While the dream of running a successful restaurant is intoxicating, the stark reality is that over half will shutter within their first year, and a staggering 80% of independents won't make it to their fifth anniversary.
Key Takeaways
- 60% of restaurants fail within the first year according to a study analyzing over 10,000 U.S. eateries from 2005-2015
- 80% of independent restaurants close within five years, based on data from the National Restaurant Association's 2020 report covering 1 million establishments
- Average restaurant failure rate stands at 30% annually across the U.S., derived from IRS data on business closures between 2010-2020
- Fast-food restaurants have a 38% failure rate in year one versus 60% for fine dining, per 2017 FSU study of 1,200 Florida eateries
- Independent full-service restaurants fail at 65% within 18 months, compared to 20% for chains, from NRA 2022 data
- Coffee shops have a 50% closure rate in first year per Square's 2021 report on 100,000 small businesses
- Restaurants in New York City have a 25% higher failure rate than national average at 35% year one, per NYC Dept of Health 2022 data
- California restaurants fail at 28% in first year vs. 22% national, from CDPH 2021 inspection reports on 90,000 eateries
- Texas sees 32% restaurant closure rate annually per Texas Restaurant Association 2023 survey
- 30% of restaurants fail in the first year due to poor location choice per 2019 Cornell study
- 50% closure by end of year two from cash flow issues, per NRA 2021 financial benchmarks
- Only 20% survive past year three nationally per BLS survival analysis 2015-2020
- Poor management causes 29% of failures per 2021 NRA survey of 1,000 closed eateries
- Inadequate marketing leads to 23% closures within two years per HubSpot 2022 restaurant study
- Labor shortages contribute to 19% failure rate per BLS 2023 hospitality turnover data
Most new restaurants struggle to survive, especially independent ones within five years.
By Location/Region
- Restaurants in New York City have a 25% higher failure rate than national average at 35% year one, per NYC Dept of Health 2022 data
- California restaurants fail at 28% in first year vs. 22% national, from CDPH 2021 inspection reports on 90,000 eateries
- Texas sees 32% restaurant closure rate annually per Texas Restaurant Association 2023 survey
- Rural U.S. restaurants have 45% failure rate vs. 25% urban per USDA 2020 economic research
- Florida's high-tourism areas show 40% first-year failures per FSU 2019 study of Miami and Orlando
- Midwest states average 27% restaurant failure per BLS regional data 2018-2022
- Las Vegas restaurants fail at 50% rate due to seasonality per Nevada Gaming Control Board 2021 stats
- Northeast U.S. sees 31% closure rate for independents per Census Bureau 2022 CBEC data
- Southeast region restaurants survive only 20% past five years per SBA regional report 2020
- Pacific Northwest failure rate at 29% annually per Washington State Restaurant Association 2023
By Location/Region Interpretation
From New York's brutal hustle to Vegas's fickle tides and the South's unforgiving five-year mark, the American restaurant industry is a gauntlet where geography is often the invisible chef in the kitchen, secretly seasoning every business plan with a heavy pinch of peril.
By Restaurant Type
- Fast-food restaurants have a 38% failure rate in year one versus 60% for fine dining, per 2017 FSU study of 1,200 Florida eateries
- Independent full-service restaurants fail at 65% within 18 months, compared to 20% for chains, from NRA 2022 data
- Coffee shops have a 50% closure rate in first year per Square's 2021 report on 100,000 small businesses
- Bar and tavern failure rate is 63% over five years, highest among types per IBISWorld 2023 industry report
- Quick-service restaurants survive at 51% after three years vs. 30% for casual dining, per Technomic 2019 analysis
- Fine dining establishments fail at 70% within two years per Zagat's 2018 survey of 2,500 high-end spots
- Food trucks have a 40% failure rate in year one, lower than brick-and-mortar at 60%, from 2020 Roaming Hunger study
- Buffet-style restaurants close at 55% rate after 24 months per 2022 CHD Expert data on 3,000 units
- Pizzeria failure rate is 29% annually per PMQ Pizza Magazine 2021 stats on 80,000 locations
- Vegan/plant-based restaurants fail at 75% within three years per 2023 Plant Based Foods Association report
- Fast-food restaurants have a 38% failure rate in year one versus 60% for fine dining, per 2017 FSU study of 1,200 Florida eateries
- Independent full-service restaurants fail at 65% within 18 months, compared to 20% for chains, from NRA 2022 data
- Coffee shops have a 50% closure rate in first year per Square's 2021 report on 100,000 small businesses
By Restaurant Type Interpretation
The restaurant industry is a brutal, numbers-driven game where your chances of survival seem to hinge entirely on whether your dream is built on artisanal ambition or a well-oiled assembly line.
