The Operational Consequences of Private Equity Buyouts: Evidence from the Restaurant Industry

Shai Bernstein and Albert Sheen
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Shai Bernstein: Stanford University
Albert Sheen: Harvard University

Research Papers from Stanford University, Graduate School of Business

Abstract: How do private equity firms affect their portfolio companies? We document operational changes in restaurant chain buyouts between 2002 and 2012 using comprehensive health inspection records in Florida. Store-level operational practices improve after private equity buyout, as restaurants become cleaner, safer, and better maintained. Supporting a causal interpretation, this effect is stronger in chain-owned stores than in franchised locations--"twin" restaurants over which private equity owners have limited control. Private equity targets also slightly reduce employee headcount, and lower menu prices. These changes to store-level operations require monitoring, training, and better alignment of worker incentives, suggesting private equity firms improve management practices throughout the organization.

JEL-codes: G24 G34 J24 J28 M11 M54 (search for similar items in EconPapers)
Date: 2014-04
New Economics Papers: this item is included in nep-cfn and nep-mfd
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3008

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