Entrepreneurs

The No. 1 thing to consider before opening a restaurant

The restaurant business is not for the faint of heart ... or stomach. They have a high failure rate, but knowing why can help prospective owners avoid a similar fate.

Around 60 percent of new restaurants fail within the first year. And nearly 80 percent shutter before their fifth anniversary.

Often, the No. 1 reason is simply location — and the general lack of self-awareness that you have no business actually being in that location.

Chef and owner in kitchen
Maskot | Getty Images

Unfortunately, that hip new part of town with cool shops and lots of foot traffic also comes with a price tag. And while it might be nice to sell meatballs right in the heart of everything, those meatballs had better be spectacular. Because the landlord doesn't care if it's your grandmother's recipe. The landlord cares about rent — specifically that you pay it.

Location is just one of many reasons why the restaurant business is not for the faint of heart. And though it may arguably be the most serious concern, it's just one more thing piled on to a mountain of obstacles that includes low start-up capital, inconsistent food and poor staffing.

Really, the list goes on and on, and it's been that way since forever. But there's also a very modern concern: technology.

It used to be that a restaurant could open fairly quietly. You had time to work out the menu and staffing issues, relative obscurity to find your voice and style, and months of experience to adequately adjust the flow and feel of the front and back of the house.

Now, you're one bad lasagna away from wallowing in the depths of Yelp hell. And in a world where buzz is everything, nothing spells trouble like the buzz of bad service and dodgy lasagna.

Watch the video to hear the hosts of "Restaurant Startup" discuss why restaurants fail.