Why Restaurants Fail In Bhubaneswar

The city is seeing a boom in the restaurant business and every one of us thinks it is a lucrative business. I have seen many restaurants closing down — Moti Mahal, Chawla Chicken, Chawlas2 have closed shop and many more are on the verge of closing or shifting or transforming themselves to cloud kitchens, which is more disastrous now.

What I feel is mostly a lack of information about this sector and the industry as a whole. The investors and owners lack this aspect and they have the ‘I know everything’ attitude. Due to this they are not focused and it is too late when they realise what’s going wrong.

One of the reasons Bhubaneswar has a high fatality rate when it comes to restaurants is because of poor location, high rentals. It’s the rental now which pushes the restaurants’ costs up. The other major aspects are owner’s involvement, poor allocation of resources which are overlooked due to the mythical turnover figures given by the Chartered Accountant. The other reasons are poor staff handling, reporting from the ground level and poor visibility in the marketing screen — especially in social media. Majority of the owners or the franchisees in Bhubaneswar have the same common problems. Some of them are:

Poor location & high rentals

The location is considered to be a prime factor that can either make or break your restaurant. While a poor location can turn fatal for your restaurant, by not generating enough customer footfalls, it is crucial not to overspend. Often good locations come at a high price, and restaurants are not able to cover their costs. At times it is crowded in a cluster — mind you it is not Khan Market or Pandara Road in New Delhi. The investors are so desperate they even settle for a first floor which itself is a deterrent and escalator cost will be high. This temptation has killed many — Saheed Nagar, being one of the locations and slowly we are having issues in Patia also. The investors got to see the market and spending habits of people before jumping in.

Inexperience

The general perception that the restaurant industry has no barriers to entry leads to a belief that anyone can open a restaurant. This is far from reality. While there are no industry barriers, poor business acumen, lack of management plans and financial planning among first-time restaurateurs are some of the primary reasons why restaurants fail. Mostly because in Bhubaneswar — the neo rich feel they know it all and Google consultant is just a click away. The first-time restaurateurs don’t hire a consultant and don’t have a business plan in place before they open an outlet. Cafe Coffee Day on Vivekananda Marg and can anyone forget the Paris Bakery fiasco?

No involvement of the owner

It is the sad truth that aspiring restaurateurs often forget: the owner’s involvement is crucial to the restaurant’s success. Investing just your money into the restaurant, and depending entirely on the restaurant manager can often turn out to be fatal. Most of them are not aware of the restaurant business, nor are they aware of sales and inventory reports, and evaluation is out of the question. Most of them keep track of their restaurant business through voice reporting from the managers and stores.

Poor allocation of resources

Overspending on the ‘not-so-important’ aspects of the restaurant is one of the fatal mistakes which the Bhubaneswar restaurateur does; they are not minimalistic which has led to many restaurant failures. It is irrational to overspend on the furniture and the ambiance if you are running short of resources in the inventory department. Similarly, you might be spending a lot on certain raw materials that are not being sold at all, leading to wastage. Not knowing how much to spend is the leading reason why restaurants have failed in Bhubaneswar — 99 Bakers being one of the bright examples. The basics are not taken care of in the restaurant. They do not plan and allocate resources nor the spending.

Poor staff management

Hiring the wrong people is just as bad as being understaffed, if not worse. Untrained staff can do a lot of harm to restaurants and ultimately becomes one of the primary reasons why restaurants fail. Unhappy and disgruntled employees can seriously damage the restaurant’s reputation, and drive customers away, thus leading to a restaurant business shutdown. Owners here do not conduct regular communication meetings with the staff to maintain transparency within the team. Thus a pleasant working environment is never there. Lack of team-building exercises and fostering work culture are not there in Bhubaneswar. So they miss out on the efficiency of the restaurant. Typical case study — Dalema/Dalma.

Complex menu

Any restaurant in Bhubaneswar has a large and diverse menu which is just confusing to the customers; it is tedious to maintain, and often the reason behind wastage of the inventory items. Undue wastage leads to high food costs, which in turn, leads to losses. It also becomes difficult and time-consuming for the cooks to prepare vastly different dishes, and may also lead to customer dissatisfaction in case of delays. None of the restaurants in Bhubaneswar has a short and simple menu, thus they cannot excel in any of the dishes. No one learns from Kalia, Kishore and Nanda — only rice / chapati, salad and mutton curry. Need to see these outlets in the afternoon. Wait time is more than 35 to 40 minutes. The owners do not do menu performance analysis. Can we learn from naan, Chilli Chicken and hot & sour soup?

Poor customer experience

Poor customer experience is often one of the main reasons why restaurants fail. They post bad reviews of the restaurants on social media and restaurant review sites, and it is extremely damaging to the restaurant. The customers are unhappy because of rude and hostile waiters or service delays and mix-up. The staff are neither aware of the hospitality ecosystem nor refined. This is the case in almost most of the outlets.

It’s a wakeup call… in the second series we will discuss handling the restaurant business in the new normal.