Have you ever wondered why most of the restaurant businesses close before the fifth month of their startup? If you are not sure then this the fifth Month in Restaurant Business article will surely help you. According to a study, 90% of restaurants close in their 1st year. From 90% almost 50% of restaurants close in their first 5 months in Pakistan. There could be thousands of reasons for the closing of a restaurant. It might be a low capital investment, wrong location, poor teamwork, poor managerial skills, or no promotion. It is very important to survive the 1st 5 months in this industry otherwise, if you fail to survive, the result will be closing of the restaurant.
The Fifth Month in Restaurant Business
Brief Introduction of the Restaurant Industry:
The restaurant industry is one of the fastest-growing industries in the world. Followed by the international food industry, the Pakistan industry is also growing day by day. Thousands of new restaurants open every month. Most of these restaurants are fast-food restaurants. According to Food Journal Pakistan, the Fast food industry is the 2nd largest industry in Pakistan with 27% value-added production in the manufacturing sector. With more than 180 million consumers, this industry also provides 16% employment in the country. This makes Pakistan the world’s eighth biggest market of food-related business.
Why Restaurant Fail?
With the rise of the middle class, the restaurant industry is booming day by day. People are now more conscious about hoteling and maintaining a standard life. Life has become business for both males and female which result in no time for cooking. People now prefer to order food online as it is economical, convenient, and better accessible. Like the other countries, Pakistan is also dominated by international food players like McDonald, KFC, Pizza Hut, etc. There is still a huge market gap in this industry that could be the target. But on the other hand, the competition is rising day by day. The rise of competition results in difficult survival for small or medium-sized restaurants. Now almost every restaurant is decreasing the prices by not negotiating the taste and quality of the food though achieving economy of scale. Which pushes small restaurants out of the competition. There are several reasons that a newly established business can avoid to survive in the industry.
Do you own 3 Million? If you don’t own then stop dreaming about opening a restaurant in Pakistan. Most of the restaurant owners who have failed in this industry complain about the low investment. There are so many things that you need to manage with this capital for at least 5 months without thinking about profit. So if you don’t own this much investment for a restaurant, then never try to take a risk.
Ignorance of Competitors:
Restaurant fails because their owner ignores the competition. If you want to avoid this thing then must know your competitor. Before opening a restaurant, study your competitor very well then decide what will be your strategy to tackle the competition.
Entering in Red Ocean:
People usually like to eat burgers, pizza, and fried chicken. According to this, some local restaurants also tries to cater to the consumer with these products. There are always chances to shift consumer loyalty but in most cases, consumer fears to try a new brand especially in the food industry. That is the reason that they even fail to capture the desired market even by offering good quality and low prices. That is why you always avoid the red ocean if you are new.
If you are thinking of opening a new restaurant then you should sit back and think about the location of the restaurant properly. Before deciding a location you must answer the following questions.
Who are your target customers?
What is their purchasing power?
How many of them own a car?
Do you have enough parking for at least 20 Cars?
Is there any building like School, university, or business?
A new restaurant must do a lot of advertisement. Mostly restaurants ignore this feature which results in the failure of the business. Asides this, most of the business even not know what is the best medium of promotion for food or food-related business. So must advertise wisely if you don’t want to fail in the restaurant business. Further, you should invest 40% of your total investment in promotion and advertisement to capture huge profits in a short time.
Prefer Independent Business over Franchising:
Smart people always choose to franchise of well-renowned restaurants while others prefer independent business over franchising. You can earn early and maximum with a franchise but if you want to set up your own independent business then it will take a lot of hard work and time to grow. There are 80% more chances for an independent business to fail while the franchising has only 20%. When you purchase a Franchise of a well-renowned restaurant then it is easy to capture the local customers of those restaurants and those potential customers who are not visiting that restaurant due to location.
Ignore Customer’s Taste:
Mostly restaurant wants to serve what they can make best by ignoring what the host wants to eat. Never ignore the power of your customers because they are the ones who decide what to eat or what to not eat. So don’t be a fool and never try to feed what you love to cook instead cook that thing that others love to eat. This is also one of the major problems that most of the restaurants fail. One more thing that you should keep in mind is that always ask your customers about the improvement. You can make them feel special through this and next time they will surely visit you.
The Fifth Month:
if you want to survive in the Restaurant industry then you need to survive till the fifth month. Mostly the restaurant owner gets disappointed when they do not achieve the break-even in the first 3 or 4 months. Don’t worry if you haven’t achieved break-even then only focus on promotion and customer building. You will get the break-even in a couple of months. All the above mistakes will be covered till the fifth month if you will remain consistent.
These are the most common mistakes that most restaurant owners do at the start. There are also many other reasons for the failure of the restaurant including bad partnerships. If you are going to make a partnership then you must have to think twice otherwise it will create a problem for you in the future. Likewise, you can take training first before making a decision to start a new restaurant.