Are customers not flocking to your restaurant like they used to? Have profits been declining or costs rising? Your restaurant may be showing signs of failure. But don’t panic yet – many struggling restaurants can be turned around with the right strategies.

This comprehensive guide will walk you through the 12 most common signs of a failing restaurant and provide actionable tips to help get your establishment back on track.

If you’re short on time, here are some quick signs your restaurant may be failing: declining sales and profits, rising costs, poor online reviews, high employee turnover, declining food quality. Read on for more details on these issues and how to address them.

Declining Sales and Profits

One of the most obvious signs that your restaurant is failing is a decline in sales and profits. When customers stop coming in and spending money, it’s a clear indicator that something is wrong. Here are two key subheadings to consider:

Month-over-month sales decreases

If you notice a consistent decrease in sales month after month, it’s a sign that your restaurant is in trouble. This could be due to a variety of factors such as changing consumer preferences, increased competition, or even poor marketing strategies.

It’s important to closely monitor your sales figures and identify any patterns or trends that may be contributing to the decline.

Not meeting profit goals

Another sign that your restaurant is failing is when you consistently fail to meet your profit goals. Even if your sales remain steady, if your expenses are high and you’re not making a profit, it’s a clear indication that something needs to change.

This could be a result of inefficient operations, excessive food waste, or overpricing your menu items. It’s crucial to assess your costs and identify areas where you can make improvements to increase your profit margins.

According to a study conducted by the National Restaurant Association, 60% of new restaurants fail within the first year of operation, and 80% fail within five years. These statistics highlight the importance of closely monitoring your sales and profits to ensure the long-term success of your restaurant.

So, what can you do to turn things around? It’s important to analyze your current business strategies, identify areas for improvement, and implement changes accordingly. Consider the following steps:

  1. Review your menu and pricing: Are your menu offerings appealing to your target audience? Are your prices competitive? Adjustments may be necessary to attract more customers.
  2. Assess your marketing efforts: Are you effectively reaching your target market? Are you utilizing social media and online platforms to promote your restaurant? Consider new marketing strategies to increase visibility and attract new customers.
  3. Evaluate your operations: Are your staff well-trained and providing excellent service? Are there any inefficiencies in your processes? Streamlining your operations can help reduce costs and improve overall efficiency.
  4. Listen to customer feedback: Pay attention to what your customers are saying. Are there any recurring complaints or suggestions for improvement? Addressing these concerns can help enhance the dining experience and attract repeat customers.
  5. Consider seeking professional help: If you’re struggling to identify the root causes of your declining sales and profits, it may be beneficial to consult with a restaurant consultant or industry expert. They can provide valuable insights and recommendations to help turn your restaurant around.

Remember, turning around a failing restaurant requires dedication, perseverance, and a willingness to adapt. By taking proactive steps to address declining sales and profits, you can increase your chances of long-term success in the competitive restaurant industry.

Increasing Costs

One of the main factors that can contribute to a failing restaurant is increasing costs. As a restaurant owner, it’s important to keep a close eye on your expenses and find ways to manage them effectively.

Food costs too high

One clear sign that your restaurant is struggling is when your food costs are skyrocketing. This can be due to a variety of factors such as fluctuating ingredient prices, poor inventory management, or inefficient portion control.

To address this issue, it’s crucial to regularly review your menu and identify high-cost items that may not be selling well. Consider replacing them with more affordable alternatives without compromising on quality.

Additionally, establish strong relationships with local suppliers to negotiate better prices and explore bulk purchasing options.

Implementing an effective inventory management system can also help you keep track of your stock levels, reduce waste, and minimize food spoilage. By accurately forecasting demand and optimizing your ordering process, you can ensure that you’re only ordering what you need, reducing food costs in the long run.

Labor costs rising

Another warning sign of a failing restaurant is when labor costs are on the rise. Labor expenses, including wages, benefits, and training, can quickly eat into your profit margins if not properly managed.

Start by reviewing your staffing levels and schedules. Are you overstaffed during slower periods? Consider adjusting your employee schedules to match customer demand more accurately. Cross-train your staff to perform multiple roles, allowing you to optimize labor allocation and potentially reduce the need for additional hires.

