Why do so many independently owned restaurants, eateries, home industries and coffee shops close-down after a short few years?
The sad thing? It is some of the nicest places that don’t last long, like the French bakery opposite the road from my office, or the home industry further up the road, or that fantastic Italian restaurant in Pinelands, Cape Town, or the trendy coffee shop in Parktown North, or the (ex) quirky spot in Illovo. All closed. Why?
I decided to do some reading on the topic and found a few interesting reasons:
Lack of passion
This is one that is dear to my heart because I see it in many companies I work with too. An entrepreneur identifies an opportunity and then goes for it. Problem is, they often do it only for the money with little passion for the business. The result is often a lack of presence in the business with the entrepreneur preferring to appoint a manager to run things daily. This doesn’t work. You can’t own a business, but not be present in it. In the beginning it is dog work, and only a passionate owner will make it through!
Offering too wide a menu
This one we know about, but here’s what’s interesting: many restaurants expand their menu out of panic. The initial interest dies down and then the question of “how do we get people back here?” leads to more items being added to the menu. This, in turn, almost inevitably results in a drop in quality. Soon the few loyal customers also leave. Instead of panicking, restaurant owners should methodically review their offering and talk to customers to find the real area for improvement.
A classic mistake: basing your pricing on what the ingredients cost instead of what the product is worth! Apparently, many restaurant owners charge too little and never reach economic sustainability. Ultimately you can never sustain a business on the idea of being cheaper. The moment you paint yourself into that corner, you can’t escape. From the onset, owners should aim to justify a premium based on them being “one of a kind”. It is about being a boutique in your area of business.
The ultimate deal breaker. It’s not as simple as choosing the busiest intersection, but finding a delicate balance between ideal location and affordability. Also, whilst having direct competitors around will be bad for business, it does help to have similar types of business around since it helps to attract feet. People like the idea of variety.
Finally, there is the matter of size. Clearly the venue can’t be too small, otherwise you can’t serve enough customers. But more importantly, it must not be too big! The bigger a place, the more difficult it is to create an atmosphere and a sense of specialness!
In conclusion, it hurts me to see small food businesses fail. Maybe more of them should take a common sense approach before opening shop? Clearly, it is not just about the food!