A new study by a pair of Harvard Business School researchers, focusing on Bay Area restaurants between 2008 and 2016, found that minimum wage hikes do indeed impact restaurants' ability to stay in business, but specifically they are more likely to impact restaurants with average or below average ratings on Yelp. As the Chronicle reports, via the study by Michael and Dara Lee Luca, the "survival of the fittest" when it comes to restaurants can be tracked with some predictability by looking at how highly Yelpers have rated them  with restaurants that have 3.5-star ratings or lower having a significantly higher chance of shutting down when costs increase.

Specifically they said that, in the period they studied, looking at 11 Bay Area cities that saw minimum wage hikes over the last decade, a one-dollar increase in the minimum wage led to a 14 percent greater chance of a restaurant with a 3.5-star rating shutting down. That chance went up to 25 percent if the restaurant had a 2.5-star rating. Meanwhile, restaurants with 4.5- and 5-star ratings saw no discernible impact from the wage hike.

This suggests that restaurants with high ratings and very steady business have less to worry about as costs rise, and they can absorb them and better offset them with menu price increases. But in a competitive restaurant scene like San Francisco's, there is no room for mediocrity, and the herd will be culled that much faster, as the Chron's Jonathan Kauffman notes.

In the case of The Corner Store, which closed last month, owners Ezra Berman and Miles Palliser blamed the cost of doing business in SF on the restaurant's failure, even though they supported the minimum wage hike on the ballot. But the restaurant also had received a couple of less than stellar reviews in the Chronicle, held 3.5 stars on Yelp, and one can just as easily attribute the closure to the fickleness of the public as a restaurant ages out of its "hot new spot" phase.

But, Kauffman also notes, the study doesn't take into account the biases of Yelpers. For instance, "Are restaurants in the Tenderloin generally ranked lower than ones in Pacific Heights? Are Yelpers more likely to be critical of restaurants serving Chinese, Mexican or Indian cuisine than those serving high-end Californian? And how does that translate into economic vulnerability?"

And as Foreign Cinema chef-owner Gayle Pirie tells the Chronicle, "Math is black and white, and restaurants operate in the gray."