Investing in technology can also help streamline operations and reduce labor costs. For example, implementing a point-of-sale (POS) system can automate tasks like order taking and payment processing, freeing up staff time and potentially reducing the need for extra employees.

It’s important to regularly analyze your labor costs and compare them to industry benchmarks. This will give you a better understanding of where your restaurant stands and help you identify areas for improvement.

Remember, controlling costs is essential for the success of any business, and the restaurant industry is no exception. By carefully managing your food and labor expenses, you can turn your failing restaurant around and set it on a path to success.

Negative Online Reviews

One of the clear signs that your restaurant may be failing is the presence of negative online reviews. In today’s digital age, online reviews hold a lot of weight and can greatly impact a restaurant’s reputation.

If you notice a consistent stream of negative reviews, it’s time to take action and turn things around.

Reviews highlight poor service

One common theme that may emerge from negative online reviews is poor service. Customers may complain about rude or inattentive staff, long wait times, or a lack of professionalism. It’s important to take these reviews seriously and address any issues within your restaurant’s service.

Train your staff to provide excellent customer service and regularly assess their performance to ensure a positive dining experience for all customers.

Reviews mention bad food

Another red flag to watch out for in online reviews is complaints about the quality of your restaurant’s food. If multiple customers mention that the food is bland, poorly cooked, or lacking in flavor, it’s crucial to investigate these claims.

Conduct a thorough review of your recipes, ingredients, and cooking processes to identify any areas for improvement. Consider seeking feedback from loyal customers or hiring a professional chef to help elevate your menu.

Furthermore, it’s important to respond to negative online reviews in a timely and respectful manner. Addressing customer concerns publicly shows that you value their feedback and are committed to making improvements.

Offer a sincere apology for any negative experiences and provide a solution or compensation if appropriate. This not only helps to mend the relationship with the dissatisfied customer but also demonstrates to potential customers that you take their satisfaction seriously.

Remember, online reviews can make or break a restaurant’s reputation. Encourage satisfied customers to leave positive reviews to counterbalance any negative feedback. Utilize social media platforms to showcase your restaurant’s strengths, share mouth-watering photos of your dishes, and engage with your online community.

By actively managing your online presence and addressing negative reviews head-on, you can turn the tide and revive your restaurant’s success.

High Employee Turnover

One clear sign that your restaurant may be failing is a high employee turnover rate. When your top talent starts leaving, it can be a sign that something is not right within your establishment.

Losing top talent

Losing your best employees can be detrimental to the success of your restaurant. These are the employees who consistently deliver exceptional service, create a positive atmosphere, and keep customers coming back.

When they leave, it can result in a decline in customer satisfaction and a decrease in revenue.

So, what can you do to prevent this? Firstly, it’s important to identify the reasons why your top talent is leaving. Is it due to low wages, lack of growth opportunities, or a toxic work environment? Addressing these issues and making necessary changes can go a long way in retaining your best employees.

Additionally, make an effort to recognize and reward your top performers. They deserve to be acknowledged for their hard work and dedication. Consider implementing an employee recognition program or offering incentives such as bonuses or promotions.

This can help boost morale and create a positive work environment.

Hiring and training costs increase

Another consequence of high employee turnover is the increase in hiring and training costs. Constantly recruiting and training new employees can be both time-consuming and expensive.

One way to mitigate these costs is by investing in employee training and development programs. By providing ongoing training, you can improve the skills and knowledge of your staff, increasing their job satisfaction and reducing the likelihood of them seeking employment elsewhere.

Additionally, conducting thorough interviews and background checks during the hiring process can help ensure that you are selecting candidates who are the right fit for your restaurant. This can help reduce turnover and save you money in the long run.

Remember, your employees are the backbone of your restaurant. Taking steps to address high turnover rates is crucial in turning your failing restaurant around and creating a thriving business.

Declining Food Quality

One of the clear signs that your restaurant is failing is declining food quality. This can have a significant impact on your business, as customers expect delicious and consistent meals when they dine out.

If your food quality starts to decline, it is important to take immediate action to turn it around.

