FUNDAMENTAL ATTRIBUTION ERROR

A restaurant near my house went out of business recently. This is not at all an uncommon occurrence – turns out that it is very difficult to operate a small business profitably in a city where nobody has any disposable income. The owners announced the closure on social media and indicated that they may try to re-open across the river in East Peoria, a miasma of strip malls resulting from a "planning" strategy of handing out tax abatements to every national chain store and franchise restaurant on Earth.

The announcement degenerated into a rant about the unreasonable cost of doing business in the city; essentially, the owners were prevented from making a profit by the onerous licensing and sanitation requirements imposed by local laws. This is a very common complaint when businesses fail and, although this makes me kind of a terrible person, it always amuses me. It would seem to me, with all the ignorance of a non-business owner, that if other businesses are able to stay open with the same requirements and the failed business was making so little money that paying for licensing put it under, it probably wasn't a very well run business. The worse their business does, though, the more their rhetoric sounds like right wing anti-government boilerplate.

Perhaps it is the government's fault that this business failed. Or perhaps, as I humbly suggested to my friends who lamented its failure, one might consider:

1. The business opened right next to the university campus on May 1, exactly nine days before the summer break began and the entire campus emptied out. As the location – literally called "Campus Town" – is in an area of the city not regularly visited by the non-student population (As with most cities, white flight took most of the population and wealth to the outlying areas in the 80s). So, respectfully, that was pretty goddamn stupid.

2. Lunch specials (most of the business in this area is daytime, since the area gets stabby at night) ran about $10-14 with tip. This might not seem expensive to people in a real city but here it is a serious liability. Central Illinois is the land of the shitty chain buffet – people want to pay very little and eat like pigs. The food at this failed restaurant was excellent and far better than the other options in the area, but college kids and Central Illinoisans are cheap and it's hard to stay open when you're surrounded by a half-dozen other restaurants selling $5 lunches. Cheap shit does well here, whereas better but more expensive food struggles to sell. If the owners didn't realize that before opening (a nearby Indian restaurant just went under in the Spring) they didn't do much research.

3. The restaurant also made the mistake, usually fatal in Central Illinois, of serving "ethnic" food, in this case Middle Eastern-type cuisine. While falafel and shawarma are not particularly foreign in most of the country, these are not well known here in the mid-1990s. Successful ethnic restaurants here tend toward cheap, crappy Mexican and cheap, crappy Chinese takeout. I'm not saying that people in the city would be totally unwilling to try "new" kinds of food, but certainly the owners were taking a risk here in the land where Ranch Dressing and American Cheese On Everything is standard operating procedure.

4. The costs of doing business imposed by the city – taxes, licensing, fees, etc. – are not exactly a mystery. You don't have to answer three riddles from a mythical beast to learn about your fixed costs. If they were shocked to learn that they needed a license to operate a restaurant or how much it cost, that points to poor planning. I suppose local governments could spring surprise new requirements on businesses, this place was hardly open long enough.

5. It opened in the dreaded Place That is a New Restaurant Every Nine Months location. This is well recognized as a negative in the bar and restaurant industry.

I don't know the intimate details of the life and death of this business. All I am suggesting is that there are quite a few potential red flags, certainly enough to suggest that perhaps the biggest problem is not that the city charges too much for the necessary licenses. Small business owners and other Job Creators tend to be an anti-government lot, and there is no doubt some justification for that. I'm sure any business owner could cite examples of rules and requirements they consider burdensome or frivolous. That said, it certainly is disproportionately popular as an excuse for the failure of businesses to profit or profit as handsomely as the owners think they should. We all love having someone else to blame when things go down the shitter, but how often does that explanation hold up to scrutiny?

39 thoughts on “FUNDAMENTAL ATTRIBUTION ERROR”

  • Didn't you do an fjm on this about 2 years ago?

    $10-14 for a kebab??
    Tell him he's dreaming.
    Even if it is the end of a drunken evening snack of choice the world over, not happening.

    Sounds like he also failed the three cardinal rules of retail: location, location, location.

  • But isn't the human spirit a wonderful thing in that it keeps on trying? And that in the face of schadenfreude-filled eyes snickering in the middle distance.

  • Here's the view from the other side – I've worked for or owned a small business for 35 years.

