This study examined the risk-adjusted performance of three restaurant sectors, namely full-service restaurants, economy/buffet restaurants, and fast-food restaurants. Three indexes—the Sharpe Index, the Treynor Index, and the Jensen Index—were derived to compare the performance of the three restaurant sectors for the period 1996-2000. The findings indicate that fast-food restaurants performed the best, followed by full-service restaurants and then economy/buffet restaurants. The results also reveal that the performance of all the three restaurant sectors was inferior to that of the market portfolio. To improve their risk-adjusted performance, restaurant firms should continue to consolidate to further enhance revenue and lower operating costs, thus raising their stock returns without increasing the systematic risk. In the meantime, they should lower their unsystematic risk.
Asbere, P. K.
, Kleiman, R. T., & McGowan, C. B. (1991). The risk-return attributes of international real estate equities. Journal of Real Estate Research, 6(2), 143-151.
2.
Battaglia, A.
(1999a). Nontraditional sites open doors, but limited menus raise “disconnect” risk. Nation's Restaurant News, 3(18), 49-52.
3.
Battaglia, A.
(1999b). Quick-service operators prosper through toy promotions. Nation's Restaurant News, 33(26), 118-122.
4.
Bowman, R. G.
(1979). The theoretical relationship between systematic risk and financial (accounting) variables. Journal of Finance, 34(3), 617-630.
5.
Copeland T.
, & Weston, J. (1988). Financial theory and corporate policy. Reading, MA: Addison-Wesley.
6.
Franchise Finance Corporation of America (FFCA)
. (2001). 2001 chain restaurant industry review & outlook, Scottsdale, AZ: Author.
7.
Gu, Z.
(1993). Debt use and profitability: Reality check for the restaurant industry. Journal of Foodservices Systems, 7, 135-147.
8.
Gu, Z.
(1994). Hospitality investment risk, return, and performance indexes: A ten-year examination. Hospitality Research Journal, 17(3), 17-26.
9.
Gu, Z.
(2002). Analyzing bankruptcy in the restaurant industry: A multiple discriminant model. International Journal of Hospitality Management, 21(1), 25-42.
10.
Gu, Z.
, & McCool, A. (1993/1994). Financial conditions and performances: A sector analysis of the restaurant industry. Journal of Hospitality Financial Management, 3(1), 1-14.
11.
Han, J.
, & Liang, Y. (1995). The historical performance of real estate investment trusts. Journal of Real Estate Research, 10(3), 235-262.
12.
Haugen, R. A.
(1997). Modern investment theory (4th ed.). Upper Saddle River, NJ: Prentice Hall.
13.
Jensen, M. C.
(1968). The performance of mutual funds in the period 1945-1964. Journal of Finance, 23, 389-416.
14.
Kim, H.
, Mattila, A., & Gu, Z. (2002). Performance of hotel real estate investment trusts: A comparative analysis of Jensen Indexes. International Journal of Hospitality Management, 21(1), 85-97.
15.
Levy, H.
, & Sarnat, M. (1984). Portfolio and investment selection: Theory and practice. Englewood Cliffs, NJ: Prentice Hall.
16.
Lintner, J.
(1965). Security prices, risk and maximal gains from diversification. Journal of Finance, 20(4), 587-615.
17.
Muller, P.
(2001). Success by design: Restaurant environment just as crucial as good food, prompt service. Nation's Restaurant News, 35 (49), 20.
18.
National Restaurant Association (NRA)
. (2001a). Industry at a glance. Retrieved December 10, 2001, from http://www.restaurant.org/research/ind_glance.cfm
19.
National Restaurant Association (NRA)
. (2001b). 2001 Restaurant industry forecast: Fullservice outlook. Retrieved December 10, 2001, from http://www.restaurant.org/research/forecast_fullservice.cfm
20.
National Restaurant Association (NRA)
. (2001c). 2001 Restaurant industry forecast: Operational trends. Retrieved December 10, 2001, from http://www.restaurant.org/research/forecast_operational.cfm
21.
National Restaurant Association (NRA)
. (2001d). 2001 Restaurant industry forecast: Quickservice outlook. Retrieved December 10, 2001, from http://www.restaurant.org/research/forecast_quickservice.cfm
22.
Papiernik, R. L.
(2001). Terrorism, economy put sales under gun. Nation's Restaurant News. 35(42), 1, 64.
23.
Petty, W.
, Keown, A., Scott, D. & Martin, J. (1993). Basic Financial Management. Englewood Cliffs, NJ: Prentice Hall.
24.
QSR boosts sales week of September 11
. (2001). Foodservice Equipment and Supplies Magazine, 54(11), 43.
25.
Roll, R.
(1978). Ambiguity when performance is measured by the security market line. Journal of Finance, 33(4), 1051-1069.
26.
Schwartz, N. D.
(1999). Still perking after these years. Fortune, 139, 203-207.
27.
Sharpe, W. F.
(1964). Capital asset prices: A theory of market equilibrium under conditions of risk. Journal of Finance, 19(3), 425-442.
28.
Sharpe, W. F.
(1966). Mutual fund performance. Journal of Business, 39(6), 119-138.
29.
Shearer, B.
(2001). Casual dining firms eye M&A as internal growth hits the limit. Mergers and Acquisitions, 35(8), 40-42.
30.
Silver, D.
(2001). Casual dining's new groove. Restaurants and Institutions, 111(11), 83-92.
31.
Treynor, J. L.
(1965). How to rate management investment funds. Harvard Business Review, 44(1), 63-75.
32.
Walker, J. R.
(2002). Introduction to hospitality (3rd ed.). Upper Saddle River, NJ: Pearson Education.
33.
Walkup, C.
(2001). Industry outlook: Analysts see growth despite some challenges. Nation's Restaurant News, 35(24), 80.
34.
Valuation of the restaurant industry
. (1999). Weekly Corporate Growth Report, 1062, 1-3.
35.
Zuber, A.
(2001). To market, to market: Chains find strength in numbers, use co-branding as growth vehicle. Nation's Restaurant News, 35(6), 45-48.
