The purpose of this article is to study the factors that impact capital expenditures in the quick-service restaurant industry. The authors hypothesize that growth opportunities, free cash flow, size, corporate earnings, economic conditions, and franchising status will have impact on the capital expenditures of quick-service restaurants. This study analyzed capital expenditure and other financial data on quick service restaurants for the period 2006 – 2016. Results suggest that corporate earnings, size, cash flow, economic conditions, and franchising have a significant relationship with capital expenditures, while growth opportunities are not associated with capital expenditures. Specifically, a high degree of corporate earnings, large size, and a high degree of cash flow tend to be associated with a high degree of capital expenditures; while favorable economic conditions and franchising tend to be associated with a low level of capital expenditures.

Purpose The purpose of this paper is twofold. First, the study examines the prolonged effect of policy-related economic uncertainty on hotel operating performance, particularly the room demand (occupancy). Second, the study attempts to explain why occupancy drops when the perceived economic uncertainty is high by studying the mediating effect of consumer sentiment in the relationship between economic policy uncertainty and hotel demand. Design/methodology/approach This quantitative study uses secondary data – US economic policy uncertainty (EPU) index, University of Michigan's index of consumer sentiment (ICS), and property-level hotel operating data from three states of the US – California, Florida and New York. Data were analyzed using random effect regression and structural equation modeling. Robustness tests were conducted to enhance the reliability of the research findings. Findings Random-effects regression analysis reveals that policy-related economic uncertainty has a negative and lead-lag effect on hotel occupancy, average daily rate and revenue per available room (RevPAR). Structural equation modeling results show that the relationship between economic policy uncertainty and hotel occupancy is significantly mediated by consumer sentiment. Robustness test results support the findings from the main analysis. Practical implications This study offers valuable implications for the hotel professionals in regard to anticipating the economic impact of policy-related uncertainty on hotel industry and understanding how consumer sentiment affects demand at such crises times. Moreover, the study suggests potential course of actions to deal with declining room demand at times of uncertainty. Originality/value This empirical study explores how economic policy uncertainty affects hotel performance at the property level and explains the mediating effect of consumer sentiment on hotel room demand. The study provides a first-hand evidence of how consumer sentiment relates to the perception of economic uncertainty and leads to decline in consumer demand. In that regard, findings of the study have valuable implications for hospitality industry practitioners and relevant policymakers.

The restaurant industry has expanded into international markets remarkably well due to various benefits. However, there are also high risks involved in internationalization and it is important to consider the internationalization strategy from the risk perspective for the restaurant industry. The current study attempts to examine the relationship between restaurant firms' internationalization and accounting-based risk. This study analyzes data from U.S. restaurant firms by estimating accounting-based risk measured by the standard deviation of return on assets (ROA), and performing a Two-Way Fixed-Effects Model. The findings of this study reveal that although internationalization shows a curvilinear relationship (i.e., concave downward) with ROA risk, the major shape of the relationship may be more linear rather than curvilinear, partially explained by organizational learning theory. Restaurant firms might initially face challenges caused by inexperience in international operations in conjunction with an unfamiliar culture and may not immediately realize the risk-reduction effects. Thus restaurant executives involved in new international operations need to be very informed on risk management. This allows them to gain more confidence in pursuing internationalization strategies and ultimately enjoy the risk-reduction effects, acknowledging that more international operations can reduce restaurant firms' ROA risk in the long run. This finding provides important insights for international restaurant companies to better understand how their implementation of internationalization strategy may contribute to their firms' accounting risks.