    Closing a business that opened with great fanfare (and a lot of personal optimism) after just nine months is a huge, public, admission of failure. Blaming over-regulation is a face-saving move. Who is going to blame poor planning, financing problems or – if you hope to re-open – your future customers?

    There are other things you can't blame in public. The real estate agent/landlord who misleads you or overcharges you. Your competition who are breaking every labour law and safety standard. (I know someone who hasn't won a bid in months – his competition just hasn't bothered to register for worker's compensation – a huge cost in construction trades.)

    You can't blame all the people who told you they really, really are tired of chain restaurants and wish there was something else in town. They came out once, decided they wouldn't pay $15 and never came back. They are now telling someone else they are really, really tired of chain restaurants etc.

    You can't blame the romantic notion that every small business owner is sitting on a little gold mine. The reality is long hours, hard work, a lot of risk, and a net income you can never really count on.

    Years ago I concluded the small business world is just a different culture. People in larger organizations just don't get it. I once had a surreal conversation with a Big Business Employee friend who couldn't understand why I was frantic about a $10,000 repair bill. It's just a business expense right? Tax deductible right? It just never occurred to him that my net income had dropped by $ 10,000.

    Maybe this guy did everything wrong, should have known better etc. etc. As a fellow small business owner I have no desire to rub his face in it. I'd like to send him flowers and a sympathy card.

  • I see plenty of businesses that think that because they are now incorporated it's all unicorns and ponies and the fantastic profits are gonna start rolling right in.

  • Yeah, well. Sorry, but unless you're in the business, you have no clue what a restaurant operation entails. The expenses are onerous. Meeting payroll according to the rules is almost impossible. That's why there is so much under the table stuff going on. An IRS employee once told me that it's known and expected that most small businesses, especially restaurants, are cheating. They'll mostly turn a blind eye unless the owner is driving a new Mercedes and living in a trophy house. Also, as regards the food business, most people don't want to spend the bucks. We grow up thinking food is free, after all, you only have to open the refrigerator and pull out what mom put there, right? Yeah, the case you cite shows some bad decisions and a lot of ignorance. Actually anyone who opens a restaurant is a nut case by definition. I should know, having owned a few and worked for many more, none of which still exist. Peoria . . . my god. Place sounds like a shit hole. Why anyone would live there (sorry Ed) let alone try to run a food operation catering to that demographic is beyond me.

  • That is one slick real estate sales person, who it sounds like convinces a new 'mark' once a year that 'this is the location for you'. Slick as in no conscious at all.

  • c u n d gulag says:

    Back in the mid 90's in my part of the Mid-Hudson Valley, a guy whose family had a nice Italian restaurant in the next town over, gutted an old Applebee's and opened-up a nice, wood-lined high-end steakhouse.

    About 100 yards from an Outback.

    I used to eat there enjoying his steaks after teaching at the college on Monday nights, and the listened to the owner bitch about how his place was empty, but the Outback was full.
    His steaks were excellent – and I know, I've eaten in many of the biggest and best and most expensive steakhouses in this country.
    And his steaks weren't overly expensive – not by any means – just expensive for this area.
    And though light-years better than an Outback steak, his were more expensive in comparison.

    Well, even though he was raised here, he didn't grok the area very well. This was IBM turf.
    And a lot of the IBM employees were cheapskates who didn't want to pay for a nice meal, and didn't tip after one.
    And they weren't too conscious of quality – just quantity for their bucks.
    Also, he had the misfortune of opening his place about 2 years after IBM laid-off about 30,000 in this area.

    I tried to tell him that Outback was a known entity, whereas his little high-end steakhouse wasn't.
    And that the people in this area were not discerning at all – just cheap. And they weren't at all adventurous. Not when it comes to food. Not, come to think of it, when it comes to anything.

    It was a classic case of bad timing, bad location, and not knowing your market.

    I ate there once or twice a week before he shut the steakhouse down, and at the same location opened a branch of his families Italian restaurant.
    It's cheap.
    The food is ok – good, but not great.
    But it's still in business.

  • We all love having someone else to blame when things go down the shitter, but how often does that explanation hold up to scrutiny?

    The Republican Brain in action – so stuffed with resentment at always being jeered at for being the dope in the group that admitting error is impossible, because the need to throw your weight around and feel important is so, so imperative. Other people are just so mean! Failure must always be their fault.

