Early Signs That Your Restaurant Is Failing and What You Can Do

2020 was one of the hardest years in history for restaurants across the United States. With COVID-19 shutting places down for social distancing regulations, many eateries have had to close their doors permanently. There’s no telling when we’ll get back to business as usual, and naturally, many restaurateurs are feeling the pressure.

Even as a restaurant owner, it can be difficult to tell when your business is in real danger of failing. However, even if your diner is on the verge of failing, there are ways to improve your services and bring your restaurant back to its former glory. Continue reading to learn how to recognize the signs that your eatery is failing and how you can save it.

Worn, Outdated Restaurant Supplies

As a business owner, you have to continually invest in your small business to encourage growth. New and better equipment and furnishings add to your ability to provide an excellent customer experience and create a welcoming atmosphere.

Some restaurants rely on their “old school” charm to draw customers, but there’s a big difference between old school and plain old. The difference is that one is a style, and the other is a deficiency and a potential hazard.

Upgrading your kitchen equipment and supplies will help with the efficiency of your business, company morale, and aesthetic appeal. The Restaurant Warehouse is a Seattle restaurant store that has all the restaurant equipment you need at low prices. Additionally, all of their commercial refrigerators, prep tables, and commercial ovens come with a warranty.

If you don’t have enough money for new equipment, you may have to take out a new loan to get the finances you need. Your small business’s solvency will determine how willing creditors are to give you a new loan. It’s important to work on your credit score to improve your eligibility for loans and get the lowest possible interest rates.

Understaffed

It takes a full staff for a restaurant to function at peak performance. A restaurant’s business efficiency depends on having enough hands on deck to meet the needs of customers. One sure sign that your restaurant is failing is if you don’t have enough people to operate your eatery.

Many business owners are indeed owner-operators, but as with any small business, your goal should be to grow. Any business that isn’t growing is failing, and if your business has been open for a while and its growth is slow or nonexistent, then your restaurant is in trouble.

There’s too much to do in a restaurant for one to be understaffed. Furthermore, not having enough team members means that customers will have to wait longer for their food, and long wait times can be the kiss of death for restaurants. Even if your restaurant is struggling financially, bolstering your staff is a great way to increase business efficiencies.

Serious Debt

Other than financing and restaurant equipment, another way to tell that your restaurant is in danger of failing is by your debt ratio. One of the best ways to assess the financial stability of your small business is to use your times interest earned (TIE) ratio as an indicator.

The way you calculate your times interest earned is with a simple ratio formula. Your ratio is how many times you could cover the interest charges from your debt with your annual revenue before income taxes are withdrawn.

If you’re not a financial expert, you’re probably wondering, “What is a good times interest earned ratio?” A higher ratio is good because the higher the ratio, the more times you could pay your interest charges. However, a lower ratio means your cash flow isn’t what it should be.

If your restaurant is struggling to make a proportionate amount of income, and you’re struggling to keep your small business open, it might be a good idea to move to a food truck. Downgrading to a food truck is better than losing your business altogether, and it allows you to decrease your operational costs while increasing your overall productivity.

If your restaurant is failing, you don’t have a lot of time to turn things around. Rather than let debt, old restaurant equipment, and understaffing be the story of your business, do what you can to raise funds, invest in your business, and if all else fails, downsize, so you can rebuild when your small business is in a better position.