Revisiting the financing behavior of restaurant firms: The firm-size perspective

In International Journal of Hospitality Management, Jang and Ryu [Jang, S., Ryu, K., 2006. Cross-balance sheet interdependencies of restaurant firms: a canonical correlation analysis. International Journal of Hospitality Management 25 (1), 159–166] published a research article about the financing behavior of restaurant firms, using a canonical correlation analysis. Even though the study presents a general picture of financing in restaurant firms, the financing behaviors of firms of different sizes may differ because they often face different financing environments. Thus, this study re-examines restaurant firms and compares the results with Jang and Ryu [Jang, S., Ryu, K., 2006. Cross-balance sheet interdependencies of restaurant firms: a canonical correlation analysis. International Journal of Hospitality Management 25 (1), 159–166] to further enhance the understanding of the financing behaviors. The results show that, despite the differences in firm sizes, overall financing behaviors are similar to those reported by Jang and Ryu [Jang, S., Ryu, K., 2006. Cross-balance sheet interdependencies of restaurant firms: a canonical correlation analysis. International Journal of Hospitality Management 25 (1), 159–166], although they also suggest that restaurant firms of different sizes do indeed exhibit some different cross-balance sheet interdependencies including relatively more reliance on accounts payable among small and medium firms and more use of long-term debts among large firms. Moreover, long-term assets related to stockholder equity more among large firms but related to supplier credit more among small and medium firms.     

The effect of increasing employee compensation on firm performance: Evidence from the restaurant industry

This study examined the effect of employee compensation on restaurant performance from both short-term and long-term perspectives. The results of this study showed that increasing employee compensation immediately enhances (decreases) restaurant revenue growth (profitability) but decreases (improves) restaurant revenue growth (profitability) after one year. The results suggested that restaurant firms can utilize employee compensation as a management tool to enhance performance in terms of both short-term revenue growth and long-term profitability gains. The results further implied that restaurant firms could consider making small but continuous increases in employee compensation to maintain higher performance outcomes. However, such increases should be implemented with appropriate initiatives to reduce shirking behaviors by overpaid employees.     

Competitive advantages of franchising firms and the moderating role of organizational characteristics: Evidence from the restaurant industry

This study investigates the effects of a firm’s involvement in franchising on efficiency and differentiation as defined in Porter’s generic competitive strategy framework. The study further examines the moderating effects of organizational characteristics (prior experience in franchising and business type) on the relationship between franchising and efficiency and between franchising and differentiation. Results indicate that as a firm increases its involvement in franchising, differentiation increases, but efficiency does not. Furthermore, prior experience enhances the effects of franchising on efficiency and differentiation, while business type only enhances effects on differentiation. The findings suggest that as an interconnected governance structure, franchising offers benefits to franchisors by helping them develop competitive advantages and outperform their competitors in the market. By discovering the detailed channels through which hospitality firms could achieve business success, this study contributes to existing literature on franchising and hospitality management and provides guidance for industry practitioners.     

Explicit expression of anti-black biases in the full-service restaurant industry: Legal responsibilities and risks

Anecdotes detailing racial prejudices and discriminatory treatment of Black Americans while dining in full-service restaurants surface routinely in the popular press. These anecdotes are buttressed by a small number of studies documenting evidence of racist language and observed mistreatment of Black restaurant customers. In an effort to further explore the pervasiveness and correlates of such explicit expression of anti-Black biases in restaurant workplaces, this study presents findings from an online survey that was administered in two independent, large, and demographically diverse samples of current restaurant employees. We find that on average between 15 % (Qualtrics sample) and 24 % (Facebook sample) of participants agreed with statements indicating that racist language and discrimination against Black customers is common in the restaurants where they work. We explore the individual and organizational correlates of such explicit expression of anti-Black biases in restaurant workplaces and highlight the associated legal ramifications. We conclude by encouraging restaurateurs to take action against manifestations of racial prejudice in their establishments in order to fulfill their legal responsibilities to both their customers and their employees and thereby to minimize the threat of litigation.     

