Uncertainty risks and strategic reaction of restaurant firms amid COVID-19: Evidence from China

To contain the pandemic of coronavirus (COVID-19), social distancing, self-isolation and travel restrictions have been imposed globally. To shed light on how COVID-19 is affecting restaurant industry, this study aims to explore the factors that affect restaurant firms’ financial turnaround for their sustainability after the business shutdowns amid the COVID-19 pandemic. By utilizing a total of 86,507 small- and medium-sized restaurant firms’ sales data collected from nine cities in Mainland China, the exploratory approach of this study successfully determines positive impacts of three aspects of operational characteristics (i.e., delivery, discounts, and service type) and brand effects as uncertainty minimizing factors amid distinctive business shutdowns and restrictions. This is the first empirical study in the management realm on the impacts of COVID-19 on restaurant industry. This paper strengthens the extant literature by highlighting the impact of COVID-19 on the restaurant industry after the business restrictions are lifted.     

Do mindfulness and perceived organizational support work? Fear of COVID-19 on restaurant frontline employees’ job insecurity and emotional exhaustion

The coronavirus disease (COVID-19) outbreak has impacted the restaurant industry tremendously. Building on the Conservation of Resources Theory, the current study investigates the relationships among U.S. restaurant frontline employees’ fear of COVID-19, job insecurity, and emotional exhaustion. The study also examines the moderating role of employee mindfulness and perceived organizational support. SPSS PROCESS macro was used for hypotheses testing. Results suggested that restaurant frontline employees’ fear of COVID-19 was positively associated with both job insecurity and emotional exhaustion. Fear of COVID-19 had an indirect effect on restaurant frontline employees’ emotional exhaustion via job insecurity. Employee mindfulness buffered the positive relationship between fear of COVID-19 and job insecurity. Perceived organizational support was found to intensify the positive relationship between job insecurity and frontline employees’ emotional exhaustion. The research provided useful human resource management practices for U.S. restaurant businesses amid crises such as COVID-19.     

Advertising expenditure,intangible value and risk: A study of restaurant companies

This study investigates the relationships between advertising expenditure, intangible value, and risk in stock returns of restaurant firms between 2000 and 2005. Tobin's Q was used to examine intangible value, and the variance of common stock return was used to measure the investment risk. The results indicate that the level of advertising expenditure has a significant positive effect on the intangible value of the firm, suggesting that advertising expenditures could help generate intangible value in restaurant firms. However, this study did not support a significant relationship between the advertising expenditure level and the stock return risk of restaurant firms.     

Can corporate social responsibility protect firm value during the COVID-19 pandemic?

The novel coronavirus (COVID-19) pandemic has caused a significant decline in the stock market worldwide, and hospitality companies are experiencing serious financial problems. Protecting and preserving firm value is a critical way of helping hospitality companies survive the crisis. The influence of corporate social responsibility (CSR) on firm value has been widely investigated. However, little is known about the stock price movement following CSR activity adoption during an industrial crisis. Using event study and difference-in-difference method, this study reveals that engaging in CSR activities can increase the stock returns and stakeholder attention of hospitality firms during the pandemic. Community-related CSR has a stronger and more immediate effect on stock returns than customer- and employee-related CSR. Results also indicate that hospitality firms that pursue improved stock market performance during a pandemic can invest in CSR to protect communities, customers, and employees for attracting further stakeholder attention.     

Comparative study of deep learning models for analyzing online restaurant reviews in the era of the COVID-19 pandemic

Online reviews remain important during the COVID-19 pandemic as they help customers make safe dining decisions. To help restaurants better understand customers’ needs and sustain their business under current circumstance, this study extracts restaurant features that are cared for by customers in current circumstance. This study also introduces deep learning methods to examine customers’ opinions about restaurant features and to detect reviews with mismatched ratings. By analyzing 112,412 restaurant reviews posted during January-June 2020 on Yelp.com, four frequently mentioned restaurant features (e.g., service, food, place, and experience) along with their associated sentiment scores were identified. Findings also show that deep learning algorithms (i.e., Bidirectional LSTM and Simple Embedding + Average Pooling) outperform traditional machine learning algorithms in sentiment classification and review rating prediction. This study strengthens the extant literature by empirically analyzing restaurant reviews posted during the COVID-19 pandemic and discovering suitable deep learning algorithms for different text mining tasks.     

