Why Restaurants Fail in the UAE?
30% of UAE Residents are willing to spend AED 100-300 while eating outside, and the restaurant management sector is expected to grow at a rate of 5.22% in 2021.
With the high purchasing power of the UAE residents, the market is becoming more robust every day, Yet statistics show us that one of the riskiest businesses to start is a Food Business.
Approximately 60% of restaurants fail within the first year of operation and 80% fail within the first five years.
Let's get to learn why restaurants and food businesses in general have such high failure rates. Here are the common reasons why independent restaurants fail:
1.Excessively high rent and occupancy costs
Inexperienced restaurateurs frequently take on rent and other occupancy charges that are too expensive for their budget, making it difficult to keep their businesses afloat.
2.Poor financial planning and lack of working capital
Frequently, concepts that might have been successful otherwise fail due to a lack of sufficient cash and operating capital to keep the restaurant open until it reaches profitability.
3.Low attention to detail in managing resources
Maintaining proper cash management and handling controls regulating portion sizes Keeping food and beverage costs under control Inventory control, theft prevention, and spoilage and waste management are all critical to a business's profitability.
4.Poor operational management
A well-trained and happy workforce is critical to every business's future. Good management practices set the tone, impact employee attitudes and performance, and encourage repeat customer visits.
5.Excessive investment in equipment, fit-outs and acquisition costs
Too many first-time restaurateurs incur excessive debt to establish or purchase their dream restaurant, resulting in loan repayments that are too high for the restaurant to be successful.
6.Poor location choice
It's critical to choose the right location. It is not uncommon for a mediocre restaurant to succeed solely because of its location, whereas a well-run operation may collapse due to poor location.
7.Poor concept choice
A restaurant that has a bad idea for a specific location or one that has a unique selling proposition frequently fails to attract enough guests to be profitable.
8.Bad/Inconsistent food and service
Most restaurant patrons place a high value on consistent quality food and service. Inconsistent food and service detract from the whole dining experience and discourage customer retention.