The Yelp factor: Sacramento businesses hate Yelp even though it might actually be good for them

Cafe Rolle sits on a strip of H Street in East Sacramento where homes give way to retail shops. Owner William Rolle has sliced smoked salmon and French pâté here going on a dozen years, and it’s the region’s top-rated restaurant—at least according to Yelp. Last month, Yelp also ranked the cafe as one of the 100 best restaurants in the United States. Yes, the entire country.

It’s no surprise then that Rolle says he loves Yelp. Business is up more than 30 percent since the accolade, and people now come from out of state to eat there. “Yelp is very powerful,” he says. With a caveat: “It can also destroy you.”

A majority of Sacramento business owners would agree with that second part. There’s no tip-toeing around it: People hate Yelp.

Stacy Paragary oversees more than a dozen local bars, clubs and restaurants as co-owner of Paragary Restaurant Group. Her employees spend hours checking Yelp for problematic reviews. The company’s even hosted private parties with free food and drinks for an exclusive group of top-level reviewers called the Yelp Elite Squad. They didn’t hit it off.

“Yelp was coming at us aggressively, constantly. I just put my foot down,” Paragary says. “I’m not going to give money to the devil.”

Restaurant owner and chef Aimal Formoli says a Yelper called one of his Formoli’s Bistro employees fat in an unsavory review, which Yelp refused to remove from the site. And Salon Cuvee & Day Spa owner Brenna Meko claims she was extorted by a Yelp salesperson, who pressured her to buy ads as to be able to get rid of poor reviews.

That all sounds real ugly. But a growing number of tech-savvy fans, academic researchers and even business owners also will tell you Yelp is a wonderful, revolutionary innovation that actually helps businesses.

The company celebrates its 10th anniversary this year. Yelpers have submitted more than 50 million reviews of businesses worldwide. There are some 120 million monthly unique users in more than two-dozen countries. Yelp’s revenue comes mostly through paid ads on its website, and while the company is not yet profitable, its stock is up more than 300 percent in a year.

Yelp says it’s big on transparency, but that’s not the case when it comes to revealing details like the number of Sacramento users. It’s estimated that there are tens of thousands. Yelp also won’t say how many top-level Elite Squad members there are, either, but local Elite member Michael Saucedo figures there are at least 2,000 more like him in the Sacramento area.

Saucedo praises Yelp because it “cuts through the corporate veil,” he says. “It gives consumers a voice against advertising.”

He’s written 1,163 reviews, more than half of them are five stars, a statistic not uncommon and one of the reasons experts say Yelp actually helps local businesses.

Some U.S. cities have a Yelp community manager. In Sacramento, it’s a young guy named Alex Lane. He’s really into celebrating all things local, and, of course, he likes to highlight the good things about Yelp, too. Such as last year’s Harvard Business School study, which says cities with robust Yelp presences also have healthier retail and hospitality economies.

Lane says that more than 80 percent of Yelp’s reviews are positive. “It’s just that the negativity on Yelp gets an inordinate amount of attention.”

When it comes to the negative stuff, small-business owners say Yelp’s first strike was its inception. Anyone could visit Yelp.com and post anything they wanted about a business. No vetting, scant rules. And Yelp had a legal right to include any business on its site. Even this paper. Even Yelp itself. Shop owners and restaurateurs were incredulous.

Some Yelpers empathize. “Who wants to hear people whine about something you put your life into?” says Elite user Serena Rodriguez. The 25-year-old Midtowner grew up a part of the restaurant industry and has worked in hospitality her entire life. Her boyfriend is a chef. She understands: It hurts to have people rip apart your livelihood.

Millions of other Yelpers don’t get it. “These people review Subway, they review Carl’s Jr.,” says chef Aimal Formoli. “It’s an open forum to talk shit about restaurants.”

In a one-star review of Formoli’s Bistro, a reviewer called a waitress “trashy” because of her tattoos. Another scathing review faulted Formoli himself for what they referred to as his “heavy” accent (he speaks English just fine).

Distasteful and factually inaccurate reviews eventually resulted in complaints to Yelp corporate, which allegedly led to shady conversations with Yelp employees. Formoli says he’s called Yelp a few times to complain. “I’ve been told, ’If you had an account with us, I could take this [bad review] off right now,’” he says.

Callista Wengler is Paragary’s marketing director and sometimes monitors Yelp’s write-ups. Her company’s one-star reviews run the gamut. A user who gave a single star to Centro Cocina Mexicana in Midtown called it “a trendy snob hole” without ever dining there. Another one-star review consisted of just three words: “Food was disgusting.” Wengler called to discuss other bad reviews, and Yelp allegedly fed her a similar line. “If we actually paid to be an advertiser on Yelp, we’d have a representative take care of all these issues,” she says.

