Introduction

It always seemed ironic that the competitive element most responsible for success in the hospitality business ... and the piece most visibly absent ... is hospitality itself!

You can be adequately fed and reasonably served in most restaurants, but how often do you experience heart-felt caring and personal connection - that warm feeling that tells you the restaurant’s staff is delighted you are there and it matters to them that you have a great time?

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 A 2003 report from an economist in the SBA's Office of Advocacy analyzed unpublished data from the U.S. Census and found that one-third of closed businesses were financially successful at closure.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.

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