Yelping about restaurant health violations, by Dai and Luca

Online reviews, like Yelp, can play an effective role in disseminating information about restaurant hygiene scores...

Digitizing Disclosure: The Case of Restaurant Hygiene Scores†
By Weijia Dai and Michael Luca*
American Economic Journal: Microeconomics 2020, 12(2): 41–59


Abstract: Collaborating with Yelp and the City of San Francisco, we revisit a canonical example of quality disclosure by evaluating and helping to redesign the posting of restaurant hygiene scores on Yelp.com. We implement a two-stage intervention that separately identifies consumer response to information disclosure and a disclosure design with improved salience—a consumer alert. We find score posting is effective, but improving salience further increases consumer response.

They write:

"The rise of online platforms raises the opportunity to revisit disclosure initiatives and to use a design economics lens to improve decisions about where and how disclosure is delivered.
...
"Our intervention proceeds in two stages. In the first stage, which begins in early 2013, Yelp starts posting hygiene scores on San Francisco restaurants. We analyze the impact of the score posting using a difference-in-differences strategy, comparing differential changes in restaurant demand after the score posting between restaurants with low hygiene scores that are more likely to be affected by the score posting (as predefined by the city) and those with higher scores.2  To shed light on demand,
we drew on purchase intention measures, such as a user calling or seeking directions to a restaurant or clicking on the restaurant’s own website link. We find that hygiene score posting on Yelp leads to a 13 percent decrease in purchase intentions for restaurants with low hygiene scores.
...
"Following the initial hygiene score posting intervention, in the second stage, we worked with Yelp in 2015 to develop a “hygiene alert”—a salient message that appears only on the Yelp pages of restaurants with low hygiene scores. Such low-score restaurants are identified by the city as having “poor” operating conditions with “high-risk” hygiene violations.

"We find a further 7 percent decrease in purchase intentions for restaurants with low scores due to hygiene alerts, and an 11 percent decrease in the number of reviews, nearly doubling the effect of the score posting for these businesses. On the restaurant side, although there is no evidence showing an improvement of restaurant hygiene scores across restaurants, we find suggested evidence of a decrease in the probability that the low-score restaurants will receive low scores again after the alert."

Restaurants without tipping

The NY Times has the story: Year of Upheaval for Restaurants That Ended Tipping

"A rational system is exactly what he was hoping for when Huertas joined several restaurants in Danny Meyer’s Union Square Hospitality Group — Maialino, Marta, the Modern, North End Grill and (as of last week) Gramercy Tavern and the newly reopened Union Square Café — that have stopped accepting tips. The switch is part of an effort to bring the nation’s roughly $800 billion restaurant business, with its frequently chaotic and unprofessional practices and traditions, in line with modern workplace standards.

Continue reading the main st

Instead of expecting customers to tip the people who wait on them, tip-free restaurants pay all employees wages that reflect their skill and seniority. The customer pays a fixed amount, stated in writing (in menu prices), as in virtually every other kind of consumer business, from Nordstrom to Netflix to The New York Times.

This service-included system — also called gratuity-free, tipless and, within the Union Square group, Hospitality Included — has been in place for several years at expensive restaurants like Per Se and the Chef’s Table at Brooklyn Fare. But this year, influential restaurants up and down the price scale and around the country signed on, including Le Pigeon and Park Kitchen in Portland, Ore.; Dahlia Lounge and Canlis in Seattle; and Comal, Cala and Petit Crenn in the Bay Area.

It is too soon to tell whether the no-tipping model will become the standard, or simply an option for a few restaurants that can make it work. What is clear after about a year is that it has forced a number of unforeseen changes, large and small, in the places that have embraced it.

...

"Mr. Adler of Huertas, and others, say that one big reason to end tipping is the need for more equity between those who work in kitchens, who earn straight wages, and those who work in dining rooms, who receive tips.

A more immediate motivation, local restaurateurs said, was the approach of the $15 minimum wage in 2018, proceeding in New York City on Dec. 31 with a raise to $11 an hour (from $9) for nontipped workers. “Labor is just going to cost more and more, and all restaurants will need to rethink how their people get paid,” Mr. Lavorini said.

As the dining business, especially at the high end, attracts more educated and skilled workers, there is increased pressure to treat them fairly, professionally and predictably.

With tipping, chaos is a consequence. Servers compete ruthlessly for Saturday night shifts, when tips run high, but many are no-shows for Monday lunch. An experienced line cook who carries $40,000 in debt from years of culinary school earns $12 an hour, while a new server can reap three times that much.

