Restaurant Failure Rates

When starting out any new small-business venture, one is required to focus on the positives, address the negatives in a cool and level-headed manner, and forge ahead. However, we bar and restaurant entrepreneurs have a daunting statistic breathing down our neck, and every person we talk to addresses it: "Don't 90% of restaurants fail in their first year?" Until recently, I believed a variation of that number, though not quite as high, and simply continued on, knowing our product to be superior. Now I can happily report something else:

It's not true.

A bit of business reading lead me to a 5-year old article by BloombergBusinessweek tearing down that statistic. The simple facts are this, according to Ohio State's Hospitality Management Program's research, 25% of restaurants fail within a year. And 60% within three years. Which may seem high, until you realize that a 60% failure rate over three years is average, across all industries, for small businesses.

Let me write it again, for myself: bars and restaurants fail on a rate similar to any other small business. It feels good to know, and while there are thousands of moving parts involved in opening a bar (or any small business), this one positive thought can make things feel a little less daunting from time to time.