How negative online restaurant reviews can hurt valuation

2 min read

Negative online reviews of your restaurant can affect your reputation, deter customers from coming through your door and cause a few nights crying in to your pillow.

Making light of bad reviews may have more consequences than you think

This, we are all aware of. But have you ever thought about how negative online restaurant reviews can reduce your restaurant’s value if and when it is time to put it up for sale?

Market valuation

A recent survey conducted by online business-for-sale marketplace showed 89 percent of potential restaurant buyers surveyed believe online reviews affect the market valuation of their restaurant.
While potential customers will briefly check a restaurant’s online reviews before deciding whether or not to eat there, someone interested in buying that restaurant will analyze them closely.
Seventy-two percent of buyers agree that online reviews are a good indication of the quality of a business’s products and services while just 58 percent of restaurant owners agree.
Why the difference? In many transactions, the business owner is older and less social media-savvy than the potential buyer.
“Small business buyers often come from a younger generation than sellers and may be more perceptive to how technology will affect the future of the business,” says BizBuySell g.m. Bob House. “Owners should be aware of how new innovations, business models and online reviews are affecting their value and be ready to address the issue during negotiations.”
The survey found that social media rankings can raise or lower the final sale price of a business transaction, including those of restaurants. How much? Forty-one percent of survey respondents said the effect falls in the five to ten percent range. An additional 35 percent said that number was even higher, somewhere between 10 to 20 percent.

Manage restaurant reviews with simpleERB

Given the magnitude of these figures, you’d think business owners, including restaurant operators, would be doing everything they can to manage and boost their online reputations. But the survey findings say they don’t. A meager 27 percent of business owners said they encourage customers to post reviews. Twenty-five percent take action to ameliorate bad reviews when their business gets one. And 24 percent share their business’s positive reviews by posting them on their website and/or giving them prominence on social media.
simpleERB has a one stop option that allows restaurant owners to easily monitor negative reviews as well as encourage customers to share positive ones  on Yelp, Trip Advisor and Facebook (you’ll need to be logged into simpleERB to see this feature).
You can add a link to the customer confirmation email which allows the customer to submit feedback to you after their meal.
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When you get a good review you can tick a box on the email copy which sends them a request to share their review, along with links to your restaurant Facebook and Trip Advisor profiles.
Thanks to simpleERB you can keep track of your restaurant’s online reputation so if you do ever decide to sell up, you won’t be caught out by a nasty shock.