All 945,000 eating and drinking establishments in the United States profess to be in the hospitality business
... so why do so few stand out for being hospitable? ... and why should that matter to anyone else other than the
owner (and perhaps the guests who dine there)?
To begin to answer these questions we must understand the impact of the restaurant industry in the United States
and grasp why eating and drinking places are so critical to our quality of life.
Every year in the United States, about 55,000 new restaurants open their doors, fueled by the dreams of their
(often inexperienced) owners and financed largely with capital raised from friends, family and personal assets. It
is an expensive gamble.
The urban myth is that 90% of these new restaurants will fail within the first year, but
definitive studies by Cornell University, Ohio State University and Restaurant Startup & Growth magazine
suggest that the actual failure rate is more like 23-26% the first year, 55-60% after three years and 70% after ten
years -- less ominous but still sobering.
Of course, these failure-rate statistics can be somewhat misleading too, because they count any turnover as a
failure, including restaurants that close or change hands while still profitable. A 2003 report from an economist
in the SBA's Office of Advocacy analyzed unpublished data from the U.S. Census and found that one-third of closed
businesses were financially successful at closure. Whether failure rates overstate or understate the odds, there is
no question that the costs associated with someone getting out of the business are significant.
An involuntary closing often means a capital loss for the investors, but think of all the families that don't get
paychecks, the payroll taxes that go unpaid, the other taxes that aren't collected and the food that doesn’t get
purchased. On top of that, thousands of entry level workers are denied entry into the world of work, the upward
mobility of minority managers (restaurants employ more than any other industry) is stifled and all the ancillary
benefits each restaurant brings to the community it serves come to an abrupt stop.
What Is Hospitality?