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Local Business Economies Ranked by Yelp, Shift Seen in Restaurant Preferences

Exploring how well urban business economies are doing around the U.S., Yelp Inc. conducted its second survey and issued the second edition of its Local Economic Outlook.  The review is designed to rank U.S. metro areas according to local-business population growth. In addition to the metro rankings, special focus was given to the restaurant industry, with Yelp finding a shift underway in consumer preferences leading to a significant rise in independent restaurants over the last five years.

Based on review ratings from Yelp, fast-food chain restaurants saw a decrease in average ratings by about one third of a star on a scale of one to five stars between 2012 and 2017. Fast-casual chain restaurants followed suit with a one tenth loss in rating points, while the independent fast-casual and independent fast-food restaurants saw a rise--7 percent over this time. Yelp attributes the rise for independent restaurants to rating services such as theirs that are making consumers more confident in these establishments.   Also, the popularity of celebrity chefs is another contributing factor.

“Entrepreneurs are investing in opening businesses throughout the southeast and southwest, buoyed by booming populations and economies,” said Carl Bialik, data science editor at Yelp. “The engine of local economies is local business, and a growing business population is a strong sign of economic health.”

Yelp taps into its 142 million local reviews as of Q3 2017 to help identify areas of the country and types of business with the highest rate of growth.  For this quarter, Yelp focuses on a number of metrics to determine local business health: “the rate of change in the number of businesses in a city, neighborhood, or business category as a way to equally weight business closures -- a sign of economic challenges -- and business openings, a sign of business investment and dynamism”.

Charleston, South Carolina, is firmly at the top of Yelp’s list for economic opportunity due to rapid population growth driving business growth, followed by Phoenix, Arizona, with Salt Lake City, Utah in third place. San Jose, California, sits in last place with the lowest rate of change in local businesses, owing to very high rents and pressure on wages around Silicon Valley.