Why Restaurants Fail? Part V: Role of Economic Factors, Risk, Density, Location, Cuisine, Health Code Violations and GIS Factors

Abstract

This study investigated the differential effect of economic recession and recovery on restaurant failures by location, type of cuisine, restaurant density, level of service and number of health code violations. Secondary data were used from a major metropolitan city in the US from 2007–2013. Economic recession and recovery were found to affect the rate of restaurant failure significantly and differently by location, restaurant density, type of cuisine, risk level, and number of citations of health code violations. Some cuisine types survived well during the recession whereas others were more vulnerable to the economic downturn. Some types of cuisine were prone to failure in both recession and recovery at higher rates than other types of cuisine, whereas others lagged only during recovery. While some types of cuisine were more likely to survive better in dense markets, no evident relationship was found between location and failure of cuisine type. There is a clear pattern of restaurant failures by Postal ZIP Code. There was a strong effect of number of health code violations on business failures.

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