American Express claims that 90% of restaurants fail within their first year. If this myth were actually true, we would run out of restaurant to eat at! Watch this video and we’ll debunk this myth for you.
How often do restaurants fail? The BIG myth about this industry is a whopping 90% crater after just one year.
That stat came from American Express. But there’s a number of reasons why it’s wrong. For one, most research on restaurants only focus on financial performance instead of also considering other factors – like family needs, managerial issues and more. And many studies only ever considered bankruptcy reports, which are very limited in their scope. A 90% failure rate doesn’t align with the 3 to 4% growth rate the National Restaurant Association assigns the industry. In other words, if the failure rate were 90%, we would run out of restaurants to eat at.
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So why does this myth persist? Well, it may feel true because restaurants face so many challenges: profit margins, turnover rate, increasing food costs, and changing laws & regulations like wages, menu labeling and healthcare. But even given these challenges, most restaurants stay in business in their first year. In fact, a Cornell study pegged the failure rate between 26%-30%, Bloomberg pegs it at 25%, and Forbes believes it’s even lower, at 17%.
One reason is that over 80% of restaurants are turning to technology– like online ordering, reservation & inventory apps, and analytics – now more than ever to help them run their business successfully.