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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{ 8 comments… read them below or add one }
The restaurant business is a tough one. Newbies to the scene think it’s a great idea to open an eatery with the bonus cheque they got from the stockbroking firm they work for with the dellusion of sharing a glass or wine or two with the punters.
The harsh reality is that food is labour intensive. The amount of times a raw ingredient needs to be handled before it hits the table is astonishing.
The savvy operator in this climate would be keeping their head down, offering a reasonably priced menu and using quality ingredients as the hero rather than buying crap and adulterating them into something palatable.
Critics can be blamed but it’s a soft cop for a restaurant to believe that to be the reason for a downfall.
The bigger they come (sans crown), the harder they fall – Caveat Emptor!
Ok, thats it! I am adding your site to my favourites!
Cheers Steve,
When you see the success of some places I reckon most of the time the business model is more important than the food.
Carl, thanks. i must revise mine.
Another restaurant have just closed last Tuesday – It’s Véra Restaurant in Brighton.
Rosie, I know. I spoke to Barry Vera Friday night. He’s in the UK working on something as a consultant. He said it closed last Monday. Administrators were appointed 18th. If you have anything to add about staff oranything my email contact details are at the top of the page. Cheers.
being a past employee of Barry Vera from Veras i hope the people in england know what he had done here in Melbourne if not they should just because you can cook doesnt mean you know how to run a resturant and being famous doesnt mean you dont have to pay the staff super BARRY!!!!!he deserves nothing he cheated about 25+ staff all while taking a big wage himself!!
Yes, I’ve heard that Barry Vera was doing a Christopher Skase thing at Vera Restaurant! So, I wonder where is he now – still in the UK?
well with the english being so slow they proberly havent caught on to his antics, and its not the first time that it has happened, hes a weasle he can talk the talk but i doubt weather or not he can walk the walk every thing he has touched has turned to crap during his tender. Here he just burnt so many good people by not paying their super and wages, dont know how people like him sleep at night if he was a real man he would stand by his convictions and pay his debt like other chefs have done and regain the peoples respect and confidence.
lets hope he rotts over there and some one gets him back from all of us here in australia