Restaurant Failure Rate Study

Posted by on Apr 5, 2013 in "The Smoking Log" | 0 comments

Restaurant Startup & Growth magazine commissioned survey indicates a “23%” first year restaurant failure rate.

Dallas is considered one of the hottest restaurant marketplaces in the country. There are more than 6,000 restaurants within a 30-minute drive time of central Dallas, and according to the National Restaurant Association, Dallas/Ft. Worth ranks second in per-capita spending on food away from home. What do you think restaurant failure rates are in this Lone Star metro? Restaurant Startup & Growth (RS&G) commissioned Cline Research Group (CRG) of Dallas to determine the rate of startup restaurant first-year failure in the Dallas metropolitan area (DMA).

CRG generated a random sample, by alphabet, of non-fast-food restaurants listed in 1997-2002 Dallas telephone books. CRG then manually tracked the 4,006 restaurants in the sample (about 20 percent of all restaurants in the DMA) from year to year, to determine which of those restaurants had failed during the five-year period, and at what stage of their “life cycle.”

Within a 90 percent confidence interval, CRG found that the first year failure rate for startups averaged 23 percent over four years in that market. Based on the study, you could say that there is a one in four chance a new startup will fail. Or, if you’re a “glass is half full” kind of guy or gal, you could say there is a 77 percent chance for first year success.

The entire study, including its methodology can be reviewed by clicking on the link below. Very little market research is conclusive; however, this survey seems to support RS&G’s contention that the common belief that new restaurant failure rates are higher than other business endeavors is based on a myth. The CRG Dallas restaurant study is further indication that while the restaurant business can be tough, it’s not impossible.

Download RS&G Restaurant Failure Rate Study

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