How Yelp Ratings, Michelin Stars Can Be a Double-Edged Sword for Restaurants

It’s no great secret that a solid Yelp rating — or, more prestigiously, a couple of Michelin stars — entices diners to visit a particular restaurant. But there are drawbacks to leaning heavily on these kinds of review systems. Two professors took a closer look at how ratings do (and often, don’t) benefit businesses for a piece published in the Harvard Business Review. Turns out, a positive review isn’t always that, well, positive for a restaurant.

Professors Gabriel Rossman of UCLA and Oliver Schilke of the University of Arizona first studied the Oscars, and then compared that process to reviews and awards for restaurants. “We analyzed the Oscars and found that movies that get Oscar nominations make a lot of money,” says Rossman. “But movies that try to get Oscars often fail, and lose a lot of money in the process.”

The upside to ratings is pretty obvious. Michelin stars, for instance, attract diners willing to pay top dollar (and often travel long distances to do so) for a plate of food. But the Michelin system has its disadvantages. As Rossman and Schilke point out, the award system prioritizes consistency. Therefore, many Michelin-starred chefs often forgo culinary experimentation, instead hiring more staff or offering certain dishes that might be expected of high end restaurants.

But investing in things that a restaurant thinks will lead to Michelin stars doesn’t always pay off. “Because it’s a prize,” says Rossman, “if you don’t get the prize, it doesn’t work for you at all. You can get very close to a Michelin star and not have it.”

The lengthy menu, large staff, and wine cellar often expected of Michelin-starred restaurants require a considerable expense. Rossman and Schilke say that, “As a result, restaurants can feel that the increased demand attracted by Michelin stars is not worth the additional expenses and constraints, and some have even gone as far as returning their stars.”

Of course, Michelin stars are one-in-a-million. Yelp reviews are not. So Rossman and Schilke also explored the impact of “judgment devices” — everything from a consumer review on a website to a formal Consumer Reports review — on a business’s sales and traffic. The upside of consumer and critic reviews? They offer consistency, and can increase traffic to a restaurant (so as long as the reviews are positive).

“Unlike a Michelin star,” says Rossman, “Everybody has a Yelp rating — some might be higher and some might be lower, depending upon the business.”

But maintaining a solid review can also be costly. Some restaurants, for instance, have been convincing customers to leave positive reviews with the promise of gift certificates in return. In such cases, the costs often outweighs the benefits.

Not only that, but sites like Yelp have been cracking down on businesses who have attempted to buy (or offer rewards for) positive reviews. Yelp began flagging businesses with suspicious activity back in 2012 through the use of “Consumer Alerts.” Businesses who have been caught paying for fraudulent reviews may now find a warning displayed on their Yelp page, along with a link to relevant evidence.

A forthcoming documentary, Billion Dollar Bully, details some other problems with Yelp: namely, that the company routinely manipulates reviews, allegedly reordering them so negative reviews appear at the top of a business’s profile, or removing positive mentions if a company doesn’t buy advertising.

So, should restaurants spend valuable time and resources ensuring they garner positive reviews from critics and customers alike? Managers have to “carefully evaluate whether pursuing favorable rankings, ratings, reviews, credentials, and prizes is worth the often considerable risks,” Rossman and Schilke write.

In other words, there’s no easy answer — but it’s safe to say that devoting energy to running a successful restaurant is likely more beneficial than chasing positive reviews.

• How Ratings and Awards Do (and Don’t) Benefit Companies [HBR]
• All Yelp Coverage [E]