  • All our family owned restaruants followed the factories out of town back in the 1980s and 90s. It had nothing to do with guv'mint unless newly formed holes in government big business regulation had something to do with it.

    Today, overpriced pizza, wings, and badly made goo from southeast Asia is the way to go if you open a chain eatery in my part of Western NY. No one in his right mind would try otherwise.

  • Went there a couple of times when I was in Peoria checking on the Dem's office in the same shopping mall. They were too expensive for the location which I couldn't quite understand (your selling Mediterranean street food right next to a Subway). Their location was far too large for the type of customer they were serving, i.e. take out. But it was good. Sorry to see it go but not unexpected. And yes blaming everything under the sun that isn't the owner is par for the course when a business fails. Also, I don't think they served beer prominently. And it is well nigh impossible in the restaurant industry to make money on only food. Most places serve food to make sure the customers don't get too drunk drinking.

  • c u n d gulag says:

    Parmenides,
    So true.
    That's why chicken-wing places that serve beer and booze, rule.
    Those little greasy and spicy things sop-up a lot of booze.

  • schmitt trigger says:

    "Central Illinois is the land of the shitty chain buffet – people want to pay very little and eat like pigs."

    That sentence also describes South Texas accurately.

  • "5. It opened in the dreaded Place That is a New Restaurant Every Nine Months location. This is well recognized as a negative in the bar and restaurant industry."

    This is the one that did it in. You spent enough time in Bloomington to remember THIS fine location:

    https://www.google.de/maps/@39.1789741,-86.5334905,3a,75y,18.03h,72.85t/data=!3m4!1e1!3m2!1s0DQTWt1uZFi_ICIiWwkScw!2e0

    No business in this building will ever be successful, ever. Poor optimistic fools keep trying, and it never, ever works, ever. Appropriately enough, the property is for sale on the Google Street View.

  • Even though I live in a small, densely-populated, fairly-wealthy state where you can't spit without hitting a strip mall and/or a restaurant of some sort (family-owned, small chain, large national chain), the rwnj's constantly and loudly whine that the state and federal requirements are just. so. business. killing. The current fad in restaurants are those buffet chains that are all-you-can-eat for a pittance; the piggies don't once stop to wonder what exactly they're getting fed for their money.

    A couple of miles from my house, there's a strip mall that can't keep restaurants, either–the area has been so super-developed with McMansions, condos, and townhouses that rush hour now lasts 4 hours, twice a day, and for those 8 hours/day, it's very, very unsafe to pull in and out of that particular strip mall. While the other businesses (dry cleaner, cheap furniture, dollar store) cope by extending their hours (that is, being open after rush hour dies down) and being open on Sundays (when commuter traffic is very light), the latest failed restaurant made the mistake of being closed on weekends *and* being fairly pricey. Instead of realizing that not many people are going to risk their lives for a $20 meal when cheaper, safer alternatives exist, the owner also blames the soshulist gummit.

  • " The business opened right next to the university campus on May 1, exactly nine days before the summer break began "

    Ouch. I live in a college town. There's a bunch of restaurants that just close down for the summer, they don't make enough to even bother staying open.

  • "While falafel and shawarma are not particularly foreign in most of the country, these are not well known here in the mid-1990s."

    Did I slip through a wormhole or somethin?

  • Kebabs exotic? My in-laws, in a very-tiny upstate NY town (population 6,000) consider the town's only Italian restaurant to be 'exotic'. It serves lasagna and spaghetti. I'm sure they would have eaten at CUND Gulag's fancy steak house had they ever had the cash to spend on it. They can understand that.

  • Yes, saw exactly the same thing in a strip mall 2 blocks from UK campus, next to a large hospital – had not one, but two Middle Eastern cuisine restaurants in the same spot successively. Food was good, but no one in that neighborhood was going to pay that much for lunch, and the hospital workers/students aren't around in the evening. I haven't looked lately to see what's there now.

  • My in-laws live in a part of southern Ohio that is very much Appalachia.

    Their entire county has a population of 15,000. I've taken it as my mission in life to expand their food horizons.

    "What's this?" (as I give them a batch of Cassoulet)

    "It's a casserole. You'll like it."

