90 Percent of New Restaurants Fail: Does a Business Degree Make a Difference?

Posted by on May 10, 2013

Do you have an entrepreneurial spirit? Is the idea of starting and running your own business alluring? Do you possess the passion but lack the education to manage your own business? Timothy Hornseth, Minnesota School of Business-Rochester (MSB) business program chair, shares his observations about the current business climate for people looking into becoming business owners in certain markets and what it takes to be successful.

business administration degree

During quarterly orientation sessions for incoming students, I tend to ask new students, including those in the business administration degree and business management programs, if they intend to start and run their own business, and what kind of business they want to own. I don’t know if students are just being mentally lazy or unimaginative, but for those who answer that they want to own a company, the most common type is either a bar or restaurant.

It may be that today it seems like a significant portion of businesses that are visible are either bars or restaurants, or perhaps it is these types of businesses that employ our students. That is what they are familiar with, so that is what they want to do.

While not trying to discourage students’ entrepreneurial spirit, in the first few business classes we try to expose the students to a wider world of business that goes beyond bars and restaurants.  There are literally thousands of kinds of businesses to own, and we encourage students to be open to possibilities. 

At the same time, MSB-Rochester instructors make sure that students are aware of the statistics of success and failure of starting and running one’s own business. The most eye-opening fact is that 90 percent of non-chain restaurants that open up do not last more than five years.  Put another way, 9 in 10 restaurants fail within the first five years!

Why is there such a high failure rate? Simply put, people are not prepared to do what needs to be done to be successful business owners.  Just because someone can cook or likes food does not mean that they can be a successful restaurant owner. It takes planning, organizing, financing, managing, hiring and controlling—all of which has little to do with actual product knowledge.

But all are necessary to be successful. And all of these are what students learn at MSB-Rochester in classes such as Supervisory Management, Restaurant and Food Service, Human Resource Management, Hospitality Management, Accounting Principles, and Operations Management.

It has been said “do what you love to do, and you will never work a day in your life.” Combine that sentiment with solid business preparation learned in business classes at MSB-Rochester and it can be the extra step for anyone to be successful in any type of company that they want to own, whether it is in food service, a specialized gift shop, animal-related, or in the health care industry.

Are you ready to get down to the business of learning business? Contact admissions at 507-536-9500.


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