VOICES: If you love Dayton, where should you buy your coffee?

They say don’t bury the lead: Across several studies, the local income or job multiplier effect has been two to three times as high for locally owned businesses relative to national chains. A typical local income or job multiplier of 1.2 for a purchase from a nationally based business turns into a multiplier of 1.4 to 1.6 for a locally owned business. What does that mean? For every $10 spent in the area, there is another $2 in induced economic activity if buying from a national chain, but another $4 to $6 if buying from a locally owned business.

Why? There are two key aspects to the differential local impact from supporting locally owned businesses. First, the business profit stays in the community when the business is locally owned. Second, if the goods and services sold in the business are produced locally, the incomes generated by the production of those goods and services stays local. The argument is that backward and forward local integration of the production supply chain is more likely to occur because a locally owned business is more likely to make that local connection.

I’ll give two examples.

First, the more than 20 locally owned microbreweries in the area provide profit to the business owners, but also income linked to the production of the brew. In contrast, a locally owned tavern using national brands for its brew only has a differential impact through the business profits.

Second, a locally owned coffee shop will absolutely generate business profits. How much of the second effect happens depends on where the production of the coffee and other items sold occurs. Is the coffee roasted locally? Do the bakery goods come from a local baker or produced in-house? Do the eggs and lettuce come from a local farmer?

Track your locally owned business purchases for a month. The average consumer household spent $5,259 on food consumed at home in 2021. Where are you buying that food? Did you go to Dot’s Market? Or Dorothy Lane Market? Or Gem City Market?

That same average consumer spent $3,030 on food away from home. So where are you eating out? Did you eat your pizza at South Park Tavern, Cassano’s or Marion’s?

Where did you hoist that pint? Was it at the Fifth Street Brewpub, Warped Wing, Eudora or one of the many other microbrew pubs?

And finally, what about your chocolate fix? Esther Price Candies and Winans Chocolates are both awaiting you.

In behavioral economics, the latest fad is “nudges.” Here is a little nudge. Take out your cellphone. Set an alarm for each day at 7:30 a.m. Title the alarm “Buy Local Today.”

Richard Stock, Ph.D. is the director of the Business Research Group at the University of Dayton.

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About the Author

Richard Stock