Five months ago, my girlfriend was eager to introduce me to a new type of cuisine. We placed a big order and then waited in hungry, excited anticipation. When only half of the items in our order showed up 45 minutes later, anticipation turned to confusion. Then, when the restaurant’s phone lines were busy for the next 15 minutes, confusion shifted to anger. Then, after finally reaching someone only to be dismissed and instructed to take up our issue with Uber Eats, we both reached full throttle hanger.
Quickly, we both submitted 1-star reviews online. Five minutes later, we both had replies from the restaurant owner. Five minutes after that, we were on speaker phone with him as he offered to remedy the experience by catering an upcoming birthday dinner. In this moment, I realized two things. One, restaurant owners are absolutely terrified of 1-star reviews. Two, Yelp provides individuals with a dangerous amount of power over restaurants that can easily be abused, which the effects of are only amplified by the ongoing pandemic.
With more than 178 million unique monthly visitors, Yelp has reached an elite level of prominence as a source for dining-related information. On top of that, 45% of customers are likely to check Yelp reviews before visiting a business. Basically, if you want to be a successful restaurant, what Yelp says about you matters a whole lot. But as a platform-based business, Yelp is challenged with the task of ensuring its information is accurate, fair, and reliable. As all of this has been playing out and unfolding, there are three major ways I can see how Yelp has disrupted the restaurant industry.
1. Customers now have an ungodly amount of power (and aren’t afraid to use it)
We’ve all heard the cliché, “The customer is always right…” However, never has this policy rang truer than it does today due to the amendment Yelp has added: “…or else you will get blasted by the customer on Yelp.” This lopsided dynamic plays out in all kinds of cruel and unfortunate ways, including one particular episode that has claimed its place in Boston restaurant lore and gave birth to #wedontnegotiatewithyelpers.
At Alden & Harlow, an upscale subterranean restaurant in Harvard Square, two women seated themselves without a reservation. After being asked to leave, and even after having their drinks taken from them, they threatened a negative Yelp review and in the process managed to keep their table. Michael Scelfo, the restaurant’s chef, lamented on Instagram after the fact:
We tried to have them leave, they refused. Taking their drink away and being forceful is not hospitable. So in lieu of calling the police (only other recourse imo) which seemed too strong a response, we opted to kill them with kindness until they left. We as a team endured a ton of abuse but ultimately chose the high road. My choice to post this is not to slander on them per say but to call attention to a major flaw in the current ‘online review system & entitled mentality.’ Ultimately, it’s about protecting the integrity of our (well documented) humble and gracious staff.
While it’s unfortunate that diners are able to get away with stunts like this one, restaurants have their hands tied. According to The Economic Journal, an extra half‐star rating causes restaurants to sell out 19 percentage points (49%) more frequently. Other platforms like Uber, Lyft, and Airbnb allow service providers to rate their customers, a move that could help restaurants even the playing field with their diners and avoid such abuse as this in the future.
2. Local restaurants have gained on chain restaurants
Chain restaurants thrive on their consistency. A Chick-fil-A Sandwich in Atlanta will taste exactly the same as a Chick-fil-A Sandwich in Detroit. Historically, customers have appreciated chain restaurants because they know what they can expect. On a personal level, when I’ve traveled alone for work, I’ve tended to go through the same thought process each time: I could get my favorite meal at Chain XYZ or I could try out this local place where God knows what I should expect. And about 75% of the time I shy away from the risk of the unknown and stick with what I know (I never regret it, but I also will never know what I missed!).
Yelp has been cutting into this competitive advantage that chain restaurants have enjoyed by adding transparency into local restaurant scenes across the country. Prospective diners can read through reviews and be encouraged to branch out and try new places with confidence rather than fall back on what is familiar.
In the process of researching this topic, I stumbled across a Harvard Business School regression analysis with restaurant data that proves this point. The author explains that “chains have experienced a decline in revenue relative to independent restaurants in the post-Yelp period. Higher Yelp penetration leads to an increase in revenue for independent restaurants, but a decrease in revenue for chain restaurants.”
Black Box Intelligence numbers also show a 1.4-percent drop in chain sales, while the U.S. Census Bureau has the restaurant industry overall — including independently run restaurants — recording a robust 5-percent gain that roughly coincides with the emergence of Yelp.
3. The overall quality of dining experiences has continued going up (while leaving Yelp behind)
This increased level of transparency, and corresponding accountability, has also lifted the overall quality of dining experiences for restaurant goers. Yelp opens up a continuous feedback loop for restaurants to consistently find feedback on what is working and what isn’t. While restaurants may take short-term hits from negative reviews, they are also given opportunities to improve and avoid similar mishaps in the future.
As the above video explains, Yelp soared out of the gates as a new type of service but has been victimized by the complexities of managing a crowd, along with a slew of copy cat services following close behind in its wake, including from Google and Facebook. While these difficulties have sent Yelp’s stock price back down to Earth, its impact on the dining industry has only been further solidified. In fact, a study at UC Davis found that online review sites as a whole have generated $2.50 per month of welfare for each restaurant goer.