Have restaurant firms been using right recession turnaround strategies?: Evaluating with propensity score measure

•This study empirically tests whether restaurant recession turnaround strategies, namely increase in advertisement, profit margin, and asset turnover strategies, have shown effective results during and after past recessions.•The study empirically tests the question by utilizing the propensity score measure (PSM) due to concerns with selection bias across restaurant segmentations and franchising firms.•Results show significant improvements in revenue for limited-service and franchised restaurants when aggressive advertisements were used but no improvements in profitability.•Profit margin strategy had no impact on revenue but affected profitability and stock returns positively for all segments.•Finally, asset turnover strategy had adverse effects on revenue the following year after recessions for all segments. Among the diverse strategies that restaurants use in recessions, some studies have shown that strategies that increase advertising, profit margins, or asset turnover have yielded promising results in terms of firm performance. However, the success of these turnaround strategies might be due to the health or size of a firm rather than the implementation of these strategies. Therefore, this study empirically tested this question utilizing the propensity score measure (PSM) due to concerns with selection bias across restaurant segments. The results showed significant improvements in revenue for limited-service and franchise restaurants when aggressive advertising was used but no improvements in profitability. The profit margin strategy had no impact on revenue but affected profitability and stock returns positively for all segments. Finally, the asset turnover strategy had adverse effects on revenue the year after a recession for all segments. These mixed results suggest that managers need to be cautious when implementing recession turnaround strategies.