Rapid responding to the COVID-19 crisis: Assessing the resilience in the German restaurant and bar industry

The COVID-19 pandemic has fundamentally impacted the restaurant and bar industry. Simultaneously, this industry is already undergoing structural change. Using the concept of organisational resilience, we analyse the impact of the COVID-19 crisis on owner’s assessment of resilience in the German restaurant and bar industry. Findings from an online survey with 623 owners and managers show that ex-ante business problems, and financing by loans or credit, reduce the likelihood of owners perceiving their business as resilient; while, delivery and takeaway service, ownership of property and higher age of owners, increase the likelihood of enterprise resilience. The paper contributes to understanding how restaurants and bars absorb and cope with the COVID-19 crisis. Furthermore, we make recommendation for future research on the recovery and adaptability of the business sector.     

An examination of restaurant employees’ work-life outlook: The influence of support systems during COVID-19

The main objective of this research paper is to examine the influence of perceived support (i.e., organizational support and social support) on life satisfaction (i.e., current and anticipated life satisfaction), which is hypothesized to increase restaurant employees’ loyalty organizational citizenship behavior (OCB) and decrease their intentions to leave the restaurant industry during the COVID-19 pandemic. Moreover, the moderating effects of employees’ resilience and employment status are also examined. Analyzing the responses of 609 restaurant employees using structural equation modeling (SEM), findings revealed that all direct effects were supported, except for the effect of anticipated life satisfaction on intention to leave the restaurant industry. Lastly, the moderating role of resilience in the relationships between current life satisfaction and restaurant employees’ loyalty OCB and intentions to leave the industry was confirmed. Theoretical and practical implications are discussed in detail.     

The chain of effects from authenticity cues to purchase intention: The role of emotions and restaurant image

The current study aimed to address the lack of studies on consumers’ perceived authenticity of traditional restaurants. Specifically, this study examined the antecedents of perceived authenticity by focusing on three restaurant attributes (i.e., authenticator, ownership type, and history). Additionally, by utilizing cognitive appraisal theory, the current study developed an authenticity model to enhance our understanding of the effect of perceived authenticity on consumer behavior. The results show that authentication by local people and chain ownership significantly enhance consumers’ perceived authenticity. Moreover, consumers’ perceived authenticity influences their purchase intention both directly and indirectly through restaurant image and positive emotion. This study’s findings provide traditional restaurateurs with insights into how to enhance perceived authenticity and purchase intention.     

EPU and financial performance in the hospitality and tourism industry: Moderating effect of CSR,institutional ownership and cash holding

The purpose of this study is to examine the effect of policy-related economic uncertainty (EPU) on the financial performance of hospitality and tourism companies. More precisely, the study aims at revealing how the performance of hospitality and tourism companies is affected at times of increasing EPU, and the role of corporate social responsibility (CSR) engagement, institutional ownership and cash holding to moderate this proposed relationship. The study’s sample includes a total of 113 companies from the hotel, restaurant and airline industries for the period 2001-2018. Hypotheses are tested via two-way fixed-effect regression. The study finds that increasing EPU is detrimental to firm performance presented in declining Tobin’s Q. However, the magnitude of this negative effect on firm performance becomes less pronounced as firms engage more in CSR, have larger fraction of institutional ownership and hold larger cash and cash equivalents     

The motivations of visiting upscale restaurants during the COVID-19 pandemic: The role of risk perception and trust in government

Despite the massive impacts of COVID-19 pandemic on hospitality industry, only limited papers empirically examined consumer reactions to current pandemic in the context of restaurants. To fill this gap, the primary aim of this paper is to reveal how individuals’ intentions to visiting upscale restaurants are affected by dining out motivations under the COVID-19 pandemic. The second aim is to investigate the moderating role of risk perceptions of COVID-19 and trust in government in building relationships. The research was conducted in Istanbul, a city deeply affected by the coronavirus. Data gathered from 681 people living Istanbul were analyzed via structural equation modeling and multi-group analysis. Findings indicated that two motivations—namely, sociability and affect regulation—have positive impacts on visit intention toward an upscale restaurant. Consumers’ COVID-19 risk perception and their trust in government moderate the relationship between some motivational factors and visit intention. The study makes a significant contribution to the literature in terms of both managing the risk perceptions of consumers and building trust in government.     

