Zagat Math

THE BACK TABLE AT New York's exclusive Jean Georges restaurant looks out over an airy, sunlight-splashed room buzzing with lunchtime activity. It is the best seat in the house, a big bay window onto some of the most exquisite food and discriminating diners in the restaurant world. And it's no accident that it's often occupied by Tim and Nina Zagat.

It's also no accident that the Zagats are the center of attention. The restaurant manager has already come tableside to greet them. Out pops Jean-Georges Vongerichten himself, in chef's attire, to join a line of admirers saluting the couple. Eugene "Tim" Zagat, a gruff-voiced bear of a man in a dark suit, along with his wife, Nina, are the brains behind the famous burgundy Zagat guidebooks, and even a four-star restaurant like this affords them a special level of respect. But fine dining isn't the only thing on the agenda today. Digging into his second plate of sea urchin, Tim Zagat excitedly discusses his plans to go well beyond restaurants, building a sprawling "surveying content" empire, with reviews of hotels, museums, movies and, well, anything that can be rated on his famous zero-to-30 scale. "Every way you can slice and dice data," he says, "we want to do that."

On an impressive scale, they already have, with a library that has grown to some 50 titles spanning three continents. Thanks to Zagat, we know that the Grant's Farm petting zoo in St. Louis is a higher-rated attraction than the Washington Monument; that the Cheesecake Factory in Las Vegas serves up tasty 21-rated food, while its counterpart in San Jose, Calif., manages a barely adequate 16; and that the staff at the Cobbler's Cove hotel in Barbados is "a bit aloof." It doesn't stop there. Zagat has found its way onto the Web and your PDA, and is also conquering the business world, where companies order custom guides to give away to their customers. In 2004, Bank of America ordered five million copies of the Zagat Movie Guide — equivalent to the entire paperback run of "The DaVinci Code."

The transformation from a two-page pet project launched from an uptown New York apartment to an international publishing juggernaut is a testament to the power of a good idea. But so much growth can put a strain on any business, and a close look at Zagat Survey LLC suggests that finding all those enthusiastic diners and shoppers to play critic — as well as keeping up the standards of its legendary rating system — has become a challenge. Over the course of several months, SmartMoney tracked down former Zagat editors, crunched the guides' numbers and discovered a few surprises about how the Zagat sausage is made. Among the most important: a curious case of grade inflation.

The guide — which millions of consumers have come to rely on — bills itself as an industry "report card" with grades handed out by the voting public. But what's become of all those tough, if not picky, reviewers? When the Zagats started selling their 1983 New York restaurant guide, it was no mean feat for a chef to score a food rating of 20 or higher, the benchmark for "very good to excellent" in Zagat terms. Only one in four New York restaurants did so at the time. Today fully 70% reach those heights. It's as if the bottom tier dropped out: Just over a decade ago 189 out of 1,300 New York restaurants rated 15 or below; today only 23 do, despite the fact that the guide now rates more than 1,500 restaurants. Step outside restaurants and the numbers look even more buoyant — including a rather impressive handicap in the golf guides, where two clubs have managed a perfect 30 for their courses.

The Zagats, both in their 60s, say the guides continue to tell it like it is, and without a doubt, many of their trademark biting comments still appear in the books. The numbers are up, they say, only because the quality of the businesses they rate has improved and because they often eliminate lesser establishments for space considerations. "We are in the business of providing customers with information they want and need," the couple explains. "Given a choice of listing a good restaurant and one that's not as good, for reasons of space, we choose the former."

This approach, though, isn't necessarily what readers expect to find. Only a handful of the guides are identified as rating the "top" of any category, while the majority would appear to be comprehensive for their market. And while the New York guide may need to leave some restaurants on the cutting-room floor, it's hard to see such space crunches in cities where even restaurant chains like Applebee's are reviewed. Instead, critics wonder about the couple's perceived coziness with the industry they cover and whether the company's rapid expansion is affecting its surveying system. Bring these criticisms up with the Zagats, however, and you'll get a passionate defense of their system. "The integrity of our survey process is our highest priority," the couple says.