The Economics of Everyday Things - 10. Michelin Stars

Episode Date: July 17, 2023

Only the finest restaurants have a chance to bask in their glow. Sometimes, it’s a bit too bright. Zachary Crockett squints at the menu.

When he was growing up, Charlie Mitchell was surrounded by food. Both my grandmother's and each side are from the south. So, collard greens, mac and cheese, ribs, fried chicken, all those things. I was just that grand kid who was always around and wanted to be in the kitchen and wanted to be in the mix. At the age of 20, he landed his first job in a kitchen, a little bar and grill and Detroit. It was a good place to learn the ropes, but he had bigger ambitions. He wanted to work in a kitchen that valued discipline and professionalism.

So he googled best restaurants in Metro Detroit and found a fine dining restaurant in the suburbs. When I walked in there, I was like, I knew it was the right place because I was so uncomfortable, so intimidated. I didn't know nothing that was going on. They have their own knives. It was intense. You know, and I'm like, okay, this is what I like. Mitchell worked there for three years. Then he eventually found his way to New York City, where he ascended the ranks of prestigious eateries. In 2021, he was brought on as a co-owner and executive chef at Clover Hill, a restaurant in the Brooklyn Heights neighborhood. It serves dishes like Spanish Blufan Tuna, Ocetra caviar, and dry-aged squab. As Mitchell built Clover Hill, he was driven by one aim, aim, to win a mark of excellence that many chefs aspire to, but very few attain. My goal was to get three mission stars.

That's what gets me out of bed every day. For the Freakonomics Radio Network, this is the economics of everyday things. I'm Zachary Crockett. Today, Michelin stars. Michelin is a company that makes tires. It's the second biggest in the world. So how did it get into the business of rating restaurants? Well, back in 1900, when the company was 10 years old, there weren't many cars on the road. To expand the market, the company began to publish a guide that made the roads less daunting for drivers.

The Michelin guide included the locations of things like gas stations, hotels, and mechanics. In 1926, it began to incorporate restaurants. And a decade later, it introduced a rating system for those restaurants. One star was worth a stop. Two stars was worth a detour. Three stars was worth a special journey. For decades, the Michelin Guide was strictly a European thing. It didn't debut in the US until 2005, and even then, it took years for it to spread

to cities outside of New York. Today, the Michelin Guide operates in more than 25 countries, but getting a star is still a rare distinction. Only around 3,400 restaurants in the world have at least one of them. Charlie Mitchell knew the odds were stacked against him when he joined Clover Hill. Brooklyn Heights is one of those neighborhoods in New York that you don't really know unless you live there. It was pretty quiet.

Our block is almost like a dead-end, not great for foot traffic, to be honest. But in October of 2022, Michelin announced that 17 New York restaurants would be getting a star. And Clover Hill was one of them. It was so surreal, honestly. We just couldn't believe it. My family, they've always supported me, knew I could for a living, but they don't know how little money I was making and all things that I went through. And I think something like this was like, oh, okay, cool. We see what he's been

doing for the last 10 years. Like, now it makes sense. And the next day I work was really tough, because I drink way too much. Mitchell and his team had no idea the star was coming. That's because Michelin stars are rewarded by anonymous inspectors, who go by aliases, use burner phone numbers, and don't even tell family members what they do for a living. They eat upwards of 10 restaurant meals every week. Chefs and restaurant owners are desperate to please them, but they don't have much information to go on.

They won't tell you exactly why they gave you a star, so we all have a different perception of what they really rate. Michelin says its inspectors give out stars solely based on the food itself. The quality of ingredients, the mastery of culinary technique, the harmony of flavors, the consistency, but many chefs swear that their dreams of a star have been thwarted by other details, like the type of cloth in their hand towels. Whatever Michelin's reasoning was, Mitchell says the benefits of his new star were immediately

apparent. The reservations grow 100% literally from half four days to fully booked days to the whole month being booked out. You see it happens overnight. It gave us breath and roll. You know, it was okay, cool. We know we're gonna survive. We're gonna put butts in seats. And those butts belong to a different kind of diner than Clover Hill's previous clientele. Before it was just people in Brooklyn, after the star, you're getting your world travelers. They get people like that who only eat at a Star restaurants. We had a gentleman come in who said,