An examination of cost management behavior in small restaurant firms

The purpose of this study is to test cost management behavior of small restaurant firms and identify whether managers of these small restaurants behave differently depending on their management and ownership structure. The sample was comprised of 87 small restaurant firms identified from the 1998 Survey of Small Business Finances (SSBF). Cost of doing business, size of staff, and five performance measures were used as dependent variables. Independent variables included management and ownership type. Study findings identified significant differences in the profit margin depending on management type and ownership percentage of the primary owner. We also find that the cost of doing business (total expenses) varies depending upon single-family majority/minority ownership and the ownership percentage of the primary owner. The results support the notion that small restaurant firms are operated differently depending on their management and ownership structure.     

“His lack of a mask ruined everything.” Restaurant customer satisfaction during the COVID-19 outbreak: An analysis of Yelp review texts and star-ratings

The aim of the study was to provide practical advice to restaurant managers for improving star ratings as well as information for researchers on how the pandemic has impacted established determinants of satisfaction. The study examined criteria used by restaurant customers in assigning star-ratings on Yelp during the COVID-19 pandemic using keyword analysis and Multiple Correspondence Analysis. In evaluating restaurants, the reviewers focused on service, overall experience, and food quality. Service was discussed in relation to the pandemic and included safety of the dine-in experience, contrasted with take-out options and compliance with COVID-19 guidelines. These criteria applied differently with lower-star reviews focusing on safety, social distancing, and mask policies. Higher-star reviews focused on take-out/delivery services, high-quality food, and an overall positive experience. The study provides valuable contributions to our understanding of how the COVID-19 pandemic will impact the restaurant sector in a post-pandemic world.     

Acquisitions and shareholders' returns in restaurant firms: The effects of free cash flow,growth opportunities,and franchising

Restaurant firms extensively expand through acquisitions. While acquisitions can be an efficient business strategy, the extant literature presented evidence showing that acquisitions can be value–increasing or –decreasing investments. However, why acquisitions increase or decrease firm value is not clear. Corporate finance and franchising theories collectively suggest that the value of acquisitions may depend on firms’ free cash flow capacities, growth opportunities, and organizational forms. The purpose of this study is to examine the concurrent effects of free cash flows, growth opportunities, and franchising on restaurant firms’ returns from acquisitions. The results showed that firms with high-free cash flows gain lower returns compared to firms with low-free cash flows, suggesting that acquisitions reduce underinvestment problems but also increase overinvestment problems. Franchising firms also gain lower returns compared to non-franchising firms; however, the availability of free cash flows exacerbates overinvestment problems in franchising firms. Theoretical and practical implications are discussed.     

The Determinant of the Hospitality Industry's Unsystematic Risk: A Comparison Between Hotel and Restaurant Firms

ABSTRACT

Unsystematic risk is accepted as an important factor in stock valuation. Despite the importance, little has been done to study the relationship of unsystematic risk to stock values in the hospitality industry. This study attempted to advance the understanding of financial variables that could be related to unsystematic risk of hospitality firms. Regression models were developed for hotel and restaurant firms, using unsystematic risk as the dependent variable and financial variables as independent variables. The major findings of this study indicate: 1) more profitable hospitality companies have less unsystematic risk, 2) reducing reliance on debt financing could reduce unsystematic risk, 3) the positive relationship between operating leverage and unsystematic risk, suggesting that decreasing operating leverage could mitigate the stock price volatility of hospitality firms, and 4) large hotel and restaurant firms have less unsystematic risk than small firms. This study should help management of hospitality firms incorporate effects of shareholder expectations into their operational decision making as an integral part of long-range financial planning.     

Restaurants and COVID-19: What are consumers’ risk perceptions about restaurant food and its packaging during the pandemic?