Service in the restaurant industry: an American and Irish comparison of service failures and recovery strategies

The literature on service failure and recovery has to date tended to focus on American experiences or on single nation studies. As large numbers of service firms continue to seek opportunities in foreign markets, more effort needs to be directed at assessing cross-national similarities and differences so that appropriate strategies can be developed. This study compares the effects of failure and recovery strategies in the restaurant sector of two countries with very different dining traditions—the United States and Ireland. Analysis of over 700 personal interviews with restaurant customers shows that there is much commonality with regard to service failures but significant differences in recovery efforts. Especially noteworthy, however is that American customers are much more likely to expect such measures. In both countries, overcompensation methods do not appear to influence customer repeat patronage intentions, nor do they have significant influence on the rating of recovery effort. This last finding suggests that restaurants could and should use less expensive recovery methods.     

Determinants of commodity price risk exposure in the restaurant industry: An analysis by commodity price cycles

The objectives of the present study were to (1) investigate the level and the extent of commodity price risk exposure in the restaurant industry and (2) identify the determinants of risk exposure. The risk exposure was estimated by 60-month rolling regressions based on equity returns. The determinants of equity risk exposure were proposed based on a discounted cash flow model. The results found that 35.39% of sample restaurant firms are exposed to commodity price risk. The level of equity risk exposure was estimated to be 1.148 during commodity price booms and 1.031 during slumps. Empirical testing was consistent with the model prediction that operating leverage and financial leverage are effective tools in managing risk exposure, but the effects are asymmetric during commodity price booms and slumps. Financial leverage was found to be more effective than operating leverage.     

Analysis of the financial practices of high and low performing firms over periods of peaks and troughs of the restaurant industry cycle

This study examined the financial practices of high and low performing firms in the restaurant business over the industry cycles. The purpose is to determine whether differences exist in the financial practices of high performers versus low performers during different stages of the cycle. In this manner, this study is able to reveal the nature of financial practices of successful firms in the restaurant business. Results show that the patterns of exercising their financial strategy over the industry cycles are significantly different. The findings of this study can be used for improving corporate investment performance through understanding the cyclical behavior of the economy and the restaurant industry. This should then presumably result in competitive investment decisions of various firms, thereby improving the effectiveness of resource allocation.     

The effects of consumer experience and disconfirmation on the timing of online review: Field evidence from the restaurant business

This study investigated the effects of consumer experience and disconfirmation on the timing of online reviews. Based on a unique dataset of restaurant reservations and online reviews, the empirical results indicate that (1) there is a reverse U-shaped relationship between consumer experience and online review posting timing, i.e., consumers who have strongly dissatisfying or satisfying experiences tend to post online reviews earlier than consumers who have moderate experience; (2) the disconfirmation between a customer’s experience and the average rating of prior reviews has a negative effect on his or her online review posting speed; and (3) the effect of disconfirmation on review posting speed is substantial for consumers who have strongly dissatisfying or satisfying experiences, while it is weaker for consumers who have moderate experience.     

Understanding and projecting the restaurantscape: The influence of neighborhood sociodemographic characteristics on restaurant location

To better understand the location patterns of different types of restaurants across the United States, we investigate the relationship between neighborhood sociodemographic characteristics and restaurant location using a unique data set from 2013 covering 30,772 U.S. zip codes. The estimation results from negative binomial regression models confirm the significant impacts of various sociodemographic factors (e.g., population density, median age, median household income, average household size, educational attainment, gender distribution, housing tenure, neighborhood urbanization) on restaurant location. We also project future restaurant growth potential based on model estimates and projected changes in sociodemographic characteristics by 2020. The results are analyzed, and several metropolitan areas in Texas and Florida are identified as having high potential for growth. Lastly, implications are provided for restaurant real estate practitioners.     

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.     

The asset-light strategies and the dividend puzzle: International evidence from the hospitality industry

This study investigates the impact of the asset-light strategy on dividend policy using a sample of large international publicly-listed companies (399 firm-year observations) operating in the hotel and restaurant industry over the 2006–2018 period. Taking the perspective of agency theory, we posit that the asset-light strategy in conjunction with significant growth is a context in which high agency conflicts arise. Using Tobit and OLS models, our results indicate that adopting an asset-light strategy only impacts dividend policy for firms with high growth. More interestingly, the positive impact of the asset-light strategy on dividend payouts occurs for firms with substantial growth if institutional ownership is low. In such situations, significant potential agency conflicts (due to high free cash flows) coupled with the lack of monitoring from institutional investors lead firms to use dividends as a monitoring tool. Finally, a change analysis supports our main findings.     