we were his 497th Mission Star restaurant. Then you get people who are like, you know, I've never had to find any experience and I chose this place because the Mission Star means that it's gonna be good. They wanna know, okay, my money's gonna be well spent here. Some newly crowned restaurants take the opportunity to ratchet up prices. Research has shown that in New York restaurants that gain a single Michelin star raise their

menu pricing by an average of 15%. More stars mean bigger price hikes. A restaurant that goes from zero to three stars typically raises prices by 80%. Right now, a meal at Clover Hill will cost you $265 plus tax and tip, almost twice as much as the restaurant charged before it got started. Mitchell says that's partly because he reconfigured the entire menu. It wasn't just a Michelin tax. It was like, okay, we have a different ionus. Let's play with some cooler ingredients and let's raise a price a little bit.

People would think like, oh, you got a Michelin star. You guys are set for life. You still have to run the business properly in order for it to actually make money. And running a Michelin star restaurant? Well, it isn't easy. And it certainly isn't cheap. That's coming up.

Gaining a Michelin star might make some aspects of the restaurant business easier, but it also comes with added pressure. As you can hear in Hulu's restaurant drama, The Bear. Hey, can I ask you something? Yeah? Really want one of these bullsh**t stars? Yeah, yeah, I really do. You're gonna have to care about everything more than anything.

Your new customers have high expectations. You're competing with the best restaurants in the world. And as Chef Charlie Mitchell knows, any guest could be a Michelin inspector, secretly reevaluating his star for next year's guide. You really feel like every single mistake matters. We are a Mr. Star restaurant.

We know we can't overcook the protein, we can't oversaw the food. We made a decision to get new plates, new wine glasses, new tapers, new chairs. Other Michelin Star restaurant restaurant tours share that feeling. It's not cheap. We do have 60 people working there from 5 in the morning to get ready every night. The last guests are out on a Friday, probably around 1am. The cleaning crew comes in, disassembles the entire stove, sands all of the stainless steel and oils it,

and then the morning prep crew comes in. There are genuinely days where the back door never locks. It's a 24-hour operation. That's Nick Coconis. He's the co-owner of five restaurants in Chicago. One of them is Alinea, which Gourmet magazine called the best restaurant in America. For the past 12 years, it has held three Michelin stars. Caconis and chef Grant Ackerts opened Alinea in 2005. Before we opened we set some goals. We said we want three Michelin stars. And that was one of those aspirational things where it's like if you build something so great that the French guide has to come to America, then you've kind of accomplished something.

Only 140 restaurants in the world have three stars. A mere 13 of those are in the United States. And Alinea is the only one in Chicago. Michelin didn't just give Alinea three stars. It raved about the place. The guide calls it an ingenious, substantive, and festive temple. During a three-hour dining experience, you'll encounter things like taffy balloons, edible tablecloths, and desserts that look like Jackson Pollock's paintings. A lot of fine dining tends to be this temple of cuisine

where you sit and you have to be focused and reverent to the food. That's not at all what we're trying to accomplish. We want it to be fun and delicious social experience. With wine parings and service fees, a dinner at Alinea can cost more than 650 bucks per person. Customers make reservations months in advance. We serve about 110 every night, seven nights a week, 50 weeks a year. Our typical wait list is about 4 or 5,000 requests per week beyond our capacity.

for a week beyond our capacity. So, how much of that business can be attributed to the restaurant's three Michelin stars? They started the Chicago Guide and we came in at three Michelin stars. It came out, and it's a week of news, and nothing changes in terms of your actual business. Caconis collects data on where a linear customers come from. Magazine articles, Yelp, social media. And despite success stories from chefs like Charlie Mitchell, he says that Michelin stars don't have much of a concrete impact

on the restaurant's revenue. There is the prestige and the reputation, which is hard to quantify the value of. And then actual attribution of new clients, which is quantifiable, and that's pretty low. In Chicago, the folks who are coming to a restaurant because it's a Michelin-starred restaurant are mostly European tourists, and they cite that as a reason that they came. But again, that's not very many. In the European market, the stars seem to have a bit more influence. The late French chef Joel Robouchon, who at one point held 31 Michelin stars across more than 20 restaurants,

once said that a single star came with a 20% bump in business. Three stars, he claimed, resulted in twice as much business. But Cacodus says Alinea attracts far more customers through visual platforms like Instagram than from the Michelin guide. Most valuable of all was a feature on the Netflix show Chefs table. Every single day, 20% to 30% of all the diners come in from all over the country, all over the world, and site Netflix. As the reason they are there.