Flippant one-star missives are not inconsequential. There are real, tangible losses for a business when star ratings take a dip. A Harvard Business School study of independently owned business in Washington state showed that “a one-star increase in Yelp rating leads to a 5-9 percent increase in revenue.”

Small-business owners like to toss around the term “extortion.” And horror stories about Yelp sales reps are so typical that one wonders if people recount them not as personal anecdote, but hearsay.

The company denies using extortion to compel businesses, and it should be noted that the courts always side with Yelp on this matter. Defamation suits against actual Yelp users are gaining legal traction, however.

“Yelp is not and never has been a pay-to-play site,” Yelp spokeswoman Morgan Remmers told SN&R.

Eventually, coders at Yelp created a fix to address what Elite Yelper Saucedo calls “one-star flamers,” or users who visit the site just to write nasty stuff. It’s called the Yelp filter. Not unlike the mysterious Google algorithm, the filter somehow identifies bogus reviews and eliminates them from a business’s overall rating.

This created new problems. East Sacramento salon owner Brenna Meko asked some of her regulars to think about posting favorable reviews on Yelp to counteract some of the negative ones. They did. But the good reviews never showed upon the site: The algorithm hid them because the customers who posted them were not regular Yelpers. She says a Yelp employee told her that if she were to become a paying advertiser, she could manage reviews on her own.

“’Give us $299 a month, and we can help you with that,’” she says Yelp told her.

“We’re a slave to our star rating and afraid to speak out,” Wengler says.

But Saucedo has a message for Sacramento’s shop and restaurant owners: “They think Yelp is for business. Well, it’s not. It’s for the consumer.”

Saucedo is the region’s premier Yelp Elite user. He sits at the front window of a downtown coffeehouse and snaps photos of his coffee drink and then uploads them to Yelp, something he’s done 20,725 times before. If you’re thinking that’s a lot of pictures, you’re right. He’s been on Yelp since 2010. Do the math.

The state worker goes by “Michelangelo S.” on the site. His spiked black hair appears magnetically charged, and he speaks with lively energy. But he also has an even-keeled outlook when it comes to the good and bad of Yelp. Perhaps that’s what makes him so popular with and respected by the Elite contingent, some of whom refer to him as “The Baron.”

To become Elite, it typically takes nomination from another user, after which a Yelp corporate panel decides who makes the cut. Membership is good for a year only, and there’s no guarantee that you’ll be reselected. No surprise, the process is secret and, in some cases, controversial. The perks are private parties with free eats and drinks, showcased reviews, and influence.

Is there a fear of Yelp Elite among business owners? “I think there is,” Saucedo says.

The most recent Yelp Elite party was last week in downtown Davis at Tako Korean BBQ, a locally owned Asian-fusion spot that’s been open for less than a month. It has a three-star rating (out of a possible five) so far, which is average.

Yelp Eliters overtook more than half of Tako’s white-lit dining room and enjoyed complimentary tacos, nachos, beers and more. Community manager Lane bounced from table to table chatting with guests. He says this was a smaller-than-usual gathering of nearly four-dozen Elite Squad members. More than 500 attended the Yelp Elite holiday party in Davis this past December.

Still, the party at Tako had a fun, communal energy. Yelp Elite newbies introduced themselves by raising their hands, Lane gave a shout-out to the “oldbies” and the Eliters sang “Happy Birthday” to Saucedo. He brought his mom to the party.

Yelp’s thrown dozens more Elite parties in the past. A few weeks ago, jewelry store Shane Co. held a Desserts & Diamonds event featuring sweets and regional winemakers. There have been Mayan end-of-the-world parties at Mexican restaurants and Wild West throwdowns at casinos. Many Yelp Eliters told SN&R that two events at Midtown restaurant Capital Dime last year were the best parties in recent memory. Capital Dime is even inviting Elite members back this week for a free happy hour. The food and drink at all these events were free.

Some business owners complain that they feel pressure to do events as a quid pro quo for positive reviews. Wengler says Paragary agreed to do Elite events in the past because she was told that Yelpers would be “going to write good reviews” afterward.

Lane says the Elite Squad is not a huge part of Yelp, and he and other Elite members dismiss the idea that the parties translate to favorable reviews. “There may be a bump, but there’s not a guarantee,” Saucedo says. “Yelp is a convenient whipping boy.”

