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Longitudinal study reveals a 26.16% first-year failure rate in restaurants, indicating that local market density and family life cycle dynamics drive business survival.
Past research on restaurant failures has focused mostly on quantitative factors and bankruptcy rates. This study explored restaurant ownership turnover rates using qualitative data, longitudinal data (1996-1999), and data from Dun and Bradstreet reports. In contrast to frequently repeated statistics, a relatively modest 26.16 percent of independent restaurants failed during the first year of operation. Results from this study indicated marginal differences in restaurant failures between franchise chains (57.2 percent) and independent operators (61.4 percent). Restaurant density and ownership turnover were strongly correlated (.9919). A qualitative analysis indicated that effective management of family life cycle and quality-of-life issues is more important than previously believed in the growth and development of a restaurant.
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Parsa et al. (2005) studied this question.
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