Restaurant closures have become increasingly widespread across the F&B sector over the past five years. Astronomical food prices and inflation exacerbated by higher wages, are hammering profit margins, making it difficult for operators to absorb costs while remaining affordable for their customers.

For many, these challenges have proved insurmountable. According to a UK Freedom of Information request, 1932 restaurants closed in 2023 alone – that’s more than 5 every day.

These sobering figures aren’t only the result of fiscal pressures. Sadly, a lot of businesses close their doors due to operational mis-steps and bad practices, many of which can be easily avoided.
By way of example, here are five critical steps that can almost guarantee your restaurant’s failure. 

Step 1. Stubbornly Resist Tech Adoption

At an operational level, change resistance is a sure-fire way of sinking your restaurant. And it's an issue that manifests in countless areas that are just too numerous to mention here. But in the context of this article, our focus is on the potentially calamitous mental malaise known as tech aversion. There tend to be three reasons behind it comfort with the familiar, time pressures and false notions about cost.

Comfort With the Familiar

In restaurants, employees and managers tend to rely on well-established systems and workflows in order to keeps things running smoothly. Unfortunately, it’s a common issue in the F&B Sector, especially with long-standing operations and family-run enterprises, in which practices and traditions are passed down through generations.

Failing to adopt the latest tech solutions (usually POS platforms) is one of the most visible symptoms of such a reactionary mindset. Sadly, it means that a lot of stubborn owners remain with their existing setups, even when they're inefficient and hopelessly outdated. 

Time Pressures

Time pressure is a constant challenge for most restaurant owners driven by the demanding nature of an industry in which schedules are tight and customer expectations unrelenting. These pressures often leave little time to make wider operational decisions.

But implementing far-reaching changes, such as the adoption of new technology, requires serious and thoughtful consideration. It's a case of balancing immediate operational needs with long-term business planning. Predictably, it's a decision that's often avoided and delayed which leads to missed growth opportunities, declining customer experience and even employee burnout. 

Perceived Costs

Failing to adopt tech is often brought about by misconceptions regarding costs. Many owners, particularly those who run small or medium-sized options believe that implementing an RMS requires significant upfront investment not to mention ongoing maintenance costs.

Yet modern systems often offers scalable pricing and subscription models that reduce initial costs dramatically. The latest cloud-based solutions include updates and support as part of their packages. Paying credence to these concerns results in owners relying on inefficient, manual processes that increase errors, slow down service and waste time. 

Step 2. Rely On Inadequate Forecasting

Another step on the road to culinary perdition is to rely on substandard forecasting. In an industry renowned for thin profit margins, restaurants are particularly vulnerable to peaks and troughs – and these can only be fully revealed with sound predictive analysis. But unreliable data produced by legacy systems and outmoded inventory management processes often get in the way. 

Legacy Forecasting

Not only do legacy restaurant management systems often fall short in terms of productivity and efficiency. They also leave a lot to be desired with regards to forecasting.

To begin with, these platforms don’t always integrate well with other systems, be it accounting software or inventory management frameworks. Essentially, they tend to operate in silos, which immediately narrows the breadth of data required for reliable forecasts.

Additionally, they’re not always able to provide much in the way of historical sales data due to tech shortcomings such as hardware constraints, poor integration options and restricted storage. Even those systems that are able to store large volumes of sales data often lack the AI and machine-learning capabilities critical for identifying patterns and making predictions.

Consequently, owners have to manipulate the data manually which leads to errors, inaccuracies and uninformed decision making. Under and over staffing is typically the consequence – and it’s a scenario played out in restaurant after restaurant after restaurant.

Unintegrated Inventory Management Systems

Then you’ve got the problems that can arise from unintegrated, unautomated inventory management processes. The discrepancies between recorded and actual stock levels caused by manual input are a frequent problem.

So too are the kind of delayed stock updates arising from patched together in-house tech stacks. The consequences of using an unintegrated system for managing inventory include stockouts, overstocking, excessive waste and supply chain problems.

Step 3. Use Your Intuition to Make Supplier Purchases

How about relying on a hunch in order to make one the most critical operational judgments of all? As absurd as this may sound, the practice is highly prevalent in the F&B industry. And predictably, the outcome is often ruinous to a restaurant’s fortunes, with added expenses and lost sales draining away profits. Experience based bias and a reliance on static inventory data are the main drivers behind this unfortunate approach.  

Experience-Based Bias

It’s not uncommon for a restaurant owner who’s been in the game a long time to become a little complacent when it comes to procurement. Flushed with past successes, no matter how distant, the operator forgoes data-driven decision-making in favour of intuition. Suboptimal purchasing practices then start to emerge such as misplaced supplier loyalty, reactive procurement and habit-based ordering. All of these conspire to drive procurement costs skyward.