The impact of the SARS outbreak on Taiwanese hotel stock performance: An event-study approach

The severe acute respiratory syndrome (SARS) outbreak in 2003 weakened the Taiwanese economy. The tourism industry suffered the most, experiencing the highest stock price decline (approximately 29 percent) within a month of the SARS outbreak. This research examined the effect of the SARS epidemic on Taiwanese hotel stock price movements using an event-study approach. Seven publicly traded hotel companies experienced steep declines in earnings and stock price during the SARS outbreak period. On and after the day of the SARS outbreak, Taiwanese hotel stocks showed significantly negative cumulative mean abnormal returns, indicating a significant impact of the SARS outbreak on hotel stock performance. Empirical findings could be used to prepare businesses for the similar epidemics, such as a deadly bird-flu epidemic.     

An analysis of the relationship between market orientation and business performance in the hotel industry

The purpose of this study was to conduct an investigation into the link between market orientation and business performance in the hotel industry. Data were generated from 63 hotels in Hong Kong. The findings indicated that market orientation is positively and significantly associated with the marketing performance and financial performance of a hotel. The implications of the findings are discussed and the limitations of the study as well as future research directions are addressed.     

Green practices in the restaurant industry from an innovation adoption perspective: Evidence from Taiwan

This study proposes an integrated model that combines the theory of planned behaviour (TPB) and the innovation adoption theory to investigate the attitudinal and behavioural decision factors on adopting green practices in the restaurant industry in Taiwan. The results demonstrate that attitude and perceived behavioural control have positive effects on behavioural intention while social influence is insignificant. Perceived innovation characteristics have direct positive effects on attitude and indirect positive impacts on behavioural intention to adopt green practices. Managerial implications are discussed.     

The impact of regulation and ownership structure on market orientation in the tourism industry in China

The nature of market orientation and its impact on business performance and other related outcomes have been extensively researched in a range of service contexts including tourism. In contrast, our understanding of the factors that influence market orientation is still limited. This paper reports on a study that contributes to our understanding of the determinants of market orientation within the tourism sector by focusing specifically on the role played by two strategically important variables, namely government regulation and ownership structure. The study analyses two national samples of hotels and travel services in the rapidly growing tourism industry in China. The hotel sector has been open to foreign investment for two decades and has a diversified ownership structure, whereas the travel services sector has been dominated by government owned firms and relatively closed to foreign investment. The results of the survey suggest that of the two new antecedents, only government regulation has a significant role to play in driving market orientation. Internally, access to appropriate managerial and marketing capabilities was identified as a significant predictor of the development of market orientation.     

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.     

Hedonic adaptation and satiation: Understanding switching behavior in the restaurant industry

The role of satiation as a determinant of restaurant patronage has been the subject of increasing research attention. The purpose of this research is to further consider the relationship between satiation and switching behavior in the restaurant industry. Specifically, we seek to address the mediating mechanism of service quality in this framework. Based on the related tenets of diminishing marginal utility and hedonic adaptation, we propose that satiation and service quality are inversely related. The results of an empirical analysis confirm that as consumers become satiated with food, atmosphere, and restaurant service, perceptions of these three facets of overall service quality are diminished, leading to decreased satisfaction and switching intentions. In addition to the practical implications of these results, the finding that satiation directly impacts service quality represents an important step in the overall task of understanding the effects of satiation in determining restaurant patronage behavior.     

Human resource systems as antecedents of hotel industry market orientation: An empirical study in the Canary Islands, Spain

This paper studies how the different dimensions determining the human resource management system (recruiting, training, evaluation and compensation) influence the market orientation of hotels. There is also an exploratory analysis of the differences in the human resource management systems according to the following hotel classification data: star rating, size, ownership, time-share offer, type of location, customer satisfaction and profitability.     

Impact of the COVID-19 pandemic: Evidence from the U.S. restaurant industry

The current study examines how the effect of COVID-19 on U.S. restaurant firms’ stock returns varies according to the firms’ pre-pandemic characteristics by employing three firm-level dimensions (financial conditions, corporate strategies, and ownership structure). Employing 795 firm-year observations obtained from annual reports and other databases, this study found that restaurant firms with past characteristics of larger size, more leverage, more cash flows, less ROA, and more internationalization are more resilient to stock declines reacting to COVID-19 than otherwise similar firms. Whereas, dividend, franchising, institutional ownership, and managerial ownership did not show any significant moderating effect on the relationship between COVID-19 and stock returns. This study sheds light on the research topic by providing insights into drivers of restaurant firm’s stock returns during the COVID-19 shock. Future studies can employ the variables and method used in the current study to extend the understanding of the issue.