City study shows revenue up at bars and restaurants in six months after ban
Jolane Dahlheimer can't complain about business at the Plan B Coffeehouse since Minneapolis' smoking ban went into effect just over a year ago.
The owner of the Wedge coffeehouse said she has seen a noticeable increase in sales since the citywide ordinance banning indoor smoking got underway.
“We've got a really big clientele base, and most of them are still coming in,” Dahlheimer said about postban life at the once somewhat smoky coffeehouse located at 2717 Hennepin Ave. S.
The increase in business she's seen echoes the findings of a city study released at the end of March that shows that during the first six months of the smoking ban, sales remained strong at Minneapolis bars and restaurants. Revenues for alcohol and food sales combined increased about 7 percent compared to the same six-month period in 2004. The rate of increase was greater than the 6.2 percent increase from 2003 to 2004, according to the study.
The study also looked at a subset of establishments licensed to sell hard liquor and divided them up into four major commercial areas: Downtown, Uptown, Northeast and the University of Minnesota area. Revenues at establishments licensed to sell hard liquor in Uptown increased 6.85 percent, compared to a 1.7 percent decrease from 2003 to 2004.
Neighborhood bars have been the hardest hit. Revenues decreased about 4 percent since 2004, compared to about a 1 percent increase from 2003 to 2004. Downtown clubs, meanwhile, saw a slight decrease in revenues, about 0.09 percent.
While business has been good at her coffee shop, Dahlheimer said the decrease in business at neighborhood bars and Downtown clubs reflects what she's been hearing from other business owners.
“I think some bars in the area have taken a pretty big hit,” Dahlheimer said.
Despite the setbacks for neighborhood bars and Downtown clubs, city officials said the results of the study are encouraging.
“This is great news for our businesses and for everyone's health,” Mayor R.T. Rybak said in a statement, in which he also encouraged residents and visitors to continue to support neighborhood bars and hot spots.
But Patricia Harrison, director of research and program development for the Minneapolis Department of Health and Family Support, admits the study doesn't show the whole picture. To get its results, the city used taxable data from the Minnesota Department of Revenue for the period immediately after the enactment of the indoor smoking ordinance - April through September - and comparable periods for the two preceding years. A total of 353 businesses licensed to serve alcoholic beverages on their premises reported sales revenues in all three study years. While revenues provide a basis to measure the strength of sales, Harrison said revenues and profits are not the same thing. Profits would provide a better idea of how businesses have been affected - but while businesses are required to report revenue for tax purposes, they are not required to report profits.
“We know that an increase in revenue does not equate with an increase in profit,” Harrison said.
She is also careful to point out that the study does not take into account other factors such as inflation, price increases due to the minimum wage increase, the possible effects of the lowering of the legal blood alcohol-concentration limit for driving, the strength of the local economy and other factors.
“It does not provide the definitive answer to the question of what was the impact of the ordinance,” Harrison said. “Nothing can really do that, and I think that's disappointing to people who want a clear answer.”
The results of the city study are also disappointing - and frustrating - for local bar and restaurant owners who say sales have been negatively impacted by the ban.
Khosrow Daivari, owner of the Leaning Tower of Pizza, 2324 Lyndale Ave. S., said the ban has been bad for business. He has seen a noticeable decrease in sales since it went into effect.
“If they took my restaurant and compared it to last year, they would not find an increase,” he said, adding that late-night business has been hit especially hard.
Carol Lynn Miller, president of the Minneapolis Hospitality Association, said the study clearly showed what the group had been saying all along - that neighborhood bars and Downtown clubs would be those most affected by the ban. She said many of the restaurants included in the study aren't showing a decrease in sales because they weren't the establishments driven by a smoking clientele. The establishments driven by a smoking clientele - mainly independent, neighborhood bars and clubs - are those hurting, a fact she said the city hasn't publicized.
“If you read the data, the report says what we had anticipated,” Miller said. “The problem is that the city spun the analysis. It's the old theory of ‘Is the glass half full or half empty?', and apparently the city wanted it to look half full.”
Harrison said the city is aware that the study doesn't illustrate the experiences of every business, but despite its flaws, revenue studies do provide useful information.
“It doesn't speak at all to the experiences of individual business owners, and we are cognizant of that,” Harrison said.
The city plans to do a further study based on complete revenue data from 2005. Those results could be released by the end of June.