  • Most restaurants fail. Most small businesses fail–usually they're undercapitalized and have a poor business plan. Occasionally, someone can introduce something new and different, but it takes knowledge of the community. You may have underpriced, bland buffets and places like Applebees (basically the old Pondersa's food with table service), but urban affluent areas tend to have equally bland food, that's better dressed and overpriced for what it is. This sort of thing often succeeds, but it often fails and the complaints are usually the libertarian rants.

  • Everybody thinks they can run a restaurant. What can be so hard? All it is is cooking and I do that every day to feed myself. They don't think about overhead or markup or even making the same dish the same way each and every time.

    I was self employed for 29 years and honestly government regulation wasn't onerous. My biggest problem was the paperwork for state sales tax (most of my product was for resale so I didn't have to collect), but I still had to file the forms.

    If you're making a profit you pay income taxes. If you're not then you don't or pay very little. If you're operating at a loss with an employee you can figure it out and either do the work yourself or if you have it and are willing to do it, invest more capital in your business.

    People think that a business owner is entitled to a large salary. Wrong. You'll probably work 16 hours a day for 5 hours pay a lot of the time.

    People used to tell me that they were envious because I could take off whenever I wanted. Wrong. If I didn't do the work it wouldn't get done and I'd have to do double when I came back and also you always think that the project you're working on won't be replaced by a new one when you're finished and you don't want to take any chances.

    People think that whatever their big interest is can be monetized by opening a business. If you like hunting you'll open a hunting store and you think that everybody will patronize your store because everybody must be as excited as you are.

    There was a local guy who would, when the weather got cool, rent empty storefronts with no parking and no air conditioning. He would open a submarine sandwich shop (I'm from NJ) and enlist his friends to work. He would almost give away the food and would work towards selling a thriving business in the spring.

    The new owners would soon realize that they had to pay their help, buy an air conditioner and raise prices. Pretty soon the thriving store wasn't thriving and would go out of business.

  • @Rich; I remember Ponderosa–or, at least, the Ponderosa of the 1970s (before I went overseas–the local one was gone when I got back in the mid-1980s). It had okay food–not fine dining, but if you wanted an average steak and an average baked potato and roll, that was the place to go. Applebees? BLEAH. Everything on that menu is an oversweetened, mushy goo heavily laced with mayo. If that's what Rill Murkuh eats, that's just another reason why I don't connect with Rill Murkuh.

    All this talk of food inspired me to go out to the local mom & pop Thai place near my house last night. They're reasonably successful (I don't see their books so I don't know how much, but the place is usually decently full during dinner and crazy-busy at lunch). The food is pretty simple, but it's fresh and delicious. The waiters know us enough to know one of my kids doesn't like tomatoes, so they leave it off his plate. That's the kind of service that keeps people coming back.

    PSA announcement: if you like the service, tip your waitstaff well!

  • Ponderosa had mystery steak that had been marinated forever. On my one and only visit to Applebee's, the taste immediately took me back to Ponderosa. It makes sense–turn an old concept into a new one by converting to table service where you have a little more portion control and can charge much higher prices.

  • Rich, you may be right. My memory of Ponderosa dates back to the 1970s. As I recall (maybe I'm thinking of a different steakhouse?), you went through a line with little plastic numbers on your tray, and the servers plopped food on your tray to match the numbers. So, for example, a kid-sized steak would be a 3, and an adult steak would be a 5. A baked potato might be an 8, and a dinner roll might be a 9. Or that's how I remember it, anyway. The one time I went to Applebees, in the early 2000s, it seemed to be trying for trendy food, but all the options were sickeningly sweet and gooey and tasted like they'd been microwaved.

  • A lot of the food at the chain restaurants is "boil in a bag". It's prepared at a central location and then re-heated at the restaurant.

    So that $16 chicken entree you just ordered at Olive Garden is essentially a glorified frozen dinner.

