Column: Rumors and misinformation feast on the restaurant industry
“They seemed to be doing well and I”™m just very sorry to hear they”™re closing,” read a quote in a local newspaper about a long-time restaurant in Westport closing. Prior to that, speculation of this fan fave closing was swirling around town. It was a shame, as the restaurant owners should have been enjoying their retirement stage and the public and media attention should have been focused on celebrating their success.
Instead, it fell prey to a cynical and anticlimactic ending. Do people comprehend that a restaurant can close by design? Whether it”™s due to a well-deserved retirement, a great offer to purchase or a change in career path, restaurants can, and do close for a myriad of positive reasons. But, I guess that”™s no fun to talk about, is it?
“What people seem to forget is that a restaurant is a business, like any other,” says Mark Moeller, a restaurant consultant and the owner of the Recipe of Success. “But unlike other industries, consumers in this day and age feel a certain closeness or personal connection to a restaurant. Or they feel a strong sense of awareness through the numerous media outlets and public platforms that now seem to write about restaurants and the players involved, creating an inflated or false sense of knowledge.”
Rumors about the restaurant industry aren”™t anything new. In fact, we restaurant folks have learned to tolerate and laugh them off.
I was recently told by a (reputable) food blogger a story about how a hugely successful restaurant owner in South Norwalk “couldn”™t make it because the concept wasn”™t a good fit for the area.” When I asked where she had acquired her information, she could only reply that “everyone knows about it.” Alas, she couldn”™t have been more mistaken. This owner not only sold the restaurant for a profit, the deal included the rights to the concept and their active consulting role in maintaining the restaurant”™s standards, menu integrity, and even the cocktail recipes.
How on earth do these rumors get started? Is it from a resentful employee? Perhaps. Or does it stem from a consumer”™s desire to have information ”” juicy, negative, gossip-spreading misinformation?
Misconceptions and gossip about the restaurant industry are just as prevalent on a larger scale as they are on a local level. We”™ve all heard the myth that 90 percent of all restaurants fail in the first year, as was so unintelligently spewed from the mouth of chef Rocco DiSpirito on his botched reality restaurant show.
“There have been numerous studies done that say this is simply not true,” says David Sederholt, COO of New York”™s Strategic Funding Source and a former chef and restaurant owner. “Not only has this statistic never been proven or backed up by any reputable industry source, if this had been true, it is unlikely that the restaurant industry would have been growing at double-digit rates prior to the current recession.”
H.G. Parsa, a professor at the Knoebel School of Hospitality Management in the Daniels College of Business at the University of Denver, debunked this myth in a longitudinal study of restaurants in Columbus, Ohio, which showed only a 57 percent to 61 percent failure rate over a three-year period of time. In addition, there is no significant difference in the failure rate of restaurant startups and small business startups in general.
According to the National Restaurant Association, 30 percent of new restaurants fail in the first year and of those that survive, another 30 percent close in the next two years. To that end, the Small Business Administration”™s Office of Advocacy, as reported by Inc. magazine, found that the two-year failure rate for all small businesses is 31 percent and after five years the rate increases to 49 percent.
“In fact, CNN Money reported the small biz loan failure rate hitting 12 percent this year, whereas SFS has funded thousands of restaurants and our default rate is a mere 6.25 percent over 10 years, “said Sederholt.
Let”™s not confuse these failure numbers with Trulia economist Jed Kolko”™s research showing Fairfield County as having more restaurants per capita ”” 27.6 per 10,000 households ”” than anywhere else in the U.S. except San Francisco, which counts 39.3 restaurants per 10,000 households. Locally, this is a supply and demand issue and while it can certainly impact failure numbers, it can also produce a robust and competitive market.
Yes, the industry is a narrow-profit, high-risk operation with frequent staff turnover ”” there”™s no denying that. It”™s prone to public scrutiny more than any other consumer product or service industry, and given the fact that its reputation is based upon perception and not the facts, no wonder we, as an industry, get torn apart limb by limb.
A restaurateur, a chef and the service staff aim to please their customer. In a perfect world, the restaurant succeeds the majority of the time. But in today”™s age of radical online persecution, whether it”™s in the form of an emotional release on YELP, a jabbing tweet, or even a personal blog rant, a restaurant can no longer fall short ”” ever.
“Unfortunately a lot people believe everything they read,” says Kate Schlientz of Intoxikate, a seasoned food writer and host of the “Fork This” radio show, “and any negative review can sting a bit as some of these review outlets have a substantial reach. But ultimately, true food enthusiasts get out there and try places for themselves and are not influenced by these review forums.”
“Everyone has a bad day,” says Moeller of both the restaurant and the customer, “but typically, instead of the customer notifying the restaurant of any negative issues with their food, service or the overall experience, they tend to react in a way that brings others into the mix before the restaurant even has a chance to address or rectify.”
“The frontline is your bottom line,” says Paul Fetscher, president of Great American Brokerage Inc., a New York firm specializing in restaurant real estate, “Restaurants create illusions. A larger restaurant must adapt their space to feel just as inviting or busy, with 20 people as it would with 75 people, and their best bang for their space is to book larger parties. Smaller restaurants, while having it easier from a visual perspective of always looking busy, often have the challenge of turning the tables enough to reach profitability and can”™t book these large parties, which is often why their price points tend to be higher ”” it”™s cause and effect for both size restaurants.”
While a consumer can”™t typically be held accountable for spreading rumors or putting a restaurant on edge, a media outlet can, and should be. Thrilled with the removal of the number and star ratings from most of Connecticut media”™s restaurant reviews, I love how the reader is now forced to actually read about the restaurant and not predicate their willingness to try a restaurant based upon a rating.
“Really what it comes down to is context and personal taste,” says Schlientz. “Food is so subjective. You don”™t know who the writer is or where they”™re coming from when they give you their opinion. Why lower your expectations of a place because of what a writer wrote or worse, why get your hopes up only to be disappointed and clearly not have the same tastes as that particular reviewer?”
The best resource for restaurant information is you, the consumer. You decide where you enjoy eating and where you are going to spend your money. Don”™t let anyone else do that for you. Show your approval by patronizing a restaurant and demonstrate your disapproval by not showing up. Your actions will speak louder than your words ”” and this way you don”™t have to worry about getting the facts right.
Linda Kavanagh is a food and travel writer and the owner of MaxEx Public Relations in Stamford. A former chef, she co-founded the New England Culinary Group, a nonprofit organization comprised of hospitality industry professionals. She can be treached at 203- 323-4185 or linda@maxexposure.net.