The COVID-19 pandemic and subsequent U.S. in-restaurant dining restrictions deleteriously affected the restaurant industry. While dining restrictions were adopted to prevent human contact, evidence suggests that consumers may mistakenly perceive that restaurant "food" and its "packaging" are risky sources of COVID-19. To explore consumers' COVID-19 risk perceptions about food itself, restaurant food specifically, and restaurant food packaging, this study collected nationwide U.S. consumer survey data (n = 958) using an online consumer panel. Findings showed that: (1) consumers were less concerned about contracting COVID-19 from food in general than restaurant food and its packaging, with consumer restaurant concern highest for food served in restaurants, and lowest for hot/cooked restaurant food followed by restaurant food from carry-out; and (2) the risk perceptions of consumers varied with financial concern for food, gender, and being in a high-risk category of COVID-19. Implications for researchers, restauranteurs, government, and food safety professionals are discussed.     

Impacts of geographic diversification on restaurant firms’ risk: Domestic vs. international diversification

In the hospitality context, the diversification literature has evolved to mostly focus on the impact of diversification on firm performance. However, without accounting for risk, the effect of diversification on firm value likely provides an incomplete picture. Therefore, this study investigates the influence of domestic and international geographic diversification on restaurant firms’ risk. This study uses the Berry-Herfindahl Index to measure the degree of domestic and international geographic diversification. Findings show a non-linear relationship between geographic diversification and restaurant firms’ risk. However, different shapes of the non-linear relationship are revealed between domestic and international geographic diversification and between operational and market-based risk. The results of this study indicate that the risk-reduction effects argued from the modern portfolio theory may be partially applicable to the geographic diversification for restaurant firms, suggesting a different view toward financial diversification and corporate diversification.     

Does managerial ownership influence franchising in restaurant companies?

Although the link between managerial ownership and firm performance is often explained in relation to a firm’s risk-taking behavior, little is known about how managerial ownership affects corporate risk-taking in industries characterized by high financial and operational risks, like the restaurant industry. To understand this important and understudied link, our study draws upon agency theory to examine the relationship between managerial ownership and franchising, typically a risk-reduction strategy of restaurant firms. Our results from panel data analyses using a sample of 962 firm-year observations show that managerial ownership is negatively associated with degree of franchising. Further, we find that after considering the scope of managerial discretion, there is a U-shaped relationship between managerial ownership and degree of franchising such that the degree of franchising decreases as managerial ownership increases up to a certain level, but then increases in tandem as managerial ownership increases to higher levels. Our results indicate that there is an optimal level of franchising associated with managerial ownership, implying that owners can influence their firms’ risk-taking behavior by setting target managerial ownership goals and designing effective incentive contracts.     

Factors influencing customers’ dine out intention during COVID-19 reopening period: The moderating role of country-of-origin effect

COVID-19 pandemic negatively affected the restaurant industry and reopening provides restaurants an opportunity to survive this crisis. This study examined the interplay of perceived importance of preventive measures, dining involvement, brand trust, and customers’ intention to dine out at American Chinese restaurants during the reopening period. Additionally, the study investigated the moderating role of country-of-origin (COO) effect on these relationships. 296 U.S. restaurant customers recruited via a market research company completed the online survey. Structural equation modeling was used for data analyses. The results indicated that dining involvement had a direct positive effect on customers’ intention to dine out. Moreover, both perceived importance of preventive measures and dining involvement could enhance customers’ intention to dine out indirectly via brand trust. Positive COO effect moderated the relationship between perceived importance of preventive measures and brand trust. The study provided significant implications for restaurant operators in the U.S during the reopening period.     

Are better-connected CEOs more socially responsible? Evidence from the U.S. restaurant industry

Extensive research has documented how corporate social responsibility (CSR) outcomes are determined by CEOs' intrinsic characteristics, while their social network status has been under-researched. Building on impression management theory and resource-based theory, the current study analyzes the association between CSR activities and top management's position in the social hierarchy, i.e., network centrality. The heterogeneous effects across different restaurant and CSR types are examined based on stakeholder theory. Using a panel dataset of publicly traded U.S. restaurant companies and a novel dataset of CEO network centrality, we find that firms with highly connected CEOs are involved in more socially responsible activities. In addition, the marginal effect of network centrality on CSR is stronger for fast-food than for full-service restaurants and more prominent for external than internal stakeholder subcategories. The results advance the determinant analysis of CSR and provide managerial implications for CEO selection and policy suggestions on CSR promotion.