...

"The “automatic service charge” imposed at many restaurants like Chez Panisse in Berkeley, Calif., and Alinea in Chicago, can redistribute money the same way a no-tipping policy does, although states treat that revenue in different ways.

Tips are also handled differently in different states, but in New York, by law, they can be pooled and distributed only to “front of house” employees: those who work in the dining room, like waiters, bartenders and backwaiters (formerly known as busboys).

...

"One clear lesson: “There are certain fixed items — a glass of wine, a bar snack, a cup of coffee — that affect how guests experience the welcome of the restaurant,” Mr. Lavorini said. The prices of those items stayed where they were, even as others, including those for many bottles of wine, rose by as much as 20 percent.

...

"From 2015 to 2016, the payroll for the Modern’s two dozen front-of-house employees’ hourly wages rose to as much as $30 an hour from $5, through a combination of the rising tipped minimum wage, paid overtime and revenue sharing.

Also, restaurants pay taxes on their revenue, but not on income from tips. When service is folded into the price of the meal, the restaurant is taxed on that “additional” revenue.

...

“It took hundreds of years to build up the traditions of how things are done in restaurants,” he said. “We can’t expect to change all of that in one year.”

Will there soon be large-scale markets for restaurant reservations?

I've been hearing the drumbeat for a while, and here's the NY Times on some new apps that seek to charge for restaurant reservations and make them exchangeable...Getting a Good Table by Flicking an App, Not Greasing a Palm

"Nowhere is the competition for tables more cutthroat than in New York City, where a black market in restaurant reservations already exists online. But since February, several new apps have taken the fight to the streets: Zurvu, Shout, Killer Rezzy and, starting Monday, Resy are all striving to become the favored portal for people willing to pay a premium to get into the best restaurants, at the last minute, via a few taps on their mobile devices.
...
"Whether diners and restaurateurs will play along is unclear. Some of the new apps, like Zurvu and Resy, cooperate with restaurants, sharing revenue (now ranging from $10 a person to $50 a table) in exchange for access to prime tables. Others, like Shout, simply make reservations under assumed names, then sell them for a flat fee or at auction. One online service, Food for All, began openly scalping reservations for $50 in April; it has already folded, with a plaintive farewell post, lamenting that restaurants “are very resistant to the idea of selling reservations.”
...
"In March, the entrepreneur Sasha A. Tcherevkoff started Killer Rezzy, an app and website that sells reservations obtained with or without the cooperation of restaurants; buyers do not know whether their transaction is authorized or not. He had no intention of causing an uproar, he said, but a social media bloodletting began, bringing accusations of scalping, price-gouging and elitism on him and his business model. He now offers to remove any restaurant from his roster upon request.

But restaurants do not necessarily know that they are on the roster. Last week, Killer Rezzy charged $25 for a table for four in a coveted slot — Saturday at 8 p.m. — at Peasant, in NoLIta, providing the name to give at the front desk. On Tuesday, the restaurant’s manager, Dulcinea Benson, said she had no idea that her tables were being sold online.

“Of course that bothers me,” she said. “We’ve been building up this restaurant and our relationships with customers for years,” she said. All of its 100 seats can be reserved free on OpenTable.

Many hard-to-get-into restaurants use OpenTable, but mostly for “shoulder seatings,” before 5:30 and after 9:30 p.m. They use their own software (or even pencil and paper) to manage prime time, when they can fill the room for free. The service charges restaurants a monthly fee, plus $1 for each customer it supplies. The Priceline Group said that the acquisition would add restaurants to its existing travel and hotel booking services, Kayak and Booking.com, and OpenTable told its members that the service would remain free. For now, restaurateurs are waiting to see where the wind of public opinion blows."

And here's some further discussion, also from the Times. Some people think all this might even be repugnant...

Should Restaurant Reservations Be for Sale?

INTRODUCTION

A reservation at Jean-Georges in Manhattan is always highly sought.Brian Harkin for The New York Times

In the past few months several new apps have let people pay to get reservations at restaurants where tables are in a great demand. Some essentially scalp reservations. With others, like Resy, the restaurants themselves sell reservations.

Are these services a useful way to let people get into popular restaurants, or are they just another way for restaurants to sell something that was once free?

