HTD 500 Chapter 3: ARTICLE 3 WHY RESTAURANTS FAIL

• School: Ryerson University
• Department: Hospitality and Tourism Management
• Course: HTD 500
• Professor: David Martin

Document Summary

Past failures were determined using quantitative factors and bankruptcy rates. This study shows turnover rates using qualitative data and longitudinal data. 26. 16% of independent restaurants failed during the first year of operations. Most restaurants closures are due to ownership changes. Restaurant failures can be from: economic, marketing and managerial perspectives. Frozen assets for non- payment of receipts portfolio. Market consolidation to gain market share in selected regions. Therefore, myth: 90% of restaurants fail; reality: 30% of restaurants fail. Turnover rates are higher than bankruptcy rates. Average market growth rate per national restaurant association: 3-4% annually limited resources: a reason for failure where they"re not flexible/adaptable. Physical structure and organization of the business larger businesses are more likely to survive. Smaller businesses are equated w/growth since they tend to believe they"re safe & secure. Small businesses end up developing too rapidly that a restaurant"s propensity to fail increases due to the subsequent financial stresses.