The Michelin Guide is pretty much a loss leader for the tire company that started publishing it 111 years ago. As the Financial Times reports, the guide is costing the company about $24 million right now, and that loss is expected to rise to $30 million a year in the next four years. These figures come from a recent consultants’ report on the company’s financials, and via the first interview with former Guide director Jean-Luc Naret since he left his post in January.
The new report advises the company to capitalize on the Internet, and to perhaps generate some profit by placing restaurants in an online guide — something that could present a significant conflict with the long-standing, perceived integrity of their reviews. But Naret, for one, says, "The Internet was one of my biggest battles over the last seven years." He says that the company’s leadership, and in particular the Michelin heirs, still don’t really get the Internet and are reluctant to make any big changes.
Furthermore, the family seems indifferent to the financial losses of the Guide, taking great pride in the brand it has helped build. Were you aware that this guide began as a way to sell more tires? It was originally published as a guide for chauffeurs in 1900, and continued to be a means of making people drive farther to dine, and therefore wear out their tires faster. The family would never think of killing off the guide, and as one senior exec puts it, "One of the biggest assets of Michelin is the brand, so [the guide] is key."
Interestingly, a recent internal study found that people who lived in countries where they published a Michelin Guide were three percent more likely to purchase Michelin tires.
Recent decisions, however, to relocate the Guide’s offices outside of central Paris and to kill off guides that were launched in Los Angeles and Las Vegas seem to reflect a bit of belt-tightening. We still give them at least another decade before they come up with an iPad app.