The economics of running a restaurant

In a 2003 American Express ad, celebrity chef Rocco DiSpirito claimed that restaurants have a 90 percent failure rate. The statement left some industry watchers and owners wondering where he got that statistic.

From Bloomberg:

"Like many viewers, H.G. Parsa did know DiSpirito from his NBC reality show The Restaurant. The nine-out-of-10 figure was familiar, too. As an associate professor in Ohio State University's Hospitality Management program, Parsa had heard it many times before. But based on his 13 years of restaurant-industry experience, he still didn't buy it.

Parsa says he spent three months trying to track down someone at American Express who could give him a source for the 90% figure quoted in the ad. As it turns out, they didn't have one. 'American Express has not been able to track down a specific data source for the statistic,' reads a written statement a spokesperson sent Parsa in response to his request."

Other studies put the failure rate closer to 25 percent, about on par with other small businesses. But DiSpirito's claim still continues to be repeated.

What are the real economics behind the restaurant industry? And how does one keep a restaurant open?

Lenny Russo, James Beard nominee and chef-owner of Heartland Restaurant in St. Paul, joins The Daily Circuit to talk about the industry. Barry K. Shuster, editor of Restaurant Start Up & Growth magazine, will also join the discussion.

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