SMOKE-FREE ORDINANCES INCREASE RESTAURANT PROFIT AND VALUE

Abstract

This study estimates the economic value added to a restaurant by a smoke-free policy using regression analysis of the purchase price of restaurants, as a function of the presence of a smoke-free law and other control variables. There was a median increase of 16% (interquartile range 11% to 25%) in the sale price of a restaurant in a jurisdiction with a smoke-free law compared to a comparable restaurant in a community without such a law. This result indicates that, contrary to claims made by the tobacco industry and other opponents of smoke-free laws, these laws are associated with an increase in restaurant profitability.

FIGURE 1

Distribution of percentage change in sales price for restaurants in smoke-free communities compared to comparable restaurants in communities that permitted smoking. The median increase is 16% (interquartile range 11% to 25%). All values over 100% are included in the top bin.

FIGURE 2

Distribution of dollar value of changes in sale price of restaurants in communities with with smoke-free laws over comparable restaurants in communities with no restrictions. The median increase in value $15,300 (interquartile range of $9,000 to $27,000) for restaurants that worth a median of $95,000 (interquartile range $50,000 to $157,000) where smoking is permitted (Table 1). All values below $0 and above $150,000 are lumped into the top and bottom bins.