The challenges of opening and operating a new restaurant can be huge, as writer Ann Bauer suggests this month in a feature about the opening, rapid decline, and eventual emergence from bankruptcy of Seven, a “coliseum-size” steak house and sushi bar at Seventh Street and Hennepin Avenue in downtown Minneapolis.
Build-out costs, investors’ disagreements, reviewers’ jabs, transient chefs, fickle customers, shifting marketplace trends, and changes in the surrounding neighborhood can all conspire to make the life of a new restaurant short. How short? Conventional wisdom holds that the lifespan is short enough to place restaurants among the riskiest ventures there are. In a 2003 American Express ad, a New York chef averred that “nine out of ten restaurants fail in the first year.”
It’s probably not so. A three-year study of 2,439 Columbus, Ohio–area restaurants conducted by Associate Professor H. G. Parsa of Ohio State University’s Hospitality Management program showed the failure rate to be only 25 percent within the first year of business and about 60 percent within three to five years.
Does that still sound dauntingly high? Maybe it is, but in 2007, two years after an evaluation of Parsa’s study was published in a restaurant-industry trade journal, a Business Week reporter concluded that the 60 percent failure rate was “on par with the cross-industry average” for all new businesses, according to statistics from the U.S. Small Business Administration.
Moreover, it might be that Parsa himself overstated the threat of failure faced by new restaurants: In his study, he counted every turnover of ownership as a failure, including those of restaurants that changed hands while they were still profitable.
I will turn 60 this month. It could be a troubling occasion, were it not for the fact that it reminds me of Mickey Mantle, the great New York Yankees outfielder. Mantle was a three-time American League Most Valuable Player and a four-time home run champion, but he was never paid more than $100,000 a year.
A few years before he died, he was asked by a group of friends at his Manhattan restaurant how much money he thought he might make “if you were playing today.”
Mantle didn’t hesitate. “I’d be making a million dollars a year,” he said.
His friends looked at each other, a little embarrassed. “Mick,” one of them said, “you’re getting out of touch. These days, some average hitters are getting $1 million a year—and out in Minnesota, Kirby Puckett is making $3 million a year.”
“Yeah,” Mantle drawled, “but you have to remember, I’m 60 years old.”
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