August 15, 2012
Local First Utah released the latest of many studies across the U.S. that have demonstrated each dollar spent at locally-owned independent businesses generates far more local wealth than money spent at absentee chains. The new study by Civic Economics examined the financial records voluntarily disclosed by 15 retailers and 7 restaurants within Salt Lake City. For the sampling of chain restaurants and retailers evaluated in the study, the firm relied on publicly available reports to extrapolate estimates of local spending.
Locally-owned retailers were found to spend 52% of their revenues in the local economy, compared to just 14% with national chain retailers. In other words, the local independent retailers spent 382% more locally than the chain retailers.
Unlike many similar studies, Civic Economics also looked at restaurants separately from other business types and found the local independent restaurants spent nearly 79% of their revenues locally. National chain restaurants’ local spending was just over 30% of revenues, meaning money spent at a local restaurant generates 2 ½ times the local economic benefit as the same amount spent at a chain eatery.
The multiplier is higher among restaurants than retailers because labor costs and locally-sourced goods tend to comprise a greater portion of all costs.
Some additional details are included in this pdf.
For a more thorough explanation of this topic, see Accurately Explaining the Multiplier Effect. This study was one of at least ten done in 2012 by Civic Economics — see Ten New Studies of the “Local Economic Premium for an overview of all results or go to Civic Economics for individual studies. The Institute for Local Self-Reliance also offers overviews of many rlevant economic studies.
For ideas on how to use this data to shift local spending habits, see Keys to Effective Buy Local Campaigns.