Purpose The purpose of this study is twofold: to investigate the relationship between restaurant firms' internationalization and systematic risk, and to further examine the relationship between internationalization and systematic risk based on the type of restaurant firm (i.e. limited-service vs full-service restaurants). Design/methodology/approach This study analyzes data from US-based publicly traded restaurant firms by estimating systematic risk based on the Carhart four-factor model and by performing a two-way random-effects model. Findings Findings support not only the risk-reduction effect of internationalization on systematic risk but also the moderating effect of the role of restaurant type on the relationship between internationalization and systematic risk. More specifically, the risk-reduction effect of internationalization on systematic risk is greater for limited-service than full-service restaurants. Practical implications The findings of this study can provide restaurant executives with more confidence in pursuing internationalization as part of their risk management strategy, acknowledging that more international operations could mitigate restaurant firms' systematic risk. More specifically, limited-service restaurants can more significantly enjoy the risk-reduction benefits by increasing their international operations than full-service restaurants based on the findings of this study. Furthermore, risk-averse investors could consider purchasing shares of limited-service multinational restaurants' stocks to enjoy more risk-reduction benefits. Originality/value By focusing on the restaurant industry with consideration for the restaurant type, this study provides more tailored recommendations for implementing internationalization strategies with regard to risk management.

ABSTRACT The purpose of this article is to study the factors that impact capital expenditures in the quick-service restaurant industry. The authors hypothesize that growth opportunities, free cash flow, size, corporate earnings, economic conditions, and franchising status will have impact on the capital expenditures of quick-service restaurants. This study analyzed capital expenditure and other financial data on quick service restaurants for the period 2006–2016. Results suggest that corporate earnings, size, cash flow, economic conditions, and franchising have a significant relationship with capital expenditures, while growth opportunities are not associated with capital expenditures. Specifically, a high degree of corporate earnings, large size, and a high degree of cash flow tend to be associated with a high degree of capital expenditures; while favorable economic conditions and franchising tend to be associated with a low level of capital expenditures.

PurposeThe purpose of this study is to invoke prospect theory to construct an empirical framework to predict idiosyncratic risk, and argue that when a firm performs better than its benchmarks, the firm tends to play safe by avoiding firm-specific risk to maintain its satisfactory performance level, but when a firm performs worse than its benchmarks, the firm may become aggressive with taking more risks to achieve an increased level of performance.Design/methodology/approachThis study tested the relationships between restaurant firms’ future idiosyncratic risk and the proposed firm financial characteristics. Heteroscedasticity- and autocorrelation-consistent (HAC) standard errors (Newey and West, 1994) were used to deal with potential problems of autocorrelations and heteroscedasticity. The standard error of residuals from the Fama-French three-factor model (Fama and French, 1993) was estimated to proxy for restaurant idiosyncratic risk.FindingsThe main analysis reveals that five financial characteristics are significant predictors for restaurant firms’ future idiosyncratic risk in accordance with the proposed, negative relationship based on the prospect theory.Practical implicationsManagers may predict their competitors’ future risk-taking behaviors using the current study’s findings, which will provide competitive advantage in a highly competitive business environment that we have now. Also, in practice, restaurant investors may consider findings of this study in forecasting future risks of their portfolio to help evaluate and revise their portfolios.Originality/valueFirst, this is a new endeavor of its kind dealing with the restaurant industry, filling the void in the literature in predicting the risk-taking behavior of restaurant firms in a time of crisis. Second, this study forms a prediction model that establishes “predictive causality” (Diebold, 2001) motivated by prospect theory. Third, building upon prior research, this study comprehensively examines relationships between the firm characteristics that capture firm-specific strategies (Ou and Penman, 1989) and the idiosyncratic risk that are “associated with firm-specific strategies” (Luo and Bhattacharya, 2009) in a restaurant setting. Finally, the findings of this study bear significant implications for practitioners and other parties of interest.

The use of debt is prevalent in the restaurant industry. While there have been numerous studies on restaurant capital structure, this study examines the relationship between firm performance and effective interest rate on debt used by restaurant firms. This study uses a sample of 56 publicly traded U.S. restaurant firms for the years 2012–2014. We examine the relationship between effective interest rates and firm performance as measured by approximate Tobin's Q, return on assets, and return on equity. We find a significant and positive relationship between effective interest rates and return on equity.

