Attention to Staffing

Businesses may require complicated operations and have revenues amounting to a huge load of money, however, all these businesses are run by who? The People. And 1 man is not enough to run a restaurant or any other business for that matter. You need a set of dedicated and focused employees to help portray a friendly, fun yet professional look to your consumers.

It thus becomes an unsaid imperative that only the most skilled and qualified personnel should handle the food and operations at your restaurant. It only takes one clumsy or rude employee to encourage your customers never to return to your food joint.

It’s a general consensus that working in lower levels of restaurant management such as cooking, cleaning or even waiting tables is just a transient job for most of the employees. Thus, it becomes even more critical to hire smartly because if u don’t pay attention you could end up hiring someone who will harm more than help out in the running the business.

7. Compromise in Quality

They say the little things matter the most, I’m not sure how it applies to life, but I am pretty sure that it applies to the restaurant business. Small little details in a restaurant can make a world of difference with paying attention to them bringing you endless praise and ignoring these details landing you up in the ‘worst restaurants’ list, if, there was one.

It’s simple, restaurants delivering consistent quality over time will thrive, those who do not will perish into oblivion.
Without getting too subjective, let’s list down a checklist of things to keep in mind while performing quality assurance checks for the restaurants and the staff.

  • Removing Untidiness, Deploying Cleanliness among staff members
  • Fastening service to ensure customers aren’t enraged by slow service.
  • Delivery times should be as low as possible. Try shortening your radius of food delivery if having problems with delivery times
  • Dishes  very similar in variety, taste, looks tend to disappoint customers
  • A very indifferent guest experience

These little things might not seem like they matter but if these small little things keep piling on to the dining experience of the customer, it could lead to the doors of your restaurant closing down a lot quicker than you imagined. Stay consistent with high quality!

8.  Unresponsiveness to Business Climate Changes

Times have changed. Businesses have evolved for the newer, smarter, more savvy generation i.e. the Millenials. Yes, they matter to your business and yes there is no way you get away with not catering to their pinpoint specific and urgent demands. Responsiveness to world events as well as to ever-changing demands of the consumer is the cornerstone to any successful business to thrive and survive for years to come. It’s the same with restaurants, influences introduced into culture and lifestyle since the advent of the internet and worldwide knowledge access has exposed younger generations to dining experiences from all around the world.

If a restaurant business fails to address these ever-changing in trends and technology and adapt and embrace them you could become what millennials call “A dinosaur” in the food industry. I don’t know about you but one thing I wouldn’t be like to be called is a dinosaur. We, hope that this extensive, detailed and comprehensive “DONT’s” list will help you maintain a well-managed restaurant providing a fine-dining experience.

Don’t forget the first step to starting a restaurant is getting the appropriate legal licenses for food safety and standards. Apply for your FSSAI License from FssaiFoodLicense now!  Call us at +91-8750008585.