  • failed restaurants never blame themselves, it's true. but often they don't even admit failing. my favorite: CLOSED FOR REMODELING. those never re-open.

    some day I'll find out what the percentage of failed restaurants is in NYC. My guess is 75%. and it's totally true about the jinxed locations. they look just like other locations except…

  • Hoosier… "No business in this building will ever be successful, ever. Poor optimistic fools keep trying, and it never, ever works, ever"

    I would say the key here is low costs. You have to get the building cheap so the taxes are lower.. you have to make it a rib place with takeout and a few tables…

    you have to cut up your own hogs and make your own cornbread and pork butt. make eggs with homemade bacon at about noon and have the ribs ready at 5pm. and you don't need no 15 hour smoked ribs either… get a pizza oven and run it at a low temp. bake and roast with spices and then coat with a KA style sauce so they can sit.. stick everything in there.. hams and chops and butts..

    then start brewing beer..

  • @ Major Kong- I know someone who used to be a manager at an Olive Garden. That is exactly how they make it.
    @ Anonymouse- My wife and twin toddlers are regulars at a local mom n pop Mexican place. We usually order for the girls when the waitress gets our drink orders, so that their food comes out quickly and we don't have toddlers melting down at our table, and that we can eat in relative peace once the beasts are fed. We went there one evening, and it was quite busy, but she put the girls order at the front, so that we got fed toddlers before a number of neighboring tables got their orders. It pays to be a regular and a good tipper.

  • Rich and mm are right: Most small businesses fail, and restaurants more often. And people start restaurants whose only experience is as a customer.

    I worked in restaurants, both chain and mom-and-pop, and it's a brutal business. Food costs are crazy high, so if you don't sell alcohol, you're fighting an uphill battle.

    In Nashville, the best local pizza joints are owned by Middle Easterners — they have shawarma, falafel, and homemade marinara to die from. If you're near a college campus, you can't go wrong with pizza.

  • So I imagine it might be different for a restaurant, especially for people with the wherewithal to actually open one, but some licensing information is a bitch to actually get the facts about.

    My wife and I are socialists, big time, but for reasons such as "jobs no longer pay money" she's considering taking her advanced degrees and opening a business. For a few years she's been making jam and selling it at farmer's markets. Due to the nature of the selling venue, and the (very small) amount of profit, she's been able to get by under Michigan's "Cottage Food" law: essentially no inspections or anything for certain types of food. What she's considering is getting licensed so that she can sell to, say, Whole Foods, or restaurants, etc. The good news, for us, is that the financial risk involved is insanely small compared to most small businesses, so even if it fails horribly we will be on the same amount of welfare we are on now.

    The frustrating thing is the non-cottage food laws. She has over 40 flavors of jam, ranging from standard single fruit types to weird blends of spices, ginger, and flowers. The trouble is that while the laws as written are fairly clear about the more normal fruit jams, they can be interpreted in an increasingly wide range for everything else, and the weirder the ingredients the less sure anyone is, least of all the inspectors. The laws seem to have been written so that an inspector can spend ten minutes per year wandering around the Jiff plant before stamping something and going home, small businesses confuse the crap out of them, and the worst part is they are anything but consistent. There's a commercial kitchen not far from our house in Ypsilanti, with reasonable rates, but the inspector is known to be hell on wheels and wants everything tested, even things that the law specifically says don't need to be tested. That jacks our fixed costs up by about $500 per flavor, and the fewer she can sell the less well she is going to do. So instead we're probably going to drive over an hour to Lansing because the inspector there isn't as strict. I actually hate this, I don't want to be cheating the system, and I don't think food inspection is some kind of gubmint plot to oppress me as a white man, but it would be nice if the laws were clear, easy to research, and consistently applied. Then we'd at least know what the costs were, and if we could afford them.

    Again, I doubt this is similar for restaurants, hot food being served has more or less the same rules everywhere. That isn't always the case, unfortunately.

  • Kudos to @xynzee for remembering the FJM about the yogurt shop in Charleston, SC that closed because of government over-regulations.

  • @HoosierPoli Oh yeah! I remember when that place used to be a Korean BBQ. Never been there though. Been past it quite a few times on my way to Great Wall. :)

  • Yeah, we have one of those every-nine-months locations too. In the last 5 or so years, it's been a Coney Island, a pizza place, a kind-of Greek restaurant, I can't remember what all else. The location is a little awkward, but not bad enough to stop anyone who actually wanted to eat there. Maybe it's on an Indian grave yard?

    Oddly, that lot is directly across the street from a tiny Chinese take-out place that has been successful for at least 15 years. Decent food and reasonable prices. Maybe that's the secret.

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