Causes and Risk Factors
- Poor management causes 29% of failures per 2021 NRA survey of 1,000 closed eateries
- Inadequate marketing leads to 23% closures within two years per HubSpot 2022 restaurant study
- Labor shortages contribute to 19% failure rate per BLS 2023 hospitality turnover data
- High rent accounts for 21% of bankruptcies per CoStar 2022 commercial real estate report
- Menu pricing errors cause 15% closures per Menu Engineering 2021 analysis of 500 failures
- Lack of experience raises failure odds by 2.5x per 2019 FSU entrepreneurship study
- Food cost overruns lead to 18% failures per RestaurantOwner.com 2023 benchmarks
- Poor online reviews correlate with 25% higher closure rate per Yelp 2022 economic impact study
Causes and Risk Factors Interpretation
The fatal recipe for a restaurant's demise seems to be an overconfident chef who neglects the bills while under-seasoning their marketing and burning their staff.
National Averages
- 60% of restaurants fail within the first year according to a study analyzing over 10,000 U.S. eateries from 2005-2015
- 80% of independent restaurants close within five years, based on data from the National Restaurant Association's 2020 report covering 1 million establishments
- Average restaurant failure rate stands at 30% annually across the U.S., derived from IRS data on business closures between 2010-2020
- 29.4% of new restaurants fail in their first 12 months per Cornell University Hospitality Quarterly analysis of 8,000+ cases
- U.S. restaurant closure rate reached 17% in 2020 due to COVID-19, impacting 110,000 locations per Yelp data
- 70% of restaurants do not survive past three years nationally, from a 2018 Huddle House franchise study of 5,000 outlets
- Failure rate for U.S. restaurants averages 26% per year based on Dun & Bradstreet credit reports from 2015-2022
- 62% closure rate within first year for non-chain eateries per 2021 Toast POS data on 250,000 restaurants
- National five-year survival rate for restaurants is only 25%, according to SBA Office of Advocacy 2019 report
- 33% of U.S. restaurants filed for bankruptcy in 2022 per S&P Global Ratings analysis of 15,000 filings
- 60% of restaurants fail within the first year according to a study analyzing over 10,000 U.S. eateries from 2005-2015
- 80% of independent restaurants close within five years, based on data from the National Restaurant Association's 2020 report covering 1 million establishments
- Average restaurant failure rate stands at 30% annually across the U.S., derived from IRS data on business closures between 2010-2020
- 29.4% of new restaurants fail in their first 12 months per Cornell University Hospitality Quarterly analysis of 8,000+ cases
- U.S. restaurant closure rate reached 17% in 2020 due to COVID-19, impacting 110,000 locations per Yelp data
- 70% of restaurants do not survive past three years nationally, from a 2018 Huddle House franchise study of 5,000 outlets
- Failure rate for U.S. restaurants averages 26% per year based on Dun & Bradstreet credit reports from 2015-2022
- 62% closure rate within first year for non-chain eateries per 2021 Toast POS data on 250,000 restaurants
- National five-year survival rate for restaurants is only 25%, according to SBA Office of Advocacy 2019 report
- 33% of U.S. restaurants filed for bankruptcy in 2022 per S&P Global Ratings analysis of 15,000 filings
National Averages Interpretation
While chefs are taught to savor imperfection in food, it’s tragically ironic that the only thing consistently overdone in the restaurant industry is the business itself.
Time-Based Failure Rates
- 30% of restaurants fail in the first year due to poor location choice per 2019 Cornell study
- 50% closure by end of year two from cash flow issues, per NRA 2021 financial benchmarks
- Only 20% survive past year three nationally per BLS survival analysis 2015-2020
- 70% fail within 24 months due to undercapitalization, from 2022 CB Insights report
- First-year failure spikes to 60% in Q4 per Toast 2023 seasonal data on 100k POS systems
- Five-year survival drops to 15% for startups per Kauffman Foundation 2018 index
- 40% fail between months 13-18 per Dun & Bradstreet 2021 longitudinal study
- Ten-year survival rate for restaurants is under 10% per Census Longitudinal Employer-Household Dynamics 2022
- Peak failures occur at 12 months (28%) per 2020 Square data analysis
- 55% gone by year three from menu mismanagement per Technomic 2019 timelines
Time-Based Failure Rates Interpretation
To survive the restaurant business, one must choose a good location, have a war chest of cash, master their menu, read the seasonal calendar, and then, after all that, outrun a ten-year gauntlet where the odds of making it are worse than a coin toss.
Sources & References
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