The restaurant also got business from a single YouTube review. During COVID, a comedy duo called Number Six with cheese ordered a linear takeout. They guzzled shots and local beer between bites of food. You know, it's got a really like, just desirable. What's that taste in there? There's no taste like no peas. I have eight, I have eight, what's that taste in there? There's no taste like no peas.

I have eight, I have eight peas. I don't like peas. There's no taste like no peas. Oh, this is good. They weren't trying to be prestigious. They weren't trying to influence anyone. And really, that sold a ton of our carry out. The Michelin Guide may have lost some clout over the years.

After all, the internet lets anyone be a restaurant critic. And many younger diners don't seem to care much about old school prestige. Michelin makes more than $31 billion a year from its tire business, but it reportedly loses $20 million a year on its guides. I was having dinner in Europe with the then president of the Michelin Guide, and he told me something that I found pretty astonishing. They spent more money dining at a linear alone than the total revenue of Chicago Guidebooks sold. It wasn't even breaking even just with my restaurant, which is kind of crazy. But Michelin stars still hold an undeniable and often psychologically damaging sway over chefs. Michelin can rescind stars at any time for any reason, and this has caused emotional

turmoil in kitchens, particularly in France where the guide started. In 2003, the chef Bernard LaZo committed suicide amid rumors that his restaurant was a star. When La Maison des Bois was demoted from three stars to two in 2019, reportedly over a souffle that tasted like cheddar cheese, Chef Mark Fera took Michelin to court for damages. He lost the case. In Cuconis' opinion, a rating of two Michelin stars might even be worse than getting a demotion. From his years in the restaurant business, he's noticed that there's something of a two star curse. In Chicago, Rhea was Michelin two stars. It closed.

Charlie Trotters of two stars. It closed. It's sort of a no man's land between one and three, which is a problem. If you're a Michelin one star restaurant and you go to three, great. You're in an elite group. If you go to two stars, that means that you're striving for three, but didn't quite get there. By no, some Michelin two-star chefs, and I think their experiences are every bit as good as Alinea. But for whatever reason, they didn't get that third star. And I know that that's a point of stress for them.

A number of chefs have attempted to give back their Michelin stars, citing creative pressures and unmeatable expectations. Michelin has said that returning a star is not possible. Cuconis does not share these concerns. At some point, Alinea will be demoted. It has to. Because at some point, Tom Brady doesn't throw the ball as well anymore. I think that we could make the best food we've ever made in 2023 or 2025 or whatever it is, and we'll get demoted at some point. It's just a list. That's not to say he can entirely ignore the high stakes.

Tonight at 5 p.m., there will be about 35 people when the door opens they want their minds blown because dammit they drove all the way from Iowa on their anniversary and they've saved up a year and they want to have a great experience. That's the pressure of having a Michelin start restaurant. Chef Charlie Mitchell says the pressure hasn't quite gotten to him yet. He still hopes that his destiny will be written in the stars. Every move I make is based on how to reach the angle of achieving three mission stars. I'm just wasting my time working eight hours a week, missing out on other life experiences for no reason. From a chef's standpoint, I think that's what it is getting your work validated.

For the economics of everyday things, I'm Zachary Krakow. This episode was produced by Sarah Lilly and mixed by Jeremy Johnston. We had additional help from Eleanor Osborne, Lyric Baudich and Daniel Moritz Rapson. [♪ OUTRO MUSIC PLAYING [♪ Should anybody spend $300 on dinner, I don't know. [♪ OUTRO MUSIC PLAYING [♪ The Freakinomics Radio Network, I don't know.