The Impact of Social Media on Restaurant Corporations’ Financial Performance

Abstract

Social media, in the form of online reviews (ORs), has become an essential element for consumers in the restaurant industry, providing reliable and unbiased information based on the dining experiences of other consumers. Social media is not only a crucial phenomenon for the strategy of restaurants, but also for their corporations. However, previous literature has focused on the analysis at the establishment level, rather than at the corporate level, especially when referring to financial performance. The present study tries to verify if social media also affects corporate financial performance. For this, the impact of ORs on advanced measures of financial performance was examined at the corporate level on a sample of 800 restaurants selected from the total population of active restaurants in Europe in 2018. The investigation applied both regression analysis and nonparametric techniques. They demonstrate a positive effect of ORs on financial performance, and a heterogeneous relationship between both variables across the European countries. Restaurants are becoming aware of the implications of this phenomenon since it could provide strategies for sustainable economic development.

A data-driven approach to measure restaurant performance by combining online reviews with historical sales data

“…( Fernández-Miguélez et al, 2020) Analytical Method: Hierarchical multiple regressions Research Goal: To identify the new or unexplored determinants of the restaurant.…”

“…Sales forecasting is essential in business management (Chern et al, 2015;Lasek et al, 2016). Moreover, ORs become a strong influence factor on customer purchase decision (Fernández-Miguélez et al, 2020;Kwok et al, 2017). In fact, recent studies show a relation between ORs and sales by showing that it is possible to forecast product sales through ORs.…”

“…Yet, they did not analyze such impact on sales. The recent study by Fernández-Miguélez et al (Fernández-Miguélez et al, 2020) established a relation between ORs and financial performance by analyzing macro-information based on firms financial reports.…”

The Effect of Countries’ Health and Environmental Conditions on Restaurant Reputation

“…This assessment is based on online clients' comments using a five-point Likert scale, including scores given for food, service, and value for money [54]. This measure has been previously used in the literature on the restaurant industry because the overall ratings aggregate many users' information simultaneously, and these data can reveal similarities between people who have expressed a shared point of view [55][56][57]. Otherwise, the ICI variables an alternative to the value of the reputation of restaurants that guarantees the reliability of aggregated online values [58].…”

“…Likewise, other control variables were included in the present study for comparison purposes [55]. The % chain and chain size variables, for example, indicate that differences exist between countries in the proportion of restaurants belonging to chains and the number of establishments making up each chain [60].…”