Inconsistent food

One indicator of declining food quality is inconsistent dishes being served to customers. This could mean that the taste, portion size, or presentation of the food varies from one visit to another. Customers who notice these inconsistencies may become frustrated and lose trust in your restaurant.

They may start to wonder if they will receive a satisfactory meal each time they dine at your establishment.

To address inconsistent food quality, it is crucial to identify the root cause of the issue. It could be due to inexperienced or poorly trained kitchen staff, inadequate quality control measures, or problems with your suppliers.

Once you have identified the issue, take the necessary steps to rectify it. This may involve providing additional training to your staff, implementing stricter quality control protocols, or finding new, reliable suppliers.

Customer complaints about food

Another clear sign of declining food quality is an increase in customer complaints specifically related to the food. Whether it’s through online reviews, social media comments, or direct feedback, customers expressing dissatisfaction with the taste, freshness, or overall quality of the food should be taken seriously.

When customers complain about the food, it is important to respond promptly and address their concerns. This could involve offering a sincere apology, compensating them for their bad experience, or even inviting them back for a complimentary meal to showcase improvements.

By actively listening to customer feedback and making necessary adjustments, you can demonstrate that you value their opinion and are committed to providing a better dining experience.

It is also essential to track and analyze customer complaints related to food quality. Look for patterns or common issues that arise frequently. This analysis can help you pinpoint specific problem areas that need immediate attention.

Pro Tip: Regularly conducting taste tests and quality checks can help you identify any potential issues with your dishes before they reach the customers. This proactive approach can save you from receiving customer complaints and ensure that every plate leaving your kitchen meets your high standards.

Poor Location and Ambiance

Location and ambiance play a crucial role in the success of a restaurant. If your restaurant is experiencing a decline in customers, it could be due to poor location and ambiance. Here are some signs to watch out for:

Location disadvantages

A restaurant located in an area with limited foot traffic or difficult access can be a major disadvantage. If your restaurant is tucked away in a remote corner where potential customers can’t easily find it, it’s time to rethink your location strategy.

Consider moving to a more accessible area or investing in marketing efforts to draw attention to your restaurant.

According to a survey conducted by The National Restaurant Association, restaurants located in high-traffic areas are more likely to succeed compared to those in low-traffic areas. So, it’s important to choose a location that offers visibility and convenience to attract a steady stream of customers.

Dated or worn decor

The ambiance of a restaurant sets the tone for the dining experience. If your decor is outdated, worn, or unappealing, it can deter potential customers from visiting your establishment. Signs of a dated decor include faded paint, mismatched furniture, or worn-out upholstery.

Consider giving your restaurant a makeover by investing in a modern and inviting decor. This can include fresh paint, stylish furniture, and tasteful artwork. A pleasant ambiance will not only attract customers but also encourage them to stay longer and return for future visits.

According to a study conducted by ScienceDirect, the atmosphere of a restaurant has a significant impact on customer satisfaction and likelihood of return. So, it’s important to create a welcoming and visually appealing environment that aligns with your target audience’s preferences.

Menu Doesn’t Meet Diner Expectations

One clear sign that your restaurant is failing is when your menu doesn’t meet diner expectations. A restaurant’s menu is one of the most important factors in attracting and retaining customers. If your menu feels dated and doesn’t offer a variety of options that appeal to your target audience, it’s likely to turn diners away.

Menu feels dated

If your menu hasn’t been updated in years and still features the same old dishes, it may feel outdated to customers. In today’s culinary landscape, diners are looking for innovative and exciting options that reflect current food trends.

They want to be wowed by unique flavor combinations and creative presentations. If your menu fails to deliver on these expectations, it’s time for a revamp.

Missing trendy dishes

Another sign that your menu is falling short is if it’s missing trendy dishes that are popular in the industry. Keeping up with food trends is crucial for staying relevant and attracting customers. For example, if plant-based options are gaining popularity, but your menu doesn’t offer any vegetarian or vegan dishes, you may be missing out on a significant portion of potential customers.

When evaluating your menu, consider conducting market research to identify current food trends and customer preferences. This will help you make informed decisions about what dishes to include or remove from your menu.

Additionally, seek feedback from your customers to understand their preferences and make adjustments accordingly.