Purpose - The purpose of the current study is to investigate the possible existence of a synergistic effect of internationalization and corporate social responsibility (CSR) on a firm's value performance.Design/methodology/approach - To empirically test the argument, this study analyzed data from 40 US-based publicly traded restaurant companies (251 observations) from 2000 to 2011 by performing a two-way fixed-effects model.Findings - This study's findings support the hypothesis that when implemented simultaneously, internationalization and CSR have a negative synergistic impact on a restaurant firm's value performance.Practical implications - Restaurant managers might need to inquire thoroughly into the timing and content of CSR investment strategies while entering into new international markets. Restaurant executives may additionally need to focus more on effective risk management than other issues (e.g. growth or reputation) when developing both internationalization and CSR strategies simultaneously.Originality/value - By suggesting and demonstrating a negative synergistic effect of internationalization and CSR on a firm's value, this study presents new and unique insights into previous research regarding the combined effect of the two strategies.

The main goal of management in the United States is to maximize the wealth of shareholders. Managers, though, sometimes make decisions that benefit them more than the shareholders. When this occurs they are considered to be exhibiting expense preference behavior. This study evaluates expense preference behavior by managers of Nevada casinos. Using ordinary least squares regression, significant positive results show that for each 1% increase in revenue, employees increase 0.88%, salaries and wages increase 0.98%, and total payroll increases 1.01%. Also during the biggest economic downturn to hit Nevada casinos, management significantly decreased employees 14.7%, salaries and wages 4.9%, and total payroll 3.9%. Since managers are able to decrease payroll-related expenses after controlling for the change in business volumes, they are most likely operating inefficiently during good economic times. These additional expenses equate to a lower net income, which decreases owners' residual income and increases the need to borrow during growth periods.

Mergers and acquisitions are frequent occurrences in the world of business. While a merged firm may convert an acquired asset to other brands, the restaurant industry tends to acquire the same brand name and does not change the name of the acquired assets. Acquisitions can prove to be a risky proposition in any industry. This study attempts to determine if a product-diversified acquisition in the restaurant industry is a value-creating decision. By comparing focused and diversified acquisitions, we try to find if focused acquisitions create value and that diversified acquisitions do not. Our initial expectation was that focused acquisitions create more shareholder value. We find that both focused and diversified acquisitions make significant positive abnormal returns for acquirers.

Within the hospitality industry, the largest expense is payroll, and it is often considered one of the most controllable. Expense preference theory postulates that managers may focus more on maximizing their own utility by overspending as opposed to firm profit maximization. The purpose of this study is to evaluate if hotel managers in Nevada casinos exhibit expense preference behavior by overstaffing. Results of various regression models show that occupied rooms is positively and significantly related to rooms payroll. In one model, there is a modestly significant relationship between market concentration and rooms payroll. Results also show that after accounting for other variables, there is no significant relationship between a recession and rooms payroll.

The purpose of this research is to explore the relationship between restaurant management factors and the unsystematic risk portion of restaurant stock returns. The riskiness of the restaurant business has been brought to the forefront of popular culture through a number of reality television shows. Although the riskiness of the business overall has been exaggerated, these shows highlight the importance of the ability of the owner-manager. We examine three critical areas of restaurant management, including financial management, operations management, and firm size, and find that all are significantly related to a firm's unsystematic risk.

This article studies the factors that determine capital expenditures of restaurant firms. Regression analysis is used to study a sample of 78 firms from 2002–2012. The study hypothesizes that growth opportunities, free cash flow, and above-average earnings will have a positive impact on the capital expenditures of restaurant firms. The impact of firm size and economic conditions on capital expenditures is also examined. As such, issues critical to the determination of capital expenditures in the U.S. restaurant industry are better understood.

