Restaurant Failure Rate not out of line

In his study of Columbus restaurants, Parsa used data from the local health department representing more than 2,439 restaurants operating in the city. He calculated failure rate for the restaurants for a three-year period, 1996-1999.

The highest failure rate was noted during the first year when about 26 percent of the restaurants failed. About 19 percent failed in the second year and 14 percent in the third year. Cumulative failure rate for the three-year period (1996-99) was 59 percent.

Among franchised chains, the failure rate was 57 percent over the three years and among independent restaurants, the rate was 4 percent higher – 61 percent.

More at this link
http://researchnews.osu.edu/archive/restfail.htm

why is the data always 10 years old?

quote:

Originally posted by spud

why is the data always 10 years old?

I don't know but your right it almost always is. That's funny. But
he made a good point on the loan aspect for restaurants.

Dear Friends

This is Parsa. When we did that study, we spent two years collecting data from Columbus, OH in the 1990s. Then we collected about 15 year data from Atlanta, GA and found the results to be very similar - first year failures under 30%. Another colleague has repeated our study using data from Los Angeles and his results were very similar to ours. Results from mid-western Columbus, westcoast LA and southeast Atlanta were all similar within sampling error - under 30% during the first year.

Now we followed up that study with a 15 year data. We tried to explore the effect of location, restaurant size, complexity of operations etc. we found very interesting results. This paper was presented in Jan 08 in Orlando and it is in review with a major journal. Soon after its publication, I will place the results here for the benefit our community.

Have you ever noticed how many places start out gangbusters. The owners get so excited and they start hiring more staff, etc. Then a year later....boom. I see this all the time.

quote:

Originally posted by hparsa

Dear Friends

This is Parsa. When we did that study, we spent two years collecting data from Columbus, OH in the 1990s. Then we collected about 15 year data from Atlanta, GA and found the results to be very similar - first year failures under 30%. Another colleague has repeated our study using data from Los Angeles and his results were very similar to ours. Results from mid-western Columbus, westcoast LA and southeast Atlanta were all similar within sampling error - under 30% during the first year.

Now we followed up that study with a 15 year data. We tried to explore the effect of location, restaurant size, complexity of operations etc. we found very interesting results. This paper was presented in Jan 08 in Orlando and it is in review with a major journal. Soon after its publication, I will place the results here for the benefit our community.

That's great, Parsa. I suspect that more than a few folks here will be interested in seeing a summary after publication.

If I take info from 1893 to 1896 I could show that buggy whips are a hot item to invest in.

I agree that the failure rate is way lower than is the fashion to say it is, but feel the use of old data is a flawed method of manipulating the outcome.