Naim Maadad is the founding CEO of Gates Hospitality Naim Maadad is the founding CEO of Gates Hospitality

It is an unfortunate reality of the culinary industry that six out of 10 restaurant brands shut down operations within one year of launch and eight out of 10 brands close shop within five years of take-off. A startling figure indeed — but a bitter truth it is.

The food and beverage business does seem extremely lucrative and glamorous from outside the circle of reference. Ensuring the long-term success of the brand is a herculean and arduous journey. My objective here is not to dampen the spirits of any aspiring investor nor to dissuade any potential investor — but purely find reasons and what to avoid in order to stand a fair chance for longer stamina in the race. Let us delve into the top reasons that are potential issues, which, if not remedied, would ensure a shorter run in the marathon.

For one, it’s the choice of location. Often the location and demographics plays a significant part in the success of the venue. A lot of planning needs to be done in the selection of the location, the rental burden and what is apt for the brand. Many a time, the bad choice of location, and high rental costs are reasons due to which businesses collapse under the burden of expenses not matching revenues. A smart way to see where the concept fits would be to ensure that the venue rentals never exceed 10% of your total revenues. Also analyse the local demographics of the area where you plan to open the concept — and ensure that the brand offering fills an existing vacuum.

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Next, it’s all about the customer experience. It is certain that if a client has a bad meal experience at the venue, it is most likely that one has lost a customer for life. It is also a known fact that such disgruntled guests would not be too kind when it comes to sharing their experience in social media and this could be detrimental to the reputation if not taken care of quickly. And if there is a trend of such feedback on public forums then the pull down effect is much stronger. Effective guest handling skills and attitude training including refresher courses for the team helps the motivation and passion to deliver consistent service excellence.

Lack of industry experience is a problem too. If you have the funds, it is very easy to set up a brand with the best of facilities and glitz. But if there is a lack of experience in the brand owners with regard to what it takes to run the venue successfully, then it is difficult to result in viability. Lack of financial planning acumen is the main threat. Planning ahead at least six months is vital for business stability. Seeking professional assistance is the first bit of advice I would give first-time restaurateurs to ensure the business is on the right track. 

Think about menu content. The success of the restaurant is not in having an extensive and complicated menu; this is not only difficult to sustain in the long run, but will probably have a negative effect. Simplicity is the name of the game as well as offering the best value for money. Whatever content you deliver, do it with passion and be unique.

Finally, it’s about the ownership stakes. There needs to be an active involvement from the owner of the business and it should not be left on the blind faith of the restaurant operator. As an owner you need to be completely aware of your restaurant business, down to every minute aspect. All the details, from daily revenue reports to monthly P&L reports — these must be carefully monitored regularly. With modern day technology available, this can be done from wherever your location may be — even while travelling.

So remember: sign a viable location; offering consistent customer service excellence is the best PR you will ever get; seek professional help if venturing into this business for the first time; think menu simplicity; and, if you’re an owner, involve yourself as a stakeholder. Good luck!

About the author: With more than 28 years of hospitality experience globally, Naim Maadad is the founding CEO of Gates Hospitality, which owns and operates hospitality concepts including Ultra Brasserie, The Black Lion Public House & Dining, Bistro des Arts, Reform Social & Grill, Publique and Folly by Nick & Scott. It has ownership of Six Senses Zighy Bay. Contact: Naim@gateshospitality.com