Why Michelin Keeps Its Michelin Guide Business Despite Losing Money

In 1900, the founders of the Michelin tire company, André and Edouard Michelin, launched a guide for hotels to give car owners in France. In 1920, they added restaurant reviews to the guide. For many decades, the Michelin Guide only rated French restaurants. In 2005, Michelin expanded to include American restaurants. Japan was added in 2007, and later South America and Asia. The Michelin guide awards one to three stars to restaurants for excellence.

The Michelin Guide Business

Michelin star has a big impact on business

Getting a Michelin star can have a massive impact on a restaurant’s business. Well-known Michelin star chef Joël Robuchon said once that one star gets a restaurant 20% more business, 2 stars get 40%  more business, and three stars get 100% more business.

Restaurants are given stars, not chefs even though chefs get most of the credit for the restaurant getting a Michelin star because they are responsible for making the food. Chefs can leave the restaurant but the restaurant will keep its Michelin star rating as long as it can maintain the quality of the food.

Michelin stars and other categories in the guide

Michelin Guide gives 3 starts based on the quality of the food.

  • 1 Star – Very good restaurant in its category, worth going if you are in the area
  • 2 Stars – Excellent cooking, worth deviating from your route
  • 3 Stars – Exceptional cuisine, worth making a trip for the food

Michelin Guide also has two other categories. There are no stars associated with them but the fact that they appear in the Michelin Guide is a big recognition for these restaurants.

  • The Michelin Plate is given to establishments that have affordable and quality food
  • The Bib Gourmand was introduced in 1997. The category includes restaurants that offer good food at moderate prices

Geographic footprint of Michelin star restaurants

Not surprisingly, France has the most Michelin Star restaurants followed by Japan and Italy. The Unites States has 239 Michelin star restaurants as of 2022.

  • France – 758
  • Japan -544
  • Italy -432
  • Germany 388
  • Spain – 281

Michelin Guide is a money-losing business but helps the Michelin brand

Michelin Guide is a very small part of Michelin’s overall business. The business is so small that it doesn’t appear as a separate line item in Michelin’s financials. Michelin Guide loses money but plays a key role in promoting the Michelin brand. It’s no secret that Michelin Guide expands to countries where it wants to increase tire sales – Michelin Guides have a positive correlation with brand awareness and tire sales.

Michelin Review Process

As a first step, Michelin looks for restaurants that get a lot of positive reviews in blogs, newspapers, and other publications to create a list of establishments worth visiting. An anonymous inspector will visit the restaurant. The identity of the inspector will not be revealed to the restaurant. If the inspector finds the food to be good, he or she may visit the restaurant multiple times. When a restaurant is listed in the Michelin guide, an inspector will visit the restaurant every 18 months or more frequently if the inspector believes the restaurant deserves a change in rating.

Michelin Inspectors

Michelin has 120 inspectors around the world. It has strict policies for its inspectors. Inspectors are anonymous and the meals are paid for by Michelin to maintain fairness. They are usually former chefs and have a strong background in culinary arts. They are required to pass the Michelin Guide training in France before becoming inspectors. They visit the restaurant multiple times before writing their report. They do not take notes while they are at the restaurant. Inspectors cannot disclose their line of work and don’t speak to journalists. Inspectors’ reports are later converted to one, two, or three stars.

Countries sometimes pay to get Michelin Guide in their country

Countries such as Thailand, Singapore, and South Korea have paid Michelin Guide to expand into their countries. Michelin maintains that the financial relationship doesn’t impact how it rates restaurants. Michelin Guides highlight the country’s unique cuisine and bring visitors to those countries. Tourism boards in many countries have been eager to build relationships with Michelin Guide for that reason.

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