Restaurants fail for a number of reasons, with the biggest one being under-capitalization.
But mostly restaurants fail because the owner has his head so far up is rectum, he thinks his tongue is a foreskin--they don't know what they are doing.
About 8 years ago, I was scouting around for a new kitchen, the lease on my existing place would expire in about 8 mths. My first choice was to find a restaurant for sale, as it would easier and cheaper to take over a clapped-out one, than it would be to start from scratch. And I had a zillion choices, each with a different story...
A) was a pizza and burger joint on a busy street with great exposure. At first glance, the infrastructure looked great, but on closer inspection, the vent hood had no , I mean "0" fire supression--highly illegal, looking closer I saw that the shaft for the hood was a common 4" household forced air duct line, again, highly illegal. I'm no electrician, but when I see 220 amps go to a knife switch and then dissapear behind a wall, somehting is fishy. Dumb (deleted) owner figured he didn't need to follow codes, get inspections, or do things right, and when the landlord witched over insurance companies, and the insurance inpsector had a peak, all hell broke loose and the operator got tossed out.
B) was a chain muffin and donut place in a mini-strip mall (donuts = fryers=ventilation system, ansul system, and gas) Nice place, all up to code. Owner had installed pinball machines and gambling machines and got shut down. O.K. that didn't bother me, but when I started to negotiate with the real estate agent I found out the the landlord would not give me any parking, nor was I able to claim any of the 30-odd parking spaces for any customers--he had sold or rented them all to the auto-body shop next door.
C) A large "indie" restaurant styled along the lines of Denny's or IHOP. Rent was a killer. Just by sitting in the place with a coffee and a cheap calcualtor, I figured I'd have to run 24 hrs and make a minimum of 5 grand a shift to cover rent and staffing costs. Not for me. This place changes hands about every 9 mths since I visited it almost 8 years ago.
And on and on, and on. A coffee shop that only sold coffee an nothing else--not even a Costco muffin, and couldn't make rent, sit-downs with no parking available, full service places running on 100 amps and no gas, places with overwhelming staffing issues, you name it
I finally bought a crapped-out place that needed a whole lot of upgrading, but at least the infrastructure and permits were in place. Place was family run, and it was just limping on, owners wouldn't even do bare maintainence on it, customers wouldn't eat there because of it, and eventually he only did take-out.