Elsevier

Health Policy

Volume 70, Issue 2, November 2004, Pages 243-254
Health Policy

Restaurant owner perceptions of the effects of a smoking ban

https://doi.org/10.1016/j.healthpol.2004.04.003Get rights and content

Abstract

In this paper business owner expectations regarding revenue changes due to a general smoking ban are analyzed using a survey mailed out to all restaurants, bars, cafés and nightclubs in Gothenburg, Sweden. A reasonable interpretation of the survey responses is that as many as 74% of the establishments do not expect to be severely hurt by a general smoking ban applying to the entire restaurant sector. The econometric results show that the owners are more likely to expect a decrease in revenues the larger their share of smoking customers. Moreover, establishments that are smoke-free are less likely to expect negative economic effects compared to those that currently allow smoking. Also, establishments with a non-smoking section are less likely to expect negative economic effects from a general smoking ban. No strong effect of the type of establishment (café, bar, or restaurant) on expected changes in revenues is detected, although establishments with late night hours are more likely to expect financial losses.

Introduction

This paper directs attention to restaurant sector business owner and their expectations regarding revenue changes due to a general smoking ban. The few previous studies conducted on the economic effects of smoking bans show no clear evidence as to how the restaurant sector is affected by tighter smoking regulations. Glantz and Smith [1] compare the sales tax data of communities with smoke-free bar and restaurant ordinances to the data of California communities with at least 60% of seating reserved for non-smokers. Hence, they study the effects on total actual retail sales of eating and drinking establishments in California after implementing smoking bans, and find no significant effect on the fraction of total retail sales at restaurants.1 Dunham and Marlow [2], using a nationwide US survey on restaurants, bars and taverns, find results consistent with the hypothesis that customer preferences influence owners’ allocations of smoking and non-smoking seats. Dunham and Marlow [3], after asking owners about their projections of revenues following new smoking laws, report that revenues would be expected to decrease by 39% for restaurants and by 83% for bars and taverns if smoking bans were implemented. This also directs attention to the fact that the distribution of the effects of a smoking ban is not uniform among different types of establishments. Previous studies have, just like this one, for practical reasons focused on revenues, although profits are the main concern.

This paper gives a number of contributions. First, very few studies (to my knowledge this is the first one that uses European data) have been conducted on the effects of a restaurant smoking ban from the perspective of firms. Second, compared to previous studies, I analyze in more detail the determinants of smoking ban effects on economic performance by including attitudes related to the smoking ban, and by controlling for several background characteristics such as type of establishment, existence of non-smoking sections, and dependence on smoking customers. Third, the use of a stated preference approach allows for an analysis of effects not possibly disentangled in a revealed preference framework. For instance, the results show that attitudes are important in explaining expected effects. Finally, the results are of policy relevance with respect to acceptance and implementation of smoking regulations.

The next section provides the theoretical departures and some background on the rationale for smoking regulations. The data and some descriptive results are then presented, followed by the modeling approach. The econometric results of expected effects on revenues among owners precede the concluding remarks.

Section snippets

Theoretical departures

From a profit maximizing perspective, we expect that firms attitudes towards a smoking ban depends primarily on the expected change in profits resulting from the ban. A new and stricter regulation changes the market equilibrium, and it is possible to hypothesize several effects from an implementation of a general smoking ban.

Firstly, since customers who like to smoke during their visits no longer can, a ban would make visits less attractive, which would be expected to affect revenues negatively

Data and descriptive results

In this paper we analyze business owner expectations regarding revenue effects of a general smoking ban, using a survey mailed to restaurants, bars, and cafés in Gothenburg, Sweden.

Modeling approach

The owners were asked the following question: “Imagine that all restaurants, bars, and cafés have to implement a smoking ban due to a new law. How do you think that your revenues would be affected?” It was also mentioned that the suggested policy would only apply indoors, which is in line with the proposed smoking ban. We use the owner’s expected changes in revenues, yi, measured by a six-grade scale for the individual business, i, provided that all restaurants, bars, and cafés have to adapt

Results

We now turn to the analysis of owner expected changes in revenues resulting from a smoking ban. The marginal effects for the ordered probit are presented in Table 3. The results are based on the categories “bankrupt or much lower revenues”, “somewhat lower revenues”, “unchanged revenues”, and “higher revenues”. The fact that these categories are skewed to the left is a consequence of two things. First, the category bankrupt was an alternative for those establishments that actually fear this or

Concluding remarks

This study relies on owner expectations regarding changes in revenues following a general smoking ban in the restaurant sector. Since these expectations are a main concern of business owners, it is natural to suspect that they can explain the support for or resistance against a general smoking ban. The econometric results show that the dependence on smoking customers and the beliefs about how the entire restaurant sector would be affected are in terms of size and statistical significance the

Acknowledgements

I am grateful for comments and help from Marcus Asplund, Anna Brink, Fredrik Carlsson, Lennart Flood, Per Haglind, F. Reed Johnson, Åsa Löfgren, Peter Martinsson, Katarina Nordblom, Björn Närlundh, Olof Johansson-Stenman, Ola Olsson, Thomas Sterner, and one anonymous referee. Financial support from the National Institute of Public Health (NIPH) in Sweden and Adlerbertska Forskningsfonden is gratefully acknowledged.

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