One size fits all? The value of standardized retail chains

Abstract

AbstractMulti‐outlet firms, or chains, account for most US retail spending. This article quantifies the welfare and profit effects of standardized chains in the restaurant industry: chains face higher demand than independents, but are less flexible in customizing product selection or prices across locations. I find that on average chains could earn 19% higher variable profits if they could customize their product optimally, but they would lose 28% of their variable profits if they were to lose their demand advantages. Local policies that ban chains would decrease consumer welfare by 1.5% to 5.4% of restaurant spending and disproportionately impact lower income consumers.