Year: 2024
Type: article
Abstract: This study investigates the drivers of profit inefficiency in the restaurant industry. Assuming that restaurants operate under monopolistic competition, we first present a characterization of the factors that explain restaurants’ departure from the profit frontier, focusing on the role of business experience, number of outlets, service model, restaurant typology, and COVID-19 shock. Based on Stochastic Frontier Analysis, we estimate how these factors explain the differences in profit inefficiency across firms using a panel dataset of 4128 restaurants in Sweden in the period 2017–2021. We find that the average level of profit efficiency is low (46%). Inefficiency increases with years in operation and is significantly higher among limited-service restaurants and single-outlet firms. Interestingly, no significant difference in profit inefficiency is detected during the COVID-19 pandemic. Our findings provide valuable insights for profit efficiency management.
Source: Tourism Economics
Institutions: Universidad de Oviedo, Leiden University, Örebro University
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W4404957638