The restaurant business is famously cutthroat. In fact, a lot of restaurants don’t even make it past their first year of operation.
Of course, that doesn’t mean that launching a profitable eatery is impossible – it’s quite the opposite. By dodging a number of far-too-common mistakes, you can set yourself (and your restaurant) up for success.
In this blog, we’ll look at some of the most common reasons why restaurants in Toronto fail. Hopefully, these insights can help your business avoid the same fate! Let’s get started.
Poor Planning
Hands down one of the most common reasons why restaurants fail is the lack of proper planning.
While building out a well-thought-out business plan ahead of time may seem like a no-brainer, you’d be surprised at how many restaurateurs rush to open their doors without doing the necessary research and prep work.
For example, a lot of restaurant owners aren’t aware of how long it can take to get a liquor license. Since liquor sales are often a major part of a restaurant’s revenue, keeping up your cash flow can be tough if you aren’t yet able to sell alcohol.
Opening a bar or restaurant? Explore these related resources for more advice.
- Is Toronto’s Restaurant Scene Oversaturated?
- How Long Does it Take to Build a Business?
- How to Hire Restaurant Staff
Not Knowing The Costs
Toronto is one of the most expensive cities in Canada, and this extends to the restaurant industry. Rent for commercial spaces in popular areas can be astronomical. Even in less trendy neighbourhoods, finding affordable space is difficult. Beyond rent, restaurant owners must also deal with high utility bills, food costs, and wages for staff.
Don’t forget – it’s not just about the costs of real estate and equipment. In Toronto, labour (especially skilled industry-specific labour) isn’t in great supply. As a result, having a top-tier staff can come at a premium. Plus, Ontario’s minimum wage is among the highest in the country. While paying employees fairly is essential, it adds to the financial pressure on restaurants, particularly when the business is just getting off the ground.
Competition & Saturation
Toronto has a thriving food scene with thousands of restaurants offering cuisines from around the world. While this diversity is great for diners, it can mean tough competition for restaurant owners. Sure, the city isn’t completely over-saturated, however, restaurants still need to pay close attention to where and who their competitors are.
In Toronto, many restaurants struggle to differentiate themselves. If a restaurant fails to create a memorable experience, customers may opt for more established or well-known options. Doing your research and knowing your competitors is a great way to help your restaurant stand out, whether it’s with a unique menu, innovative layout, or something else that gets customers through the door.
Choosing the Wrong Location
We’ve said it before! Location can be a complete dealbreaker when it comes to the success of your restaurant. It’s hard to overstate this. Whether it’s the first, second, or tenth location of your business, setting up shop in the wrong place can be outright detrimental.
Avoid the mistake of prioritizing cheaper rent over a location with good foot traffic or visibility. While saving money on rent might seem smart at first, it can hurt business if your potential customers can’t easily find the restaurant.
On the other hand, some restaurateurs choose prime locations with high foot traffic but fail to consider whether the area aligns with their target audience. For example, opening a high-end fine dining restaurant in a neighbourhood next to the local university might not attract the right clientele.
Again, competition plays a role in location. If you’re looking to serve a specific type of cuisine, try to avoid opening up on the same street that already has two or three established restaurants of that style. So what can you do if you don’t know where the best location for your restaurant will be? Work with an experienced Toronto restaurant real estate agent. They know all about the city’s best enclaves for dining, where consumers like to go, and how restaurateurs can set themselves up for success.
On the hunt for more advice related to restaurant operations? Check out these other resources from our blog – on the house!
- Everything You Don’t Know About Restaurant Real Estate
- Buying a Restaurant? Here Are 5 Questions to Ask
- How to Find a Restaurant For Sale in Toronto
Not Having the Right Help
No matter how experienced you may be with Toronto’s restaurant industry, there’s no substitute for personalized support from an industry expert. More specifically, a professional restaurant real estate agent. That’s where we come in – Carve Real Estate.
As professional specialists, we know the unique ins and outs of restaurant real estate. Not only can we help you find the perfect spot to bring your dreams to fruition, but we’ll also serve as your long-term advisor on all things restaurant-related.
Ready to bring your restaurant dreams to life? Carve Real Estate can help! You can reach us by email at ryan@carverealestate.com or by phone at 416-618-0054.