The parties do make an impact. Shane Co. has a four-and-a-half star rating, including 11 perfect reviews from Yelp Eliters. Capital Dime has three-and-a-half stars, but more than 25 five-star ratings from the Elite. In both cases, five-star reviews by Eliters make up more than 10 percent of the restaurant’s total feedback.

Yu Cho is the manager at Tako’s in Davis. He’s pleased with the Yelp event and told SN&R no money was exchanged between the business, which his mom owns and operates, and Yelp. There was also no agreement, explicit or implicit, that Eliters would be writing favorable reviews afterward. He says it’s simply a marketing opportunity for both parties.

Which was kind of funny to him. “Our marketing manager says that Yelp kills businesses,” Cho says.

Saucedo thinks that the Elite freebies can be too much. “If there’s one thing that disappoints me about a lot of Yelpers,” he says, “it’s their sense of entitlement.”

Some say Yelp uses the Elite Squad to pressure businesses into giving away freebies. “I have had several owners send me coupons to try their business again for free, which I think is fair,” says Elite user Jennifer Scott. She says a business once even tried to bribe her to write a good review (she outed that business on Yelp’s Talk Sacramento message board).

Other Yelpers have gone so far to demand freebies after disappointing shopping or dining experiences. Those type of stories often go viral, such as a 2012 case when a Yelper reportedly threatened the owner of The Red Rabbit Kitchen & Bar with a negative review unless he received complimentary meals.

Are Yelpers asking for freebies? “It wouldn’t surprise me,” Saucedo says. Community managers tell Elites that accepting freebies is not appropriate conduct. But other Yelpers agree that it probably happens more than it should.

“There are just as many stand-up, factually honest Yelpers out there as there are dirtbags who are on there to do no good,” says Jana Thomas, an Elite member who has been doing reviews on the site for four years. Thomas lives in the Arden Arcade area, and, not unlike Saucedo, says she was born to be an Elite member.

“Yelp Elites are seen as either the Mother Mary or the Antichrist himself,” she says. Not that she cares.

“I am karma’s bitch and just like paying it forward by telling the reality and truth of my consumer experience.”

Thomas might be surprised to learn, however, that writing whatever you want on Yelp might just be a big-time boon for the Sacramento economy.

Lane sits down at a Midtown restaurant and sips on a craft beer. He’s polite while discussing all the Yelp negativity, so it’s time to talk about how Yelp helps.

“The biggest thing people forget is that local businesses are getting business from Yelp,” he says.

And how. Professor Michael Luca’s Harvard Business School study shines a light on the good side of Yelp. Between the years of 2003 and 2009, he investigated Yelp’s impact on locavorism in Washington by analyzing restaurant profits before and after Yelp’s arrival.

His discoveries? For starters, Yelp’s penetration was commensurate with a decrease in chain restaurants over six years. The company’s in-house studies confirm this, too. For instance, 93 percent of all users who consult the site for shopping advice end up buying local, according to Yelp.

“The whole thing about Yelp is finding great local businesses,” says local marketing director Ashley North, one of the company’s three Sacramento-based employees.

The Harvard study says that local businesses not only expanded because of Yelp, they also profited from positive reviews—especially those by Elite Yelpers. In fact, Luca argues that the more information there is on a business’s page—such as Elite photos and lengthy reviews—the stronger the consumer response. “[A] restaurant’s average rating is affected by the number of reviews,” he wrote, “and whether the reviewers are certified as ’elite.’”

Interestingly, the same results don’t apply to the Starbucks and Quiznos of the world. “[D]espite the large impact of Yelp on revenue for independent restaurants … the impact is statistically insignificant and close to zero for chains.”

Here in Sacramento, Yelp parties do a lot to elevate local businesses, such as the block parties it’s hosted with the Handle District. These events have drawn thousands of guests and raised nearly $10,000 for area nonprofits like WEAVE and Happy Tails.

Seann Rooney oversees 30 Midtown businesses as executive director of the Handle District. He’s done a few events with Yelp and says the partnership has been a great relationship. “Yelp reaches so many people, it is incredible,” he says. “They are a marketing force.”

“We’re committed to highlighting the best this community has to offer,” Lane says. “And over 80 percent of our reviews are considered positive.”

Last April, Yelp held a town-hall-style meeting in Midtown. It was a chance for business owners to speak to Yelp employees and Elite members. Saucedo was there, and he says that while a lot of businesses came to confront, it was ultimately a positive experience.

Can Yelp and Sacramento’s small businesses one day coexist?

Perhaps. But that doesn’t mean shop and restaurant owners will be Yelping anytime soon. As Chu from Tako’s put it: “I like to enjoy my food.”