Did You Know?
Metro — Entrepreneurs looking to venture into the
restaurant business have long been told that roughly 90 percent of restaurants
fail within their first year of operation. However, while that was once a
widely accepted statistic, it’s not nearly close to being true. In fact,
research suggests the figure is far closer to 60 percent, and that’s after
three years, not one. H.G. Parsa, an associate
professor in the Ohio State University’s Hospitality Management program, had
heard enough of the “90 percent” talk to do some research of his own as to the
validity of the number.
What Parsa found was that
roughly 1 in 4 restaurants close or change ownership within a year of opening.
The number rises to 3 in 5 (60 percent) after three years. Parsa
was inspired by an American Express commercial that quoted the infamous (and,
apparently, false) statistic. He then examined Health Department turnover
records of over 2,500 restaurants in Columbus over a 3-year period. Remarkably,
the 60percent failure rate is on par with the cross-industry rate for new
businesses, essentially making the restaurant business no more or less risky
than any other.