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Restaurant Risk

Posted by Capital Retail on May 28, 2018
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Are you looking to open a restaurant and make millions? It’s a very risky venture but it’s not the 90% first year failure rate that is often cited. If that statistic were true, the restaurant industry failure rate would mean virtually no business for anyone. In fact, restaurants are in growth mode due to an influx of money. Money is pouring into restaurants from private equity groups. Private equity groups own many of the largest restaurant chains, or they have significant investments in them. The quick-service and casual-dining segments of the sector are attracting the most attention especially after the well know success of local restaurants Sweetgreen and CAVA. Multiples are rebounding for these segments in both the public and private markets.  According to A recent Cornell University study showed the number of restaurants failing in the first year is closer to 60 percent, and while this may still seem a high, statistics need to be examined in context to be fully understood. Restaurants are no more risky than any other new business according to the U.S. Bureau of Labor Statistics. Don’t give up your dream of owning a restaurant without taking a closer look at the restaurant industry. There are many steps you can take to increase your chances for success. According to celebrity chef Robert Irvine, and host of business make-over show “Restaurant: Impossible,” the top reasons why restaurants fail include bad people management skills, spotty customer service, terrible food and poor accounting.  Many entrepreneurs who want less risk but still like the restaurant business sign up to be a franchisee. Franchisees do not need to create their own  brand or concept and can often benefit from the buying power and marketing campaigns of the franchisor. However, franchise ownership comes with its own pitfalls and each potential franchisee should  thoroughly research the franchisor and their business model before signing a contract. In the restaurant business, knowledge, realistic expectations and passion are powerful attributes.

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