A new research paper reveals the steep cost of fake reviews for restaurants. Yi Cao, an assistant professor of accounting at George Mason University, co-authored the study examining restaurants flagged by Yelp for planting, purchasing, or incentivizing reviews. Since 2023, Yelp has flagged more than 4,900 businesses with a "Consumer Alert" banner that appears for 90 days.
The penalties extend far beyond those three months. Cao's team cross-analyzed Yelp data with foot traffic reports from SafeGraph and credit card transaction data from Consumer Edge. They found that flagged restaurants saw foot traffic drop by 8 percent immediately after the alert appeared. The decline deepened during holidays, when diners rely more heavily on Yelp. Most penalized restaurants failed to recover to pre-alert traffic levels even after a year and a half.
In 2020, the fast-casual chain Burgerim was caught planting fake reviews and received over 200 digital warning banners across its various locations' Yelp pages.
Yelp identifies fake reviews partly through consumer and business owner reports, and partly through an algorithm that screens for AI-generated language. Cao notes that detecting fake reviews is improving as the technology becomes more sophisticated. "This is a classical theory of a trade-off between the benefits of manipulating reputation and the risks of getting caught," Cao says. "When the risk is relatively low, the business owners decide the incremental benefits are worth the risk."