The Dynamics of the Profitability and Growth of Restaurants; The Case of Norway

Opstad, Leiv; Idsø, Johannes; Valenta, Robin

doi:10.3390/economies10020053

Cited by 11 publications

(15 citation statements)

References 44 publications

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“…The degree of profit persistence is generally around 0.25 for Norwegian bakeries in the period. This is in line with other research for the service sector (Giotopoulos, 2014;Opstad, Idsø & Valenta, 2022). The long-run equilibrium calculated for the coefficients and constants above presents a clear picture.…”

Section: Profit Persistency and Long-run Profitability (Hypothesis 1)supporting

confidence: 90%

Non-Linear Economies of Scale in Food Production: The Case of Norwegian Bakeries

Opstad¹,

Valenta²

2022

IJAEFA

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The bakery industry has a rich history. Its modern forms involve both manufacturing products and delivering them to customers. Both small bakers and large producers sell their products to the supermarket. The largest bakeries export a wide variety of baked foods. The sector is a large employer and it has been thoroughly studied internationally. However, only a small number of studies have analysed the baked goods sector, often due to the lack of categorization of bakeries in the data. In this article, we use public statistics on Norwegian bakeries to study their economies of scale. The profitability of large bakeries persistently exceeds the average rate. New bakeries are equally likely to succeed or fail in the long run. Many new bakeries enter the market as a result of tough competition and a long period of high sector probability but it is difficult for them to survive. Those that must leave the market are mostly new entrants. Despite their difficulties, small and medium-sized bakeries are more profitable than new start-up businesses. We investigate the non-linear relationship between size and profitability as well as between and within bakeries.

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Section: Profit Persistency and Long-run Profitability (Hypothesis 1)supporting

confidence: 90%

Non-Linear Economies of Scale in Food Production: The Case of Norwegian Bakeries

Opstad¹,

Valenta²

2022

IJAEFA

View full text Add to dashboard Cite

show abstract

“…The marginal rate of profit can serve as a measure of firm-specific factors (Mueller, 1968), and the persistence of profits can thus be interpreted as the importance of firm specific factors. Opstad et al, (2022) estimate that the degree of profit persistency is .25, which is higher than for primary producers of food, and similar to other service sectors (Hirsch, 2018). Parsa et al (2011) indicate three factors to explain the exit of restaurants: location, affiliation (independent versus chain), and size.…”

Section: Literature Reviewmentioning

confidence: 63%

“…The strong turnover and competition, combined with the low fixed costs and the even playing ground of the restaurant sector, explain why the degree of profit persistence is low for restaurants (Luca & Luca, 2019;Opstad et al, 2022).…”

Section: Introductionmentioning

confidence: 99%

The Long-Run Equilibrium of Industry Population and Bottom Lines: Analysing the Near-Perfect Restaurant Industry

2022

JABE

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The establishment and bankruptcy of businesses is a crucial aspect of the market economy. The market in which restaurants compete is characterized by few barriers to entry, strong competition, low marginal rates of profit, and high levels of bankruptcy. Using publicly available panel data of all Norwegian restaurants, we examine the determinants of market levels of entry and exit. In theory, the driving force in the space of market turnover is the marginal rate of profit in the industry. There is a strong link between the profit rates in the sector and number of firms leaving and entry the marked.

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“…They found a high degree of profit persistence, presumably caused by the imbalance in bargaining power in the food value chains. Finally, Opstad et al (2022) focused on the dynamics of profits in the Norwegian restaurant industry, finding significant profit persistence (around 0.25), which they explained as being due to isolation mechanisms preventing competitors from replicating a product.…”

Section: Research Backgroundmentioning

confidence: 99%

Profit and viability persistence: Evidence from the Spanish agricultural sector

et al. 2023

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The literature focused on analyzing profit persistence in the agricultural sector is scarce. This paper contributes to reducing this gap by carrying out an empirical study of 10 types of farming in Spain based on a dynamic panel model with microeconomic data from a large sample of farms provided by the Spanish Farm Accountancy Data Network. The generalized method of moments system estimator is used to assess profit persistence, including all significant lagged profit rates explaining the adjustment of abnormal profits over time. Moreover, the dynamic of farms' economic performance is analyzed considering the return on assets as a dependent variable (i.e., measuring farms' profitability), as well as an alternative indicator that also accounts for opportunity costs (i.e., measuring farms' viability). The results show that profit and viability persistence in the farming sector are complex dynamic processes that depend on several lags of the aforementioned dependent variables (between 2 and 5 years), with high abnormal profit and viability persistence being widespread. In any case, heterogeneous persistence results are achieved depending on the type of farming. The differences found can be explained by disparities in several explanatory variables contributing to above‐ or below‐average performance. The conclusions reached could lead to sounder decision‐making regarding agricultural policy (i.e., farm subsidies) and competition policy (i.e., exceptions to competition law). [EconLit Citations: D41; L13; L22; L25; Q12; C23].

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The Dynamics of the Profitability and Growth of Restaurants; The Case of Norway

Cited by 11 publications

References 44 publications

Non-Linear Economies of Scale in Food Production: The Case of Norwegian Bakeries

Non-Linear Economies of Scale in Food Production: The Case of Norwegian Bakeries

The Long-Run Equilibrium of Industry Population and Bottom Lines: Analysing the Near-Perfect Restaurant Industry

Profit and viability persistence: Evidence from the Spanish agricultural sector

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