Operational efficiency evaluation of restaurant firms

Abstract

Purpose

The purpose of this study is to examine the operational efficiency of restaurants in a dynamic context, over the period 2011-2014. The paper also analyzes efficiency with respect to several frontiers and production technologies dependent on restaurant size. Finally, it provides a new perspective by examining financial and non-financial variables that can directly affect the efficiency of restaurant firms.

Design/methodology/approach

The study applies metafrontier data envelopment analysis (DEA) methodology to investigate differences in production technologies, dynamic Tobit regression models and bootstrap procedure.

Findings

The results reveal that operational efficiency in the restaurant industry is affected by firm size, showing that large restaurants perform better than medium-sized and small restaurants Moreover, the evidence suggests a link between the efficiency index and financial variables, such as credit ratings, probability of default or bankruptcy, leverage and cash flow, as well as a link with non-financial variables, such as type of auditor.

Practical implications

The strength of restaurant firms has practical implications for managers and entrepreneurs, linked to the investment possibilities and growth potential of companies in that industry.

Originality/value

This study provides exploratory insights into operational efficiency as well as restaurant efficiency determinants. Performance and operational efficiency are key factors to restaurant firms’ survival in the economies that have been most severely affected by the financial crisis. Furthermore, this study confirms the relevance of financial and non-financial variables, which are associated with firm efficiency in this industry.

Citation

Alberca, P. and Parte, L. (2018), "Operational efficiency evaluation of restaurant firms", International Journal of Contemporary Hospitality Management, Vol. 30 No. 3, pp. 1959-1977. https://doi.org/10.1108/IJCHM-09-2016-0547