READ THE DISCUSSION »

DEBATERS

• 

  Democratizing the Dining Experience

  TYLER COWEN, ECONOMIST
  Money is ultimately a more egalitarian force than privilege, as everyone’s greenbacks are worth the same.
• 

  The Latest Slap in the Face From Restaurants

  GABRIELLA GERSHENSON, FOOD EDITOR
  Restaurants on Resy’s roster telegraph an indifference to their customers that reads even colder than an uppity host.
• 

  Increases Respect for Owners and Tables

  ALEX STUPAK, CHEF AND RESTAURATEUR
  If anyone understands anything about the economics of restaurants they would know that a few tables are the difference between profit and deficit.
• 

  Hospitality Shouldn’t Have a Price

  TINA VAUGHN, OWNER, THE SIMONE
  Balancing the reservations book is a challenge and a joy. Getting calls from new guests lets me begin a relationship before they even arrive.

Why it's hard to get hot restaurant reservations or concert tickets (and why concierges sometimes can)

It turns out you need professional gear to get some reservations: the New Statesman has a report from the front.

The Bot Wars: why you can never buy concert tickets online

Enterprising programmers are creating bots that can reserve, and in some cases buy, everything from restaurant tables to eBay goods before humans can even get a look in. Where will the bot wars end?

"Just as high frequency trading, via automated software, took over the financial markets in the early 2000s, the use of bots is a technique that is increasingly coming to dominate online sales of all stripes."
*********
Some of my earlier posts on this subject here,  here and here  focused on concert tickets and professional re-sellers (scalpers) who sometimes skirt the law.


HT: Dean Jens

Unraveling in the market for chefs?

It turns out that good restaurants need good cooks, and they are hard to find and keep in the growing market for fancy restaurants: Talent Shortage: Why New York’s Chefs Can’t Find Enough Good Cooks

Stephanie Hurder points out to me that the article hints at possible unraveling of the market:

"Another move is judging final exams at culinary schools like the International Culinary Center. If a chef sees a student whose work impresses them, they can offer the student a trailing gig — like an extended interview in the kitchen — on the spot."

How restaurants deal with no-shows

Here's an article from eater.com with interesting details on the different marketplace institutions being tried to limit no-shows at high end restaurants...from abolishing reservations, to overbooking, to credit card reservations with penalties, to a theater-ticket model.  How Restaurants Can Deal With No-Show Diners

HT: Neil Dorosin (who points out that somewhat similar issues arise in school choice, since schools also suffer from no-shows when the school year begins)

Incentive compatibility in a giant outdoor 18th century restaurant

"the waiters were prevented from cheating the management by being made to pay cash from their own pockets for everything they ordered from the kitchens, reimbursing themselves when the customers settled their bills."

That detail is from The English pleasures of Vauxhall, a large, long lived "pleasure gardens" on the banks of the Thames that was both an outdoor concert venue and an innovative early large scale caterer to its customers, founded in the 1700's.

Tips, Tip Pooling, and Tip Credits

Restaurant wait-staff in the United States make a significant part of their incomes in tips left by satisfied or habit-driven or social-norm-conscious patrons (but this isn't a post about the large behavioral literature on restaurant tipping, e.g. here). A consequence of this is that restaurants and certain other employers can receive "tip credits" that release them from the obligation to pay the minimum wage, since their employees will be having part of their wage paid by their customers.

There's a body of law about what employers can and cannot do with tips (e.g. require them to be pooled, shared with non wait-staff, etc.), and about what constitutes a tip (e.g. not all "service charges" go to the server): see e.g. NoLo.com's  Tips, Tip Pooling, and Tip Credits: What Service Employees Need to Know

There are presently a number of lawsuits going through the courts about this, and some new legislation, discussed in an op-ed in the NY Times by Tim and Nina Zagat of Zagat's fame: Adding Fairness to the Tip

With the new year have come some new regulations in NY: New Rules Impose Systems for Sharing of Tips
"The new regulations apply to workers in restaurants and hotels and cover a number of issues, including who should pay for laundering “wash-and-wear” uniforms, like special T-shirts. The rules also raise the minimum wage for tipped employees, to $5 from $4.65 an hour for food service workers and to $5.65 from $4.90 an hour for service workers, a category that includes coat check workers in a restaurant or porters in hotels. (There is a separate minimum for workers at resort hotels.)


"The new rules also define the job categories that are eligible for shares in tips from the dining room: food service workers only, including waiters, bartenders and bussers, as well as sommeliers and hosts, provided they are not managers.

