Why restaurant failure rates disagree

Every figure below was read from the page that published it, not from a search result. Each answers some version of “how often do restaurants fail”.

The first two rows answer the same question about the same industry and differ by a factor of nearly twenty. That is not a rounding disagreement. It is three separate things being called one word.

What counts as failure. A restaurant that closes because its owner retired, sold, rebranded or moved two doors down is a closure in a licence record and not a failure in any useful sense. A study following a cohort forward counts the exit. An analyst verifying closures from review sites often counts the sign coming down. Neither is wrong; they are not the same quantity.

Which restaurants are in the denominator. A rate over “restaurants operating this year” is dominated by established businesses and will always look low. A rate over “restaurants that opened in year X” follows the riskiest period of a business’s life and will always look high. Both get published as “the failure rate”.

When the closure becomes visible. This is the one almost nobody states, and it is the reason we publish no failure rate of our own. A closure does not appear in a licence record when it happens — it appears when the licence lapses past its renewal window, which takes roughly three years. Any count of recent closures is therefore an undercount, and it is an undercount that shrinks as the data ages. Measure the same year twice, three years apart, and you get two different answers with no error in either.

We hold the Chicago licence record: 21,529 restaurant attempts, each one an individual business with a start date and, where the record shows it, an end. What that supports is survival, measured only over attempts old enough to have had the full horizon in which to fail.

• 85.6% are still licensed at two years, over 20,134 attempts.
• 60.9% at four years, over 18,684.
• 47.0% at six years, over 17,344.

Set against the published figures, that puts 14.4% of Chicago attempts gone by the end of two years, and it lands outside both. It is lower than 17% — which is claimed for the first year alone, so that figure would have more restaurants gone in one year than we observe in two. It is far above 0.9%, which would need almost all of our two-year attrition to arrive in the second year.

Neither of those is a contradiction, and it would be the same overreach this page is about to call one. Different cities, different periods, different definitions of failure, and a licence record that cannot see a recent closure at all. What it does show is that three careful measurements of “how often restaurants fail” do not converge, and that picking whichever one suits an argument is trivially easy.

The full curve, cohort and method are published separately.

The complement of a survival rate is not a closure rate. A 60.9% four-year survival does not mean 39.1% closed — part of the remainder is attempts whose outcome is not yet observable. Closures take roughly three years to surface in the licence record, so any recent-period closure figure would be an undercount, which is why none is published.

We could publish one. It would rank, it would be quoted, and it would be wrong in the same direction as everyone else’s — low, because the closures have not surfaced yet. The honest version of this page is the one that explains why the number you came for does not exist in the form you wanted it.