Inspired by their love of the TV show Bar Rescue, two economics professors binge-watched reality television to produce the first comprehensive examination of business-intervention shows.
By Peter Calcagno
Research inspiration can strike one anywhere. the idea for a project on entrepreneurship and saving businesses started at a Charleston Riverdogs’ game. Russell Sobel, an economics professor at The Citadel, and I were discussing the lines for concession and managing service when I asked him if he ever watched the show Bar Rescue.
“I love that show,” he said.
Having both studied and written on the topic of entrepreneur-ship, and given that the show has a dynamic appeal about helping failing entrepreneurs, we discussed during the game the question of whether an expert can actually save a failing business in 24 to 48 hours and if we could address that empirically. He told me that he and my economics colleague at the College, Doug Walker, had just recently been watching Bar Rescue and had a similar conversation.
Now, rarely do you hear the words academia and reality TV uttered in the same sentence, but earlier this year, Walker, Sobel, his daughter Reagan Sobel ’18 (a hospitality and tourism management major and economics minor who did a lot of the data collection) and I published a research paper that looked at how successful these experts really are.
The 16-page analysis, “How Effective Are Expert TV Hosts at Saving Failing Businesses,” appeared in the academic journal Contemporary Economic Policy and is the first comprehensive and scientific examination of business-intervention shows.
The impetus for the paper was the result of noticing that many of the businesses featured in these shows, like the restaurants in Kitchen Nightmares and Restaurant Impossible and the bars in Bar Rescue, probably deserve to fail. For example, one bar featured on Bar Rescue was a pirate-themed bar that anyone should realize would not have much appeal to the general public.
Lest you get the impression that all academics are just bookish people who never actually stooped to watching reality TV unless forced to do so for research purposes, think again. As noted, we loved watching these shows, but – unlike regular viewers, perhaps – as economic wonks, we talked about how bad some of the businesses were and that they should and would fail even with the help. In addition to the aforementioned shows, we also watched a few others for fun, like Tabatha Takes Over, but I don’t think any of us realized how many shows there are until we started our research. We compiled data on every business (more than 500) that appeared on 11 different shows, including Hotel Hell (Fox), Hotel Impossible (Travel Channel) and The Profit (CNBC), by watching hundreds of hours of episodes, examining thousands of customer reviews and interviewing owners, employees and local reporters.
We noted that there were two issues at work: First, how and when should you measure failure? Any business, especially restaurants and bars, may close in a given year, so to look at only the places these shows had helped, and over the entirety of the life of the show, may overstate the show’s success or failure. We had to examine an annual failure rate of similar establishments and see how these places compare. Take Kitchen Nightmares, hosted by Chef Gordon Ramsay, which ended in 2014 after six seasons. Overall, 70.1 percent of the 77 establishments from the six seasons have closed, and this presents an inaccuracy in assessing the show based on the annual overall closure rate.
One can easily see the importance of our conversion to the average annual failure rate in terms of what this closure percentage occurring over almost a decade implies. Using our annualized failure rate for the businesses featured on the six seasons of Kitchen Nightmares combined is only 30.1 percent. For comparison, the industry-level annual failure rate for eating and drinking establishments is 16.7 percent. The average annual failure rate for the businesses featured on Kitchen Nightmares is obviously higher than the average annual failure rate for the industry as a whole. The academically interesting question becomes whether the difference is statistically significant.
“If there were a show called Restaurant Accounting Theory and Methods, it might really help the businesses in question, but it would surely fail as a TV show.” – Doug Walker, economics professor
The second issue is whether these places should be saved. If you understand the profit-and-loss system, you know that perpetuating failing businesses is ignoring the market signal and that these resources may better serve the economy and community if used in another way.
“In many cases, these business owners were apparently doing such a bad job managing their restaurants and bars that ‘the market’ would likely lead to them closing anyway,” notes Walker, whose primary research focus is on the economic and social impacts of legalized gambling. “Not every restaurant will or should survive in a competitive market. Take Charleston as an example. We have many excellent restaurants, and if one is not consistently serving great food with great service, it will be tough to survive here. This competition in the market is to the benefit of consumers and to the businesses who serve them well.”
But can the impact of a celebrity host and the publicity surrounding the airing of the show fix all of a struggling business’ problems? That’s a tall order given that many of the issues are the result of years of neglect, poor training of staff and interpersonal conflicts. Our study discovered that the establishments actually end up doing worse than the average business in their industry.
The best the shows seemed to have given the businesses was some public exposure, which perhaps prolonged their life by a few months, leading us to wonder why some reality shows were still airing if they weren’t successful with the interventions. We think the answer is that it’s the TV business. The goal is to be entertaining – to get ratings and sell advertisements, regardless of the final outcome. As Walker notes, “If there were a show called Restaurant Accounting Theory and Methods, it might really help the businesses in question, but it would surely fail as a TV show.”
We argue that this explains why the shows often feature businesses that have terrible food, are horrendously dirty with rat and roach infestations or have stubborn or stupid owners. These scenarios create conflict between the show’s host and the business owner, which for many viewers is entertaining.
And evidently makes for an interesting academic paper as well.
– Peter Calcagno is a professor of economics, specializing in public choice economics, political economy and public finance. He is also the founding director of the Center for Public Choice and Market Process in the College’s School of Business.
Illustration by Adam Koon