"The new rules allow restaurants to dictate both the system and the percentage allocated to each job category. Gratuities can be combined in a pool, to be divided by all the staff members who have helped a team effort. Or, individual servers can collect their own tips and give portions, or shares, to members of the team.

"The Labor Department will require that employers keep records of tip pools and shares; the records could be examined during investigations undertaken by the department on its own or in response to complaints.
...
"Higher-end, full-service restaurants tend to favor the pooling of tips, because it breeds less squabbling over stations and shift assignments, provides an incentive for teamwork and encourages the servers to police their own performance.


"The new regulations generally limit the pool to service workers in the dining room who interact with customers directly — like waiters — or indirectly, like servers who ferry plates from the kitchen to a station where another server picks them up and delivers them to the table. But bartenders, who prepare beverages for the dining room in a role analogous to that of a cook, can also share in the tip pool, even though kitchen staff members cannot.

“A lot of this arises from custom and tradition,” Ms. Lindholm said. “If you’re looking for perfect logic in this, it isn’t there.”

The market for knife sharpening

There was a time when knife sharpeners brought their grindstones to the meat packers and butchers who were their main customers, and sharpened customers' knives on customers' premises. Now, the NY Times reports, the model is to rent a double set of knives to customers (who now include restaurants), so that the knife sharpener can come in and exchange all the dull knives for sharp ones, and sharpen the knives on his own premises: Venerable Craft, Modern Practitioner.

Apparently this business is one with ethnic, networked roots:
"Mr. Ambrosi’s grandfather, who came to the United States in the 1920s, hailed from the poor village of Carisolo. The village, with two neighboring towns of Pinzolo and Giustino, produced many of the more than 100 commercial knife sharpeners at work today in North America, sharpeners said. "
...
"At first the immigrants came mainly to New York, but soon their offspring scattered to stake out new routes, a dozen sharpeners across the country said in interviews. Ambrosis with grindstones do business in Connecticut, New Jersey and Ohio, as well as boroughs of New York. The Binellis set up knife-sharpening businesses in Detroit, Chicago and Medford, Mass.; the Maganzinis ended up in and around Boston. The Povinellis set up shop in Buffalo and ventured to North and South Carolina and Arizona; offshoots of the Nella family went to Toronto and Vancouver, as well as Long Island, Seattle and West Jordan, Utah.

"Robert Ambrosi’s grandfather traveled the Bronx in a horse-drawn cart with a grindstone powered by a foot pedal, serving, like the other knife sharpeners, mainly butchers and meatpackers.

"Mr. Ambrosi’s father used a grindstone fueled by a battery carried in a truck. The battery had to be plugged in each night in the garage to recharge. Then in the 1950s came the great innovation — double sets of knives — that eventually freed the Ambrosis to set up their first shop."
...
"Some of the northern Italian knife sharpeners still function in the old style, as members of the New York Grinders Association. The rules used to be simple: Don’t mess with someone’s turf. Stick to your own route — the one you inherited from your father or grandfather. Avoid the vendettas that have overtaken sharpeners in other cities.

“People will trade stops,” said Rinaldo Beltrami, the association’s president.

"Mr. Ambrosi, who let his membership in the association lapse, said, “I was brought up in that way of thinking.” Yet he will still sometimes appease a competitor by saying, “Let’s sit down, we’ll have a meeting, we’ll make a borderline — I won’t bother you.”

"Yet his sons have been knocking on doors to establish new routes, and Mr. Ambrosi has developed a Web site and a mail-order service, because his sons need enough business to sustain their future families, too. "

Indian weddings in New England: the hotel market

The Boston Globe reports: For hotels, a perfect match--Recession-hit hosts embrace Indian weddings.

"On a hot, sunny Saturday in early May, a raucous wedding procession of women in bright, shimmery saris and men in long embroidered kurtas and sunglasses danced through a hotel parking lot behind a van blaring bhangra beats. The groom brought up the rear on a dappled white horse.

"It was the first time the Marlborough Best Western had hosted a traditional Indian wedding and, in keeping with Indian culture, it was an elaborate, all-day affair, with 450 guests.

"Best Western is among the many hotels actively pursuing this lucrative market as they struggle to make up for last year’s recession-diminished revenues.

"The InterContinental Hotel, the Ritz-Carlton, the Taj Boston, and the Westin in Waltham have all hosted Indian wedding expos in the past year. Hyatt Hotels Corp. developed an Indian wedding webinar to educate staff about ceremonial customs, cuisine, even popular brands of alcohol.

"And India New England, a newspaper published in Waltham, has had so much demand from advertisers that it put out two wedding supplements instead of one last year and plans to do the same this year.

“Literally, this market is just exploding,’’ said publisher Upendra Mishra."

..."The weddings, [wedding planner and decorator Shobha Shastry] said, typically range from $50,000 to $150,000 and can go as high as $300,000.

"The average cost of a wedding in Massachusetts, by comparison, is closer to $30,000, according to the research company the Wedding Report Inc."

..."There are about 1,500 Indian weddings a year in the region, according to India New England — more than double the number 10 years ago."

The market for cooked food (and thoughts of D'Artagnan at Maastricht)

The market for pleasure boats ranges from canoes to yachts, and air transport ranges from economy class to big private jets, but the market for cooked food must rival them in its range. Here's an account of an enterprise yacht/jumbo jet meal: The D’Artagnan Anniversary Party.

"To mark the 25th anniversary of her company, D’Artagnan, Ariane Daguin, a native of the Gascon region in the southwest of France, flew in over two hundred of her countrymen for a week-long celebration in New York. ... What’s more, throughout the week Ms. Daugin installed a handful of Michelin-starred Gascon chefs in some of the most venerated kitchens in the city. The collaborations between the visiting chefs and their hosts culminated last Sunday in what D’Artagnan billed as, “The 32 Star Dinner: A Progressive Dining Experience.” Thirty-two is the total number of Michelin and New York Times stars achieved by the group of chefs responsible for the meal, which, true to the epicurean spirit of the evening, was served not in one restaurant, but in four: cocktails, hors d’oeuvres, and the first two courses at Daniel, the next at Jean-Georges, two more at Per Se, and dessert at Le Bernardin. The buses that chauffeured us from stop to stop were filled with Gascon Armagnac."

(The headline of the article had led me to think it might be about the historical D'Artagnan, whose experience of Maastricht, in 1673, was more unfortunate than mine in 2009:)

Restaurant reservations

An interesting paper by Alexei Alexandrov and Martin A. Lariviere asks Are Reservations Recommended?
From the abstract:

"We examine the role of reservations in capacity-constrained services with a focus on restaurants. Although customers value reservations, restaurants typically neither charge for them nor impose penalties for failing to honor them. However, reservations impose costs on firms offering them. We highlight ways in which reservations can increase a firm’s sales by altering customer behavior. First, when demand is uncertain, reservations induce more customers to patronize the restaurant on slow nights. The firm must then trade off higher sales in a soft market with sales lost to no shows on busy nights. Competition makes reservations more attractive as long as enough customers will consider dining at either restaurant. When there are many firms in the market, it is rarely an equilibrium for none to offer reservations. Second, we show that reservations can increase sales by shifting demand from a popular peak period to a less desirable off-peak time. This is accomplished by informing diners when all peak reservations have been given out. "



And from the Introduction:

"Restaurant reservations are a curious phenomenon. Customers value them, but restaurants give them away. Indeed, firms such as Weekend Epicure have stepped in to profit from the resulting arbitrage opportunity. These “scalpers” reserve tables at popular spots under fictitious names that they share with the first paying party. (Fees are on the order of $35 to $40.) What makes offering reservations even more remarkable is that they are costly to provide. Fischer (2005) identifies three costs to offering reservations. These include additional staff needed to take reservations and added complexity from having to balance the needs of walk-in customers with commitments made to reservation holders. The final consideration is no shows.
Customers can generally fail to keep reservations without penalty, but restaurants suffer if they hold capacity for customers that never come. No shows represent a real problem. Bertsimas and Shioda (2003) report a no-show rate of 3% to 15% for the restaurant they studied. More generally, rates of 20% are not unusual (Webb Pressler, 2003) and special occasions such as New Year’s Eve can push rates to 40% (Martin, 2001).
Why then should restaurants offer reservations? One reason is the operational benefits they provide. Reservations regulate the flow of work. By staggering seatings, a restaurateur can assure that waiters are not overwhelmed by a rush of customers followed by the bartender and kitchen being swamped with orders. Reservations thus allow fast service without excessive capacity (Fischer, 2005). Reservations would then be appealing when either customers are delay sensitive or the firm’s costs increase with arrival variability. Further, reservations may allow a restaurant to estimate demand and improve staffing and sourcing decision."