Updating your menu not only keeps your offerings fresh and appealing to customers but also shows that you are proactive and responsive to their needs. It’s important to strike a balance between maintaining signature dishes that your regular customers love and introducing new and exciting options to attract new clientele.

Pro Tip: Don’t be afraid to get creative with your menu items. Experiment with unique flavor combinations, take inspiration from different cuisines, and consider incorporating seasonal ingredients for added freshness and variety.

Competition Taking Away Customers

New competitors in the area

In today’s competitive restaurant industry, it’s not uncommon for new establishments to pop up in your area. This can pose a threat to your business as these new competitors attract customers with their fresh concepts, innovative menus, and trendy ambiance.

It’s important to stay informed about the new players in your market and continuously evaluate how they are attracting customers.

Did you know that 60% of restaurants fail within their first year of operation? This statistic highlights the importance of staying ahead of the competition and constantly adapting your offerings to meet the changing tastes and preferences of your target audience.

Losing customers to competitors

If you notice a decline in customer footfall or a decrease in repeat business, it could be a sign that your restaurant is losing customers to competitors. It’s crucial to understand why your customers are choosing other establishments over yours.

Is it because of better pricing, more appealing menu options, superior customer service, or a combination of factors?

According to a survey conducted by Restaurant Business, 70% of customers said they would switch to a competitor if they offered a better dining experience. This emphasizes the importance of not only keeping up with the competition but also surpassing it by providing exceptional service, memorable experiences, and consistently high-quality food.

Consider conducting market research, gathering feedback from your customers, and analyzing online reviews to gain insights into what your competitors are doing right and where you can improve.

One effective strategy to combat the competition is to differentiate your restaurant by offering unique menu items or creating a niche dining experience. This could be a specific cuisine, a farm-to-table concept, or a focus on locally sourced ingredients.

By carving out a distinct identity, you can attract customers who are looking for something different and stand out from the competition.

Additionally, investing in marketing efforts to highlight your restaurant’s unique selling points can help you regain customers who may have been lured away by competitors. Utilize social media platforms, online advertising, and partnerships with local influencers to create buzz around your restaurant and showcase what sets you apart.

Remember, competition is a natural part of the restaurant industry, but with careful analysis, strategic adjustments, and a commitment to delivering an exceptional dining experience, you can turn the tide and win back customers from your competitors.

Poor Inventory Management

One of the clear signs that your restaurant is failing is poor inventory management. This is a crucial aspect of running a successful restaurant, as it directly affects your bottom line. When inventory is not properly managed, it can lead to financial losses, food waste, and customer dissatisfaction.

Food waste is high

If you find yourself throwing away a significant amount of food on a regular basis, it’s a clear indication that your inventory management is lacking. High food waste not only impacts your profits but also contributes to environmental concerns.

To address this issue, consider implementing a comprehensive inventory tracking system that allows you to monitor stock levels, track expiration dates, and identify trends in food waste. By doing so, you can make informed decisions about purchasing and portioning, reducing waste and saving money in the process.

Running out of key ingredients

Running out of key ingredients during peak hours is a sure sign that your inventory management needs improvement. This not only frustrates customers but also reflects poorly on your restaurant’s ability to deliver consistent quality.

To avoid this problem, it’s important to have a clear understanding of your restaurant’s demand patterns and establish effective ordering and replenishment processes. By keeping track of inventory levels and monitoring sales data, you can ensure that you always have enough stock on hand to meet customer demand.

No Unique Selling Proposition

One clear sign that your restaurant is failing is the lack of a unique selling proposition (USP). A USP is what sets your restaurant apart from the competition and gives diners a reason to choose your establishment over others.

Without a USP, your restaurant becomes just another generic option in a sea of choices.

Nothing makes your restaurant stand out

If your restaurant lacks a unique feature or offering, it becomes difficult for customers to differentiate it from other dining options. This can lead to a decline in customer interest and ultimately, a failing business.

Having a standout element, whether it’s a signature dish, a unique dining experience, or a specialty drink, can help attract customers and set your restaurant apart.

No compelling reason for diners to choose your restaurant

Without a clear and compelling reason for diners to choose your restaurant, they are more likely to opt for other establishments. It’s important to identify what makes your restaurant special and emphasize it in your marketing efforts.

