It happens to everyone: finding a good hidden food spot, you keep it to yourself. But when you return weeks later, you see the for lease sign. While restaurant closures may seem sudden, there are warning signs that show an establishment has been struggling for some time. With that, here are 10 ways to tell if a restaurant is headed towards closure.
10. They’re Asking Customers to Pay Cash Only
This is a clear warning sign for closure. While occasional terminal errors occur, some restaurants that operate on a cash-only basis for extended periods are trying to avoid those bank fees. It may also be because they hide their revenue from creditors, or their merchant account is frozen due to non-payment.
9. Basic Supplies Are Running Low
Have you ever noticed those empty napkin dispensers and condiments that aren’t refilled? When you ask, the staff informs you that they’re out of such basic needs. These small supply issues indicate that the establishment is closing its doors soon. The owner is stretching the remains of their expenses to pay off staff and debts rather than spending them on basic supplies.
8. They’re Constantly “Under New Management”
If you notice that a restaurant changes ownership or management multiple times in just a short period, then they’re business model is broken. Each new owner thinks that they can turn around a struggling business, but if three different management teams have failed in two years, the problem may lie in its leadership. That signals an establishment with bad economics!
7. Weird Hours or Frequent Unexpected Closures
When a restaurant closes on a day when they’re supposed to be open, then it’s definitely struggling. You may also notice shortened hours without announcements or “closed for private events” signs that they’ve probably put up three times a week. They’re masking their staff shortage or maybe their attempts to reduce their operating costs.
6. They’re Always Out of Key Ingredients
If a staff member tells you that they’re out of this or that, then it’s a frequent refrain of a struggling restaurant. While running out of menu items occasionally happens, consistently being out of their popular dishes or basic ingredients suggests a supply chain problem. It’s usually because the vendors haven’t been paid or have had their credit cut off.
5. The Place Looks Neglected
While a neglected place is a red flag, it probably means that the restaurant is heading for closure. You’ll often see them in broken comfort rooms, burnt-out lights, torn upholstery, or peeling paint. When the owner/s stop investing in the interior (and exterior) of a restaurant, then it’s because every dollar they have is spent to keep the doors open for another day.
4. Staff Turnover Is Through the Roof
When you notice that your favorite restaurant’s staff is different every time, then it’s a bad sign. It means that they have a high turnover due to reasons of unpaid wages or poor management. You’ll know that experienced servers and chefs run out of an establishment first because they can read the writing on the wall.
3. Aggressive Discounting and Constant Deals
Occasional promotions are normal, but desperate discounting is a different story. When a restaurant is running 50% off deals every week, or they offer aggressive Groupons, then they’re trying to generate any cash flow that they can get. This strategy won’t work long-term as it attracts deal-seekers rather than loyal customers.
2. Declining Food Quality
Probably the obvious sign is that the food isn’t good anymore. We’re talking about smaller portions, cheaper ingredients, and less attention to the plating presentation of the dish. When their signature dish, which was once loved by everyone, is now sad and dry, then the management has probably prioritized survival over the quality of their meals. Soon enough, they’ll be pulling those for lease signs.
1. The Menu Keeps Shrinking
When a restaurant starts reducing its menu options, then it’s a sign that it’s struggling. They cut their menu to reduce food costs and minimize the waste of unsold ingredients. While some restaurants minimize for quality reasons, an extensive menu drop is a sign of cash flow problems. The restaurant is fighting for survival until it closes its doors.