How do online reviews impact revenue for restaurants?

It's clearly important for restaurants to claim their listings on as many review sites as possible, but a business owner shouldn't just stop there.

Our analysis reveals that as customers search those review sites for a place to eat, one of the things they're looking for is a restaurant that engages with customer reviews.

69% of restaurants in our study haven't responded to a single review. Let's see how responding to reviews impacts revenue for restaurants who do, or don't, take advantage of this simple online practice.

As you can see in the charts above, restaurants that don't respond to any reviews earn less than the average restaurant. But a little can go a long way, as restaurants who responded to even just one review earn 7% more than average.

Restaurants who respond more frequently, up to 25% of the time, earn 23% more than average. Interestingly, however, revenue decreases as review rate climbs above the 25% mark.

This is likely because busy, popular restaurants with a large number of total reviews are more likely to earn more money than the average restaurant, but since they receive so many positive reviews, they are more likely to have a much lower review response percentage.

This becomes clear when you look at restaurant revenue by total number of review responses:

Restaurants that responded to at least 1 review respond to an average of 42 total reviews on average.

Restaurants who respond to just 2 to 10 reviews earn more than the average restaurant. And by the time you reach 100 or more review responses, restaurants earn $241,000 more each year than average.

When it comes to responding to reviews, it's clear that restaurants should focus primarily on giving thoughtful and meaningful responses to both negative and positive reviews.

As we'll expand on in the sections below, getting more reviews is clearly important, but staying engaged with customers in a real and meaningful way can make a clear difference.

Restaurant owners often stress about their star rating, but as you can see in the section above, a perfect star rating doesn't necessarily equal big increases in revenue.

Meanwhile, our findings suggest that they should focus much more on increasing the number of reviews than almost anything else.

Restaurants in our analysis averaged 234 reviews on review sites. This is much higher than the 83 average across all businesses, which emphasizes just how important the number of reviews is for restaurants on review sites.

We analyzed the revenue of businesses whose review counts fall above and below that average 234 review threshold.

Restaurants with more than the average 234 reviews earn 56% more in annual revenue than businesses with review counts below the average.

Restaurants with less than the average number, on the other hand, average 26% less.

Because restaurants average such a large number of reviews, we decided to take a much deeper look at the numbers.

Here we see an even more distinct relationship between the number of reviews and an increase in average revenue.

Restaurants start to earn near average revenue amounts as they come closer to the 233 review count range. Average revenue then quickly begins to climb with the total number of reviews.

Restaurants in the 233 to 500 review count range earn 40% over baseline, and when you get to restaurants with 1,000 or more reviews, average revenue is more than double that of the average restaurant.

This is strong evidence suggesting that when a customer searches for a nearby restaurant on online review sites, a large number of reviews may outweigh most other factors.

Once again, Google is the most important when we look at individual review sites. Restaurants with more than the average number of reviews on Google average 18% more than baseline, while those with a below-average number average 32% less.

Local restaurants should still focus on getting as many reviews on as many sites as possible. Even if some of those are negative reviews (which isn't necessarily a bad thing, as we'll explain later in this report), there's little question that customers put more value in a higher number of reviews than they do in a 5-star rating.

It's clearly important to get a steady stream of fresh reviews, but how important is the mix of positive vs. negative reviews? Let's find out.

On average, 20% of reviews posted on a given restaurant in our analysis were negative, which matches the average negative review rate across all industries.

So are restaurants more or less sensitive to a large number of negative reviews? Let's take a look at revenue at restaurants based on what percentage of their reviews are negative.

These findings show that while quantity of reviews is important, when it comes to quality it's all about authenticity.

Restaurants whose total number of reviews are 15-20% negative average 24% more in annual revenue than restaurants whose reviews are 5-10% negative!

In other words, restaurants with a higher ratio of bad reviews actually make more money, to a point. The optimal ratio of negative reviews is 10-25%.

When customers browse restaurant listings on review sites, they may expect to see a certain amount of bad reviews. A restaurant profile with little to no negative reviews might appear untested or even suspiciously guilty of buying fake reviews.

Our takeaway: restaurants that focus on getting as many real and authentic reviews as possible reap the rewards.

Finally, we looked at which states were home to restaurants that were the best at managing their online presence. First we looked at the percentage of restaurants in each state that had claimed at least one review site listing.

89% of Rhode Island restaurants have claimed at least 1 business listing, which is good for the top spot nationwide. Massachusetts, Connecticut, and New Jersey all tied for second at 86% of restaurants with at least one review site claimed.

On the other end of the spectrum, over 30% of restaurants in Idaho, Arkansas, Alabama, Mississippi, Wyoming, West Virginia, Kansas, and Kentucky haven't claimed their listing on any review sites.

Lastly, we looked at how frequently restaurants in each state responded to their reviews.

Nevada restaurants are the most engaged with their reviewers, averaging a response rate of 6.1% per restaurant.

North Dakota restaurants come in at the bottom of the list, with restaurants on average responding to only 1.4% of reviews.