Analizing Risk in the Restaurant Industry

Abstract

The objectives of the study are twofold. It first aims to examine whether systematic risk is influenced and predicted by certain financial variables in the overall U.S. restaurant industry, and it sets out to determine which variables better explain the systematic risk. Second, it intends to investigate how those financial variables affect the systematic risk with regards to the quick-service and the full-service segments. The financial variables utilized were profitability, leverage, efficiency, liquidity, growth, and size. For the overall restaurant industry, profitability was found to be the most significant variable and negatively related to systematic risk. The second significant variable was leverage, positively related to systematic risk. The third significant variable was liquidity; it was positively related to systematic risk. By comparing the quick and full-service segments, profitability was statistically significant in both segments. Leverage was found to be significant in the quick-service segment.