Diminishing Failure Levels
Restaurant ownership turnover ratewas
calculated for one-, two- and three-year
periods from 1996 through 1999. Failure
rates declined for each year, with the highest
failure rate noted during the first year
(26.16 percent) followed by the second
(19.23 percent) and the third year (14.35
percent) (see Exhibits 1 and 2). Likewise,
the highest restaurant ownership turnover
occurred during the first year. These
results are consistent with several other
studies.31 In his 2004 study of 24,000 restaurants
in the Los Angeles area, for
instance, John Self reported a first-year
failure rate of 24.3 percent and a threeyear
cumulative rate of 50.9 percent for
1999 through 2002.