There’s a popular belief that nine out of ten new restaurants fail in the first year. It’s a myth.
A new study by an associate professor of hospitality management at Ohio State has identified a real figure of six. Six out of ten new restaurants fail in the first year. That’s still pretty high mortality, but not out of line with startups in other business categories.
Nevertheless, I think the only business tougher than retail is the restaurant business. There are just so many different reasons why people don’t come back.
No matter what new services or products appear, no matter what tools, concepts, strategies or tactics people dream up, the basic fundamentals and principles of marketing stubbornly remain the same: maximize your assets, discover needs and how to satisfy them, and, of course, segment something. Anything.
Though almost every new business category begins with a broad market appeal, in no time, entrepreneurs segment the market. By price, gender, age, geography ... every way imaginable.
A wise marketing professor once said that when things go wrong, more often than not, it isn’t because the strategy was bad; it was because the strategy was executed poorly, or, not at all. In other words, nobody made it happen.
William Bonoma at the Harvard School of Business likened it to war. He said, in effect, without a competent, hard-charging sergeant to drive the squad up the hill, no strategy would work.
You wonder why every car dealer TV ad is followed by an ambulance-chasing lawyer ad … is followed by a car dealer ad … is followed by an ambulance-chasing lawyer ad … is followed by . . . you get the point.
Business categories become commodities when consumers no longer identify a meaningful difference between brands. When that happens, the only difference a brand can create is in advertising. Better advertising than others, or, as in most cases, more advertising.
Just because somebody tells you that a certain business category is a dying business doesn’t mean it’s gonna die today or tomorrow. People were still making money on Blockbuster stores a decade after the announcement of their demise.
Business categories do, indeed, die. Almost always because of advances in science. Nobody’s making steamships any more.
But some categories that start shrinking aren’t necessarily dying. They’re just getting smaller.