LA Eats & Economics
Navigating the intersection of restaurants in Los Angeles and socioeconomic trends
Preface
In a city that never sleeps, restaurants emerge and evolve, creating a vibrant tapestry that reflects the pulse of its diverse neighborhoods. But have you ever considered the hidden forces shaping this dynamic landscape? Why do certain areas within Los Angeles have more restaurants, and what makes a region a hotter target for restaurants to open up at?
Our project studies the mysteries behind the rise and fall of restaurants in Los Angeles, delving into the relationship between socioeconomic indicators and food service establishments.
Introduction
Los Angeles is widely regarded as being rich with diversity, and these cultural components extend to its establishments, such as restaurants. The Wall Street Journal recognizes that across the United States, restaurants are risky investments, with even higher rates of closure if the establishment is independently owned, as opposed to chains (Jakab). Staffing problems and rising costs of ingredients are often cited as obstacles that make it difficult to turn a profit (Harris). However, these problems plague the restaurant industry at large, and by examining a smaller region, such as a county, subtler trends are able to be identified. Although Los Angeles County has a set minimum wage, some cities within the county, including the city of Los Angeles, have an even higher baseline. Such discrepancies, among others, are important to consider in the interest of informing potential restaurant owners about the area in which they plan to open in.
This project explores socioeconomic factors, such as minimum wage and median income, across the districts of the city and county, and how they are correlated with a restaurant’s ability to stay open in Los Angeles. Our first dataset is a publicly-created compilation of currently active restaurants in Los Angeles, sourced from the Los Angeles Office of Finance. These entries are then refined to those that share the NAICS code 722110, which refers to full-service restaurants. This data provides fundamental information, such as the distribution of active restaurants within the county, as well as how long each establishment has been operating. Our second data set focuses solely on the economic makeup of the county. The median income dataset is sourced from the most recent United States Census, and filtered down to only include the Los Angeles records. Overlaying the two datasets allows for an examination of the financial status of the places in Los Angeles where the most full-service restaurants are currently open, and any possible correlation between the two.
Place in Literature
Various sources highlight the key factors influencing restaurant success, with a consensus among scholars that a restaurant’s geographic location plays a pivotal role. The literature consistently emphasizes the critical importance of location, revealing how different variables inherent in various locales collectively shape the overall business environment. In particular, several sources discussed the relationship between a region’s minimum wage and cost of living with the number of restaurants opening and closing. Examining California’s minimum wage landscape in 2023, the article from Paycor illustrates how minimum wages vary based on a city’s unique cost of living (“California Wage”). Esposito’s study on Los Angeles restaurants further substantiates this correlation, revealing a positive link between closure rates and minimum wage increases, with higher living costs posing challenges for restaurant sustainability (24). Harris’ analysis extends this perspective by asserting that Los Angeles’ elevated minimum wage and increased cost of living have molded the restaurant landscape, with resilient businesses navigating tight profit margins. However, contradictions arise in the discourse on minimum wage within the restaurant industry, as Flaming’s argument advocates for the potential benefits of minimum wage increases, citing reduced employee turnover and increased local spending.
The examination of the socioeconomic status of different areas has also provided valuable insights into its potential impact on the distribution of restaurants across regions. Esposito introduces the complexity of competition in lower-income areas, contrasting with the 2019 study on the Density of Restaurants, which identifies a positive association between restaurant density, a higher proportion of non-Hispanic white residents, and residents with education beyond high school (Gase et al.). And such factors, when considering the LA Census 2020 LRS (Low Response Score) results, unveils a general association with areas above the poverty level, signaling a higher cost of living. However, the same 2019 study introduces support for greater density of large chains in neighborhoods with lower socioeconomic status, making it noteworthy that certain trends can differ based on the restaurants being studied.
While the significance of location in determining restaurant success is underscored, the discourse becomes intricately nuanced when exploring how specific socio-economic factors contribute to or hinder business viability. Small nuances such as building aesthetic, proximity to other restaurants and stores, just scratch the surface on what potential factors impact restaurant success. The more these nearly infinite variables are researched, the more that can be understood about what makes a successful restaurant.
Research Questions
Numerous considerations influence the establishment of a restaurant, with pivotal implications for its success or failure. We decided to pose two fundamental questions to help guide our exploration:
