The poisoned chalice of restaurant popularity

Discovering a great restaurant is thrilling, especially before it really takes off. It's delightful to scope out a fresh place, realize the food is amazing, and then, while you can, keep it a secret. That hidden gem down the quiet street is yours. For restaurants, though, "hidden gem" status isn't always ideal. The industry is notoriously tough, and margins are razor-thin. And so, when a place blows up — because it gets an award or winds up on a best-of list or goes viral on TikTok — it's generally good news. Longtime customers may not love having to share their favorite spot with a bunch of newbies, but restaurateurs need butts in seats.

Except, success can sometimes come back to bite the business. Getting good is one thing. Getting big is another, and not every operation is up to the task.

Daniel Sands, a researcher at the University College London's School of Management, recently took a look at the fates of New York City's most promising restaurants over the course of two decades to track how reviews from outside parties — in this case, the Michelin Guide — influenced the behaviors of the businesses. His findings: The brightest food-world stars tended to burn out faster. He tracked newly opened restaurants from 2000 to 2014 that got a starred review from The New York Times, an early sign of critical success. He then looked at the diverging fortunes of those restaurants that went on to receive a Michelin star — a signifier of excellence in the industry. The award, however, proved to be a poisoned chalice for many winners. By 2019, Sands found that restaurants given a Michelin star were more likely to shutter. Blowing up changed things so much for some restaurants that it hurt as much as, or more than, it helped.

"Michelin stars aren't creating new pressures itself. What they seem to be doing is exacerbating the existing challenges," Sands told me. "And so the types of things that you'd be dealing with maybe at a slow, steady pace throughout your lifetime now seem to happen more rapidly."

The publicity created around an award such as a Michelin star drives interest. Google searches for the restaurant increase, and new customers start coming in, including tourists. This is by and large a good thing — restaurants make money by serving people — but it can also be a challenge as consumer expectations become lofty.

"To meet these expectations, we'd see restaurateurs engage in different sorts of behaviors, everything from updating decor and service in ways that might not be revenue enhancing to a story of maybe displacing some of the regular customers that are a very important part of this business," Sands said.

Once a restaurant gains notoriety, other businesses it works with take note. Suppliers think they can charge more, landlords increase the rent, and chefs and employees ask for better pay. More money may be coming in the door, but it's going out just as quickly.

"It can be a challenge to maintain your prices, to be able to maintain your quality, not to lose your personnel who have helped to make it successful," said Darren Tristano, the founder and CEO of Foodservice Results, a food-industry consultancy.

Joe Carroll, a New York restaurateur who owns the barbecue spot Fette Sau and the steakhouse St. Anselm in Brooklyn, told me his relationships with suppliers haven't changed much as his restaurants have gotten more popular. But rent is a different story. The landlord for one of his restaurants runs a mechanic shop next door, and they see the lines down the street. "The landlord definitely sees you're doing crazy business, and they want a piece of that," he said. His rent has quadrupled over the past decade. In some respects, Carroll doesn't blame them, but he acknowledges that for some restaurants, this may be a death knell.

"What winds up happening is everyone gets a little greedy, and it doesn't work anymore," he said. "Restaurants operate a small margin of success, and if you go beyond that, it becomes impossible to really succeed anymore and maintain the business."

In a 2014 New York Times op-ed, the New York restaurateur Danny Meyer lamented having to move his award-winning Union Square Cafe away from its original location because of a huge rent hike. "It's hard to come to grips with the notion that our success has, in part, contributed to our inability to remain in our neighborhood," he wrote.

Of course, there isn't a direct line from success to disaster in restaurants. In general, being crowded is preferable to having empty seats, and figuring out how to adapt to newfound success is a good problem to have.

Ryan Sutton, a New York-based food critic at The LO Times, acknowledged a Michelin star can increase a restaurant's expenses — especially if it's pursuing more stars — as it tries to continually serve the same dishes or hopes to hire pricier chefs. But he pointed out that even if they ultimately failed, the Michelin restaurants that closed in Sands' research generally had a pretty good run. "Restaurants close for so many complicated reasons," he said. Internal factors tend to outweigh external factors. If the place can't navigate increased pressure, it's at least in part a management issue because the owners or people running the place can't keep it together.

Not to be a navel-gazing New Yorker here, but the city does have its idiosyncrasies that might not translate to other parts of the country. There's a lot of tourism, a lot of business people and gatherings with big expense accounts, and prices are wildly high. It's also one of the most Michelin-starred restaurant cities in the world. As John Gordon, a restaurant analyst in San Diego, put it to me, New York City is a "special market," and the rent is "just astronomical."

Carroll has had one Michelin-starred restaurant, Semilla, that did, indeed, close down. It did "killer business" for about a year and a half after getting the accolade and then fell off. He doesn't think the star was really the problem, though. Semilla offered a 10-course menu that didn't necessarily attract repeat business. "Anyone who needed to go went, and not many people were coming back," he said. The "cantankerous" chef who oversaw the restaurant was tough, too.

In many ways, "what to do about growth" is a classic question in any business, including restaurants and hospitality. Do you build another location? Do you move to a new, bigger space? How do you manage supply chains, employee raise requests, and rising rent costs? How do you evolve enough to meet the moment without changing what made things work in the first place?

"When a successful restaurant goes under, there's usually some underlying problem," Carroll said. It might be mismanagement, or the owner or operator has a personal problem, such as a drug addiction, or there's a conflict with the landlord. Some of it is within a restaurant's control, but some of it isn't. And even if it is within the place's control, it's a hard business — there's no guarantee that a second location in Philadelphia will perform as well as the original in Manhattan.

On the consumer end of things, the experience can be frustrating, too. People want their favorite places to survive and thrive — your favorite restaurant is no good to you if it closes. But they also want to be able to keep frequenting the places they like — your favorite restaurant is no good to you if you can't get a reservation anymore. And just because a spot is hot for a minute doesn't mean it will stay that way forever. A place needs those regulars for a rainy Tuesday in February when the tourists wouldn't dare venture out.

It's understandable to want the "best." It's why people spend hours curating their vacations to make sure they have the optimal trip. But if we all seek out the best collectively and wind up coming to the same conclusions, we make each other a little miserable. A lot of Instagram-inspired and Instagram-optimized trips wind up sucking. There's only so much room at the top, and sometimes, the machine ends up eating a great thing.

On a more local level, if and when your regular date spot picks up a Michelin star, or takes off with the TikTok crowd, or lands on a best-of list, know it might be a minute before you can get a table. But you probably want to get yourself on the list, even if your reservation is six months from now, because the place's landlord is looking at the lease and wondering how fast they can start charging more.

Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.