Static Inventory Data

In some cases however, the owner may have no recourse but to rely on gut feeling. As we’ve seen in Step 2, outmoded POS systems are often incapable of furnishing owners with comprehensive data for the purposes of forecasting.

What’s more, the slow frequency with which the data is often updated can be a huge issue. Even today, an inordinate number of restaurant and F&B operators monitor key metrics that aren’t updated in real-time. We’re talking about critical information here, from the most basic data such as current stock levels, right through to usage rates, par levels and item shelf life. Without up-to-the-second stats, managers resort to intuition in order to fill in the gaps.

The costs that can then arise from over-purchasing, such as increased waste, higher storage expenses and tied-up capital, not to mention the lost sales from running out of ingredients, can quickly erode profits and damage customer satisfaction. This cycle perpetuates inefficiency and undermines long-term operational success.

Step 4. Overcomplicate Your Menu

Central to a restaurant’s entire operation is the menu. It shapes customer perceptions, defines its identity and drives sales. So, to run a restaurant into the ground, it can prove extremely helpful to make the menu as overcomplicated as possible. And sadly, far too many operators take just such an approach, whether out of a forlorn attempt to compete with rivals, to broaden appeal or to satisfy false notions about value perception.

Competitor Pressure

To get one over on competitors, restaurants will sometimes expand their menus to match or surpass rival offerings. But this is a misguided strategy. A large and elaborate menu puts excessive strain on the kitchen. With too many dishes to master, maintaining high culinary standards becomes a major headache as does dish consistency. Prep times can also become slower leading to longer wait times and irate customers.

Over-Catering

To broaden their restaurant’s appeal, some owners attempt to cater for dietary preferences by including as many options as they can. Although some patrons may equate variety with value for money, there’s often a quality trade-off – with resources spread thin across many dishes, inconsistencies and poor quality often emerge. In addition to operational strain (see above) and decision fatigue (see below), offering an overloaded menu makes it difficult for a restaurant to position itself in a competitive market.

Value Perception

The idea that customers equate more menu options with better value is a notion that belongs in the past. But it's a mistaken strategy that remains common in the F&B sector. These days, modern consumer preferences prioritise quality over quantity.

A menu that reads like the magna carta is going to overwhelm customers, particularly younger patrons known for short attention spans and a predilection for immediate gratification. Sifting through an endless array of dishes is simply not what most customers want anymore. 

Ultimately, the ingredients and preparation necessitated by an overloaded menu is going to put undo strain on your back-of-house team causing inefficiency, excess cost and employee stress. Dish inconsistencies will inevitably arise and foot traffic will decline as your customers take their business to competitor restaurants that prioritise quality over quantity.   

Step 5. Don't Keep a Tight Reign On Expenses

In the long run, poor budget control is going to have a significant impact on the profitability and sustainability of any business. This is especially true of the restaurant industry. Unsurprisingly, it’s a trap that can ensnare even the best-intentioned owners. In addition to the time-constraints endured by many a put-upon manager, the unique combination of high food costs and labour expenses, exacerbated by razor-thin margins makes the entire process extraordinarily challenging.

Fluctuating Food Costs

Food costs account for a significant proportion of a restaurant’s expenses. And they’re extremely difficult to manage. Fluctuating according to season, they’re influenced by customer demand supply and chain disruptions, not to mention broader economic pressures. They’re also influenced by hidden costs such as waste and packaging. Mismanagement is therefore widespread, with debt accumulation, cash-flow problems and eroding profit margins an industry-wide problem

Labour Law Complexities

The labour-intensive, service-oriented nature of the F&B industry means that restaurants have to rely heavily on human labour. And this is expensive, particularly if you factor in minimum wage increases and the onboarding costs driven by high staff turnover. Maintaining tight control is challenging enough, without the added complexities of labour law compliance relating to overtime, employee benefits, taxes and payroll regulations.

Given that food and labour expenses account for 60 – 70% of a restaurant’s prime costs, any sort of mismanagement can quickly eat into the slim profit margins typical of most F&B operations. Throw in the sheer unpredictability of customer demand and the intense pressure from the competition and you’ve got a potent recipe for permanent financial instability.

Final Thoughts

The purpose of this article is, of course, to signpost the common pitfalls into which many restaurant owners often tumble. Yet they can all be avoided by implementing a genuine next-gen restaurant management system that allows you to:

• Analyse and Predict Customer Demand with Pinpoint Accuracy
• Rely on AI and Machine Learning to Reveal Sales Patterns and Trends
• Make Informed Data-Driven Supplier Purchases
• Automate, Integrate and Manage Your Inventory in Real Time
• Create Centralised Prep Plans for Kitchen Staff
• Easily Analyse, Manage and Optimise Your Menu
• Monitor and Control Your Budget With Ease