Based on the strategic debt argument, this study hypothesizes that short-term debt generally leads a restaurant firm to poor performance due to the lack of a strategic approach from using short-term debt. The study further examines the moderating role of economic conditions in the relationship between short-term debt and firm performance through a pooled regression analysis with heteroscedasticity-consistent standard errors. The data are from publicly traded US restaurant firms for the period 1990–2009. The findings support the research hypothesis that short-term debt in general has a negative impact on the performance of restaurant firms, while the negative effects are significantly reduced during economic downturns.

Purpose - The existing research finds a positive financial impact of franchising for relatively short time windows, usually less than ten years. As a result, these studies leave one critical research question unanswered: does franchising influence restaurant firms' financial performance consistently in the long term? The purpose of this paper is to address the research question and offer relevant managerial implications.Design/methodology/approach - This study uses and expands the models derived from Ohlson, from Amir and Lev and from Lev and Zarowin to address the financial impacts of franchise in the restaurant industry from a long-term and consistent perspective.Findings - Carrying out empirical tests over all ten-year testing windows that span 1980-2010 with quarterly data, this study finds that franchising is an effective mechanism to systematically and consistently outperform non-franchise firms in the long term and provides compelling empirical evidence to answer the research question. Further, limited-service restaurants also exhibit consistent and positive impacts on firm financial performance in the long term, suggesting limited-service operations are also effective to enhance firm value and outperform competitors.Originality/value - First, this study expands the set of variables employed by many financial researchers to explain stock price in the restaurant industry. Second, this study tests and shows that franchising systematically leads to financial outperformance over the long term. Third, this study tests and shows that limited service restaurants consistently and systematically outperform their peers in the long run. Finally, the results of this study can be used to help investors and fund managers select restaurant company stocks and offer compelling evidence in support of franchising and limited service operations.

Jordan Salmon Anthony F. Lucas Jim Kilby Michael C. Dalbor Casino executives were polled regarding their discounting practices and policies. The results indicated that casinos offering discounts to players were most concerned with a player's actual loss and least concerned about the number of hands/rounds played and the player's average bet. The extant literature clearly demonstrates that such a focus can result in substantial financial consequences (Lucas, Kilby & Santos, 2003; Kilby, Fox & Lucas, 2004). Additionally, the analysis of two discount-oriented deals offered to premium players demonstrates the potentially destructive power of discounts on casino cash flows. These results fill a gap in the literature related to the prevalence of discounts and the extent of casino managements' knowledge of discount mechanics.

This paper analyzes the effect of the 2003 Illinois gaming tax increase on gaming demand. To model gaming demand, slot machine coin-in is chosen for the period January 2000 to December 2006. Multiple regression analysis is used to model both the tax increase and account for seasonality in the data. A Box Jenkins model was employed to address correlation of error terms. The findings reveal that Illinois experienced a decrease in gaming demand when the tax increases took effect. The findings indicate that legislators should acknowledge and evaluate the negative economic pressures tax increases have on the gaming industry.

ABSTRACT The U.S restaurant industry has experienced strong growth since 1970 (National Restaurant Association, n.d.). Publicly traded restaurant firms tend to initiate dividends soon after they go public, quite often even in the same year. This study tests hypotheses based upon four dividend initiation theories: signaling, life-cycle, agency costs and catering. The results reveal that only the signaling theory is significant. Since most restaurant firms initiate dividends at the growth stage, they tend to have little free cash flow, high investment opportunities, and low dividend premiums (which are less favorable to investors).

ABSTRACT This is the first study to consider the impact of payment method on announcement period returns in response to a merger and acquisition in the hospitality industry. Much research has been published on the returns to mergers and acquisitions generally, and, in the last ten years, quite a bit has been published on this topic in hospitality journals. But very little has been published about the impact of payment method in hospitality mergers and acquisitions. This paper uses standard event study methodology to determine abnormal returns for a sample of 282 bidding hospitality firms. The results are that an acquisition in the hospitality industry is more likely to be profitable if payment is made with cash. This provides empirical support for the asymmetric information and signaling theories premise that bidding firms will earn positive abnormal returns for cash offers, but returns are not significantly different than zero for stock offers.