Why do some restaurants fail and others succeed?

Having extensive experience in assisting people with buying and selling restaurant equipment. We interview sellers who are going out of business to understand the reasons behind their closures. In most cases, the primary reason is that the food quality and taste at the restaurant is mediocre to poor. While many owners attribute their failure to location, our findings suggest that even the best location cannot compensate for subpar food quality— and taste unless it’s in a heavy tourist area where high foot traffic can temporarily mask the issue.

It’s crucial for potential restaurant owners to prioritize creating an exceptional menu before focusing on location or purchasing equipment. A menu with outstanding food quality and taste is essential for long-term success. We’ve observed many restaurants with minimal road or foot traffic that have huge reservation waiting lists due to their superior food taste and quality. If potential restaurant operators focus on perfecting a great menu, everything else will fall into place. Additionally, never attempt to open a restaurant with only one or two months of capital. You should plan for the possibility of no business for the first 12 months and ensure you have that amount of capital in the bank.

Of course, there are exceptions to this rule, such as having a high-traffic location and excellent food from the start. The synchronicity to opening a great restaurant should be as follows: first, prioritize creating an exceptional and consistent menu—taste is the most important factor. Second, focus on finding a suitable location. Location Many potential restaurant owners look for a location, then build out and remodel it, and buy brand-new restaurant equipment.

Opening a new restaurant this way can be very expensive and doesn’t have to be. A Better Alternative Most restaurants close because they are losing money. The value of a failing restaurant is only the value of its assets, specifically the second-hand restaurant equipment and furnishings. If you consider 100 failed restaurants up for sale, only about 5% will sell at their asking price. The other 95% will come to resale companies like BKK Auctioneers, selling their assets well below second-hand market prices and returning the keys to the landlord.

What to Do Find a failed restaurant for sale—trust me, there are many! When you find the right one, offer the seller a fair second-hand market value for the equipment and other assets, excluding any remodeling costs. With minimal effort, you can acquire a well-equipped restaurant for a fraction of the cost compared to starting from scratch.

Unlocking Restaurant Success: Insights

At BKK Auctioneers, we have extensive experience assisting individuals in buying and selling restaurant equipment. Through numerous interviews with sellers exiting the business, we’ve identified that the predominant reason for restaurant failures is mediocre to poor food quality and taste. While many owners blame location, our findings indicate that even the best location can’t compensate for subpar food—unless it’s in a high-traffic tourist area where the sheer volume of visitors temporarily masks the issue.

The Key to Success: Exceptional Food Quality and Taste

For aspiring restaurant owners, the creation of an exceptional menu should be the primary focus before considering location or equipment purchases. Here’s why:

• Long-Term Success: A menu that consistently offers outstanding food quality and taste is crucial for long-term success.
• Customer Loyalty: Superior food can generate a loyal customer base, resulting in consistent patronage even if the restaurant is in a less-than-ideal location.
• Word of Mouth: Exceptional taste often leads to positive word-of-mouth marketing, which is invaluable for sustained business growth.

We’ve observed that some restaurants with minimal road or foot traffic still have extensive reservation waiting lists due to their superior food taste and quality. Therefore, the emphasis should be on perfecting a great menu; everything else will fall into place.

Financial Planning: Capital for the Long Haul

Another critical aspect of opening a restaurant is ensuring sufficient capital. Here’s what we recommend:

• Adequate Funding: Never attempt to open a restaurant with only one or two months of capital. Plan for the possibility of no business for the first 12 months and ensure you have that amount of capital in the bank.
• Exceptional Cases: There are exceptions to this rule, such as having a high-traffic location coupled with excellent food from the start.

Strategic Location and Cost-Effective Setup

Many potential restaurant owners prioritize finding a location, then spend extensively on building out, remodeling, and buying brand-new equipment. This approach can be very expensive and is often unnecessary.

A Better Alternative: Leveraging Second-Hand Opportunities

1. Identify Failed Restaurants: Many restaurants close due to financial losses. The true value of a failing restaurant lies in its assets, primarily second-hand equipment and furnishings.
2. Negotiate Smartly: Only about 5% of failed restaurants sell at their asking price. The other 95% often come to resale companies like BKK Auctioneers, selling their assets well below second-hand market prices.
3. Acquire Affordably: Find a failed restaurant for sale, offer the seller a fair second-hand market value for the equipment and other assets, excluding any remodeling costs. This strategy allows you to acquire a well-equipped restaurant for a fraction of the cost compared to starting from scratch.

Conclusion

The path to opening a successful restaurant should begin with creating an exceptional and consistent menu—taste is paramount. Following this, focus on finding a suitable location. By leveraging opportunities from failed restaurants, you can set up cost-effectively without compromising on quality.

We hope this advice aids you in your journey to opening a successful restaurant.

Kindest regards,

BKK Auctioneers

Business Phone number+ 66 081 189 9297 English: +66 0890 493 146