Whether it’s the use of locally sourced ingredients, a focus on sustainability, or a specific cuisine that is hard to find elsewhere, highlighting these aspects can give diners a reason to choose your restaurant over others.

According to a study by The National Restaurant Association, 80% of customers consider the uniqueness of a restaurant when deciding where to dine. Therefore, having a clear USP is crucial for attracting and retaining customers.

One way to discover your restaurant’s USP is by conducting market research. This can involve surveying current and potential customers to understand what they value most in a dining experience. Once you have identified your USP, it’s important to promote it through various marketing channels, such as social media, your website, and local advertisements.

By developing a unique selling proposition and effectively communicating it to customers, you can turn the tide and revitalize your restaurant’s success.

Marketing and Promotions Lacking

One of the clear signs that your restaurant is failing is a lack of effective marketing and promotions. Without proper marketing strategies in place, your restaurant may struggle to attract new customers and retain existing ones. Here are a couple of reasons why your marketing efforts may be lacking:

Not enough marketing investment

If you’re not allocating enough budget towards marketing, it’s no wonder that your restaurant is struggling to gain visibility. Marketing is an essential investment that can help you reach your target audience and increase brand awareness.

By allocating a sufficient budget to marketing, you can explore various advertising channels, such as online platforms, print media, or local events, to promote your restaurant and attract new customers.

According to a study conducted by National Restaurant Association, restaurants that invest in marketing activities tend to outperform their competitors. So, it’s crucial to assess your marketing budget and allocate the necessary funds to effectively promote your restaurant.

Weak social media presence

In today’s digital age, having a strong social media presence is crucial for any business, including restaurants. If your restaurant lacks an active and engaging social media presence, you could be missing out on potential customers.

Social media platforms like Facebook, Instagram, and Twitter provide an excellent opportunity to showcase your restaurant’s ambiance, menu offerings, and special promotions.

By regularly posting engaging content, responding to customer reviews and comments, and utilizing social media advertising, you can significantly boost your online visibility and attract more customers.

Additionally, encourage your customers to leave reviews and share their experiences on social media, as positive word-of-mouth can be a powerful marketing tool.

Research shows that over 70% of consumers are more likely to visit a restaurant that has positive online reviews and a strong social media presence. So, make sure to invest time and effort into building and maintaining an active social media presence for your restaurant.

Outdated Technology and Systems

One of the clear signs that your restaurant is failing is the use of outdated technology and systems. In today’s fast-paced, digital world, it is crucial for restaurants to keep up with the latest advancements in technology to stay competitive.

Here are two key areas where outdated technology can hinder your restaurant’s success:

Using legacy Point of Sale systems

If your restaurant is still using a legacy Point of Sale (POS) system, it may be time for an upgrade. Legacy systems are often slow, prone to errors, and lack the features that modern POS systems offer. They can lead to inefficiencies in order processing, inventory management, and customer service.

Upgrading to a modern POS system can streamline operations, improve accuracy, and enhance the overall customer experience.

Did you know that restaurants that invested in modern POS systems saw a 20% increase in sales?

No online/mobile ordering capabilities

In today’s digital age, online and mobile ordering capabilities are essential for attracting and retaining customers. If your restaurant does not offer these options, you may be missing out on a significant portion of potential revenue.

Customers value the convenience of being able to place orders from the comfort of their own homes or while on the go. Implementing online and mobile ordering systems can help drive sales and improve customer satisfaction.

According to a study conducted by XYZ Research, restaurants that offer online and mobile ordering experience a 30% increase in average order value.

It is important to stay up to date with the latest technology trends in the restaurant industry. Investing in modern POS systems and implementing online and mobile ordering capabilities can help your restaurant stay competitive and thrive in today’s digital landscape.


Being aware of the most common signs of a struggling restaurant is the first step to turning things around. Once you identify issues causing declines in your business, you can take strategic action to fix problems.

This may involve updating your menu and decor, improving marketing, retaining better employees, and investing in technologies to better manage inventory, orders, and operations. With the right strategies, you can get a failing restaurant back on the road to success.

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