Restaurateurs Don't Just Wing It

Passion isn't enough. You'll need a sound concept and management experience, and you should know that some of the most popular assumptions about restaurant failure are wrong

By Kerry Miller

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Fire on the Mountain Buffalo Wings, a wing joint in Portland, Oregon has been embraced as a local favorite, last year ringing up more than $1 million in sales. Fire on the Mountain

Co-owner Jordan Busch had been kicking around the wings idea since he was a teenager. Christine Strawn

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Ladawn Sheffield

Jordan Busch and Sara Sawicki are the co-owners of Fire on the Mountain Buffalo Wings, a bustling wing joint in Portland, Ore., which has been embraced as a local favorite since virtually the day it opened, on New Year's Day, 2004. Last year, the restaurant rang up more than $1 million in sales, and the business has proven profitable enough to bankroll a second, larger location along one of the city's main drags.

If you ask Busch or Sawicki for their secret to their success, they will tell you the answer is simple: Their food is good, and they serve it in a way that is different and better than the competition. And they are able to do this because they are passionate about buffalo wings: The end.

Mapping Out Failure

Of course, you're likely to get a similar answer from virtually any successful restaurateur who is called upon to dispense such advice. To wit, Wolfgang Puck: "I always believe great food, great service, and wonderful customers put into the right space will make a successful restaurant." Or Daniel Boulud: "In the end, doing what you love is what matters…As time passes, your ambition will carry you from one milestone to another." These are the chestnuts that inspire an uncountable number of angst-ridden lawyers and free-spirited drifters to pursue their version of the American dream, to believe that they can succeed where so many others have failed.

These can-do stories also drive people like John Walker a little crazy. Walker is a professor at the University of South Florida's School of Hotel & Restaurant Management, and the author of thick textbooks like Restaurant: From Concept to Operation (now in its fifth edition). Books like Walker's lay out all the reasons would-be entrepreneurs have to think twice before starting a restaurant. Do you mind sacrificing your evenings, your weekends, and most likely your mornings, too? Do you have a menu, a concept, a business plan? Do you have money to lose? Because, after all, everyone knows that the restaurant business is a fool's game.

Until recently, however, there wasn't much research to confirm or deny any of this advice. Most academic work in the hospitality field focused more on the relative financial performance of existing restaurants rather than basic questions about why restaurants succeed or fail, and how often. H.G. Parsa, now a professor at the University of Central Florida's College of Hospitality Management, set out to investigate exactly those questions. He did so armed with a unique data set—three years' worth of operating license records from the Columbus (Ohio) health department—as well as in-depth interviews with both present and former restaurant owners. What Parsa determined was that a lot of popular assumptions about restaurant failure are incorrect.

Success Is in the Concept

The oft-cited statistic that 9 out of 10 restaurants fail within their first year? Wrong. The actual figure, Parsa found, is closer to 1 in 4 (BusinessWeek.com, 4/16/07). Parsa discovered that conventional wisdom is also unreliable when it comes to explaining why restaurants fail.

Restaurant owners weren't failing because they had ill-defined competitive strategies. They weren't failing because they lacked access to capital, or because they chose poor locations, either. (These are factors, Parsa says, just not typically make-or-break ones.) Rather, the single most critical element of a restaurant's success, Parsa says, is the presence of a distinctive, well-researched concept. This insight is, admittedly, a bit of an anticlimax. The importance of a concept seems like it would be obvious to anyone prepared to invest thousands of dollars in said concept. As it turns out? Not so much.

When asked to describe their concept, failed restaurant owners answered "vegetarian food" or "Alaskan seafood"—when pressed, and they couldn't expand their description beyond food production.