Together with news that Port Melbourne’s Ping has closed (via Epicure) comes, via Ruhlman, the news that 60 per cent of restaurants fail, not the popularly quoted figure of 90 per cent. According to Businessweek, banks perpetuate the myth that 90 per cent of restaurants fail, which justifies the fact that they won’t invest in them because they are high risk businesses.
The story quotes research from HG Parsa, associate professor in Ohio State University’s Hospitality Management program:
“about one in four restaurants close or change ownership within their first year of business. Over three years, that number rises to three in five. While a 60% failure rate may still sound high, that’s on par with the cross-industry average for new businesses…”
Apparently the main reasons for failure are, like for any business an initial lack of working capital and the business owner’s lack of time, knowledge or passion.
The issue of location can be overcome by a great product, something I think we will see from Tempura Hajime, which will be one of this year’s new restaurant successes.
Back to Ping. When I last visited eight months ago there was a pong of death about it. All the warning signs were there. The service was bad, the quality of food was suffering and some wines were not available because the owner was on holiday. Another blogger reported that the seven day restaurant was closing some lunch times.
There is plenty of shuffling of the restaurant pack in Melbourne and the suburbs right now. The transformation of Crown Casino into a culinary juggernaute with some of the country’s top chefs will inevitably hit some of the CBD’s fine dining hard.
Already some of the below is playing out. Watch out for more:
The food fascist’s guide to restaurant failure
1. Crap service. When a restaurant is on its knees the staff will know and the service will suffer however much they hide it. The best people will leave and out of work actors will join.
2. The food gets worse. Substitution of cheap ingredients and the owner cutting costs in the kitchen.
3. There are gaps of what’s available on the menu or wine list. The owner can’t afford to pay the bills.
4. Linen is replaced by paper. Bills again and two points off (in some restaurant reviews)
5. Closed on Monday, Tuesday, Wednesday. People stopped coming. Why?
6. Investors pull out. Restaurateur forced to buy them out or find a new investor. Where are the money men when you need them?
7. Fire the chef! His portions are too small (people want value), big (he’s wasting money) and people don’t like the food anymore.
8. Hire a hot new chef. Make him/her a partner in the business. But don’t show him the real financials.
9. Refurbish, refurbish, refurbish. Sell your house or mortgage. Beg, borrow or steal the money any way you can – the banks won’t lend it to you.
10. Launch a whack new foam-based tapas menu. Yeah, that’ll get ’em in.
11. Increase prices. Especially for anything that sounds Spanish and foreign sounding wines.
12. Punters stop coming. They can smell fear a mile away (and the new chef’s cooking).
13. Alert, alert! Restaurant reviewer in the house. Yet you still manage to serve raw food. He/she laughs at the air/foam/breeze and the height of the food and the $50,000 lampshade.
14. 9/20 scored in major newspaper. Restaurant closes and the reviewer is blamed. Afterall, there’s nothing wrong with really tall food and the new investor thought it tasted great. So did the restaurateurs mates. It’s a shae they weren’t prepared to pay for their meals though. In reality the punters new this was going to happen months ago.
This has given me an idea for a board game. Any additions?
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