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Restaurant Failure Rate Statistics: What Can Make or Break a Food Business?

According to recent restaurant failure rate statistics, a restaurant is most likely to shut down in its first year of business, while others don’t survive after their fifth year.

This information may be familiar to seasoned food business owners, so it’s worth understanding the factors that affect business longevity.

Fortunately, many technologies today can help restaurateurs manage their businesses, run operations, and serve customers more efficiently. And you’d be surprised to know they are affordable.

One is the smart QR code menu software, a digital alternative to paper menus that helped restaurants revitalize their business operations even at the height of the pandemic.

Learn the restaurant success rates and other details—like how many restaurants fail in their respective niche—to stay on top of your operations and deal with the challenges head-on.

True or False: 90% of businesses fail

Restaurant failure rate
Illustration of restaurants that failed and struggled.

The claim that 90 percent of restaurants fail in the first year of business is false.

According to recent statistics, three out of five new restaurants won’t survive a year, while four out of five will most likely fail in the next five years. These numbers provide a huge difference from the 90% failure rate.

That means 60% of businesses in the restaurant industry will struggle in a year, and 80% will continuously have difficulty surpassing challenges in the next five years, which may lead to them closing down.

But these estimates should not discourage everyone wanting to break into the restaurant industry. Learning from seasoned entrepreneurs and carving your own brand is still best. 

Using affordable restaurant tools will definitely help you stay on top of your day-to-day operations.

What is the success rate of a restaurant?

Staff analyzing data
Restaurant employees checking data.

20% of restaurants can succeed in the market, according to the latest statistics and data from the National Restaurant Association. 

That means one in every five food and beverage businesses will move towards long-term success and profitability.

However, succeeding in the restaurant industry is not a walk in the park. There are different reasons why these sectors need help to keep themselves on their feet. 

Simply taking the signs a restaurant is failing is the wrong move. If you’re in the food and hospitality industry, educating yourself on the common causes of restaurant failure can help you boost your restaurant success rates. 

Addressing low-profit margins, high labor costs, and other financial and operational challenges can help you assess which tools you need for your business to stay resilient.

For instance, integrating a QR code menu and restaurant management system can help businesses stay on top of these challenges.

Why do restaurants fail?

Graph for reasons restaurants fail
Illustration of reasons why restaurants fail.

Most business owners find it hard to open a restaurant because there are so many things to think about, and making rash decisions contributes to the outcome of their start-up restaurant

And you might be asking how many restaurants fail, and how to avoid these instances. Learn from the most common reasons why restaurants fail to assess your own business and see or anticipate where it might fall short:

Poor restaurant location

According to the Dining Trends Report of 2022, 55% of diners decide where to eat based on location. That’s equivalent to five out of nine patrons opting to dine in at your establishment if you have an open restaurant.

Choose a safe area with ample space to cater to your target customers. It is also necessary to provide nearby parking and a stable cellular and WiFi signal.

Poor inventory and staff management

Studies show that due to poor inventory and staff management, businesses lose about 20% of sales due to theft, spilled drinks, and unrecorded expenses. 

The business course of your restaurant depends on how productive and maximized the internal workflow is.

That is why 92% of restaurants now use tools like a QR code menu to streamline their services to customers and avoid these financial incidents.

Unreasonable menu pricing

According to statistics, 45% of Americans, 47% of Canadians, and 35% of Boomers say that menu price hikes impact their ordering decision in a restaurant. That is roughly half of the patrons determining the failure rate of your business. 

Ensure that your menu prices are reasonable in order not to prevent customers from ordering. You must consider your menu psychology, gross profit margins, and other pricing techniques.

By making the appropriate financial cuts for your equipment, utilities, labor, ingredients, and other expenses, you will be able to maintain your budget.

Weak marketing strategy

A recent Dining Trends data analysis shows that 41% of customers research a restaurant’s social media before choosing it. 

Meanwhile, four out of every seven Gen Zs in the US have visited a new restaurant based purely on favorable online reviews. 

In addition, eight out of ten diners check out a restaurant’s website before visiting a different one.

A weak marketing strategy will prevent your restaurant from succeeding in the industry. Without any social media presence or an accessible restaurant website, you cannot cater to and address your customers in the online market. 

Hence, this will decrease your chance of maintaining a good reputation for customer loyalty.  

Lack of technology

Seven out of 10 restaurants implemented QR codes during the pandemic. And 97% of restaurants use at least one online ordering platform in running business operations.

Not investing in technology like digital menu apps, restaurant tools, and POS integrations hinders your restaurant from streamlining your business operations.

This contributes to the increasing failure rate in the restaurant industry since problems may arise on any given day. 

For instance, customer traffic decreases when your restaurant lacks consistency in providing quality food and service. This may be due to overworking your staff, understaffing, or order mistakes that you could have easily avoided with the right technology.

Reliable tools like MENU TIGER QR code menu software provides ease for restaurant and bar owners as they can invest in a low-cost but effective digital menu that quickly takes orders and payments even on the busiest days.

How MENU TIGER can help reduce restaurant failure rate statistics

Restaurant failure rate statistics
An infographic of the failure rate statistics.

Failing is not an option when running a restaurant business, especially during the height of inflation and a high employee turnover rate.

That is why using MENU TIGER—a digital menu software—hinders your chances of failing in the industry. It has the best features at the most affordable price, which you can use to help your restaurant improve its services and increase customer retention. 

One of the software’s facets is offering contactless and cashless services using QR codes and an online ordering system, improving the customer dining experience.

Aside from that, you can also maximize productivity and reduce order mistakes in your restaurant using the software, increasing your chances of establishing a best-performing restaurant in the market.

Increased staff or employee retention

According to the U.S. Department of Labor Statistics, the food services industry had a substantially higher dropout rate than any other. When employees are overworked and feel undervalued, this transpires.

With MENU TIGER, you can provide an alternative solution to reduce laborious processes, such as an advanced QR code online ordering platform that allows clients to place orders and make payments in one scan.

You can raise the staff retention rate by paying attention to the status of your employees and providing incentives and bonuses. It is important to take care of their needs in addition to their obligations.

Augmented order accuracy and better services

Order mistakes usually occur when waitstaff fail to get the correct order or when customers don’t state their wants clearly. 

On average, these can cost around $30 per order, roughly $9,000 every month, serving 20 restaurant tables. If this goes on for a year, your restaurant’s financial loss will burden your success. 

Using MENU TIGER, you can avoid major financial loss since the software augments order accuracy and reduce order mistakes in your restaurant. Customers can quickly scan a menu QR code to place orders without needing waitstaff.

Advanced ordering system

Lightspeed states that 77% of patrons still want to use contactless payment transactions even after the pandemic. Moreover, an average increase of 14% of a restaurant’s total revenue is due to mobile orders.

Using MENU TIGER, your restaurant can offer contactless and cashless transactions that satisfy the preferences of these customer statistics. This will even allow you to increase your sales by 10% after introducing online ordering in your restaurant.

MENU TIGER enables you to use a customized interactive menu where patrons scan to order and pay while dining at your restaurant. An interactive menu offers contactless transactions and allows patrons to browse your offerings at their own pace.

MENU TIGER: the best tool for failproof restaurants

The restaurant failure rate statistics will gradually decrease as more restaurants finally learn the importance of investing in software that best fits their business needs.

Elevate customer service using today’s digital tools so you can leave a lasting mark in the restaurant industry. One you can trust is MENU TIGER’s no-code online QR code menu software.

It provides more flexible options for restaurants and caters to the more on-the-go customers who prefer a seamless way to order and pay.

Sign up for a MENU TIGER free trial today.

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