Restaurants can be incredibly rewarding, but the economics that underpin them leave very little room for error. Detailed data from the U.S. National Restaurant Association show that food and labor each eat up about 33 cents of every sales dollar, while utilities, rent, supplies and other expenses account for another 29 percentrestaurant.org. After these costs there is only around a 5 percent pre‑tax marginrestaurant.org. Industry experts interviewed by Insurance Journal note that “around 85 percent of total revenue” at profitable restaurants goes to operating costsinvestopedia.com, meaning owners may be “fortunate” to see a 10 percent profitinsurancejournal.com. Any spike in costs—through inflation or supply disruptions—can quickly erase profit.
Recent years have intensified these pressures. A December 2024 survey found that more than three‑quarters of restaurant managers faced supply‑chain delays in 2023 and over half had to change menus because ingredients or equipment were unavailablenetsuite.com. Climate‑driven events such as avian flu or droughts have tightened supplies and raised prices for staples like chicken, eggs and cooking oilsnetsuite.comnetsuite.com. Staffing adds another layer of difficulty; a 2025 report notes that 70 percent of operators have job openings they can’t fill and 45 percent say they lack enough employees to meet demandnetsuite.com. Workers are reluctant to return to low‑paying, high‑stress jobs, and restaurants must compete with other industries for talentnetsuite.com.
The combination of thin margins, high costs, and operational complexity contributes to a daunting failure rate. Academic research found that despite myths of “90 percent failure,” roughly one‑third of new restaurants close in their first year and the industry has embraced a 30 percent failure rate as normaldaniels.du.edu. Insurance‑industry sources say that only about 20 percent of restaurants succeed long term, with 80 percent failing within five yearsinsurancejournal.com. When coupled with large upfront investments, regulatory compliance and intense competition, it becomes clear why so many restaurateurs struggle to turn a profit in this challenging business.
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