Why Restaurants Fail? Part II - The Impact of Affiliation, Location, and Size on Restaurant Failures: Results from a Survival Analysis

It has been suggested that changes in organizational populations are shaped by a natural (biological) selection process. Industries and businesses evolve through standard and identifiable phases throughout their lifespan. This study analyzed organizational mortality in the restaurant sector based on restaurant location, affiliation (presence/no presence of multi-unit locations of restaurants in a given geographical area), and size. Objectives of this study are to understand organizational failure from a population ecology perspective and, specifically, to identify the influences of location, competitive density, and organizational size on restaurant failure. The analyses indicated all three variables—location, affiliation, and size—are significant influences on restaurants' mortality. Chain restaurants were found to have significantly lower failure rates than independently owned restaurants. Restaurants that are smaller in size had higher failurerates than large sized restaurants. There is a significant effect of location, as measured by U.S. postal zip codes, on restaurant failures.