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This version was published on August 1, 2008
Journal of Hospitality & Tourism Research, Vol. 32, No. 3, 327-341 (2008)
DOI: 10.1177/1096348008317387

Risk-Return Analysis of Fast-Food Versus Casual-Dining Restaurants: Who Moved My Cheeseburger?

Melih Madanoglu

Florida Gulf Coast University, mmadanog{at}fgcu.edu

Kyuho Lee

Western Carolina University, klee{at}email.wcu.edu

Francis A. Kwansa

University of Delaware, kwansa{at}udel.edu

The study demonstrates how a hypothetical investor or a restaurant industry executive can assess the risk-adjusted performance of fast-food and casual-dining restaurant segments by using both traditional and contemporary risk-adjusted performance measures. This study focuses on 24 casual-dining and 18 fast-food restaurants that are publicly traded on major U.S. stock exchanges. The results revealed that casual-dining firms out-performed fast-food restaurants in all performance aspects: mean return, standard deviation, the Sharpe Ratio, the Sortino Ratio, and the Upside Potential Ratio. The article offers suggestions for potential investors about how to utilize downside risk measures in their capital investment decisions.

Key Words: risk-adjusted performance • restaurant industry • fast food • casual dining • downside risk


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