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Better Business Bureau grades companies on a peculiar curve

Paying the BBB to be listed as an accredited business appears to have instant benefits in the agency's ratings.

January 21, 2009|DAVID LAZARUS

If you check out Wolfgang Puck's Spago restaurant on the Better Business Bureau's website, you'll discover that, under the organization's new rating system, the world-famous Beverly Hills eatery merits a grade of B-minus.

Why? That's hard to say. The online report says the bureau has received no complaints about Spago from customers and is unaware of any government actions against the restaurant.

Now check out the considerably less prominent Cafe Santorini in Pasadena. It too has prompted no complaints to the bureau and has no government actions outstanding. It gets a grade of A-plus.

One big difference: Cafe Santorini pays the bureau about $350 a year to be listed as an accredited business. Spago makes no such payments and is thus an unaccredited business.

The private, nonprofit Better Business Bureau insists there's no "pay-for-play" component to its new rating system.

But a random search of the organization's database of about 4 million North American companies seems to show that the roughly 400,000 accredited businesses, even those that get numerous complaints, very often receive higher grades than unaccredited companies with spotless complaint records.

"There is no guarantee that an accredited business will get an A-plus," said Steve Cox, a spokesman for the Better Business Bureau. "But should they get an A-plus? The answer is yes if they uphold the standards we espouse in the marketplace."

Then why do so many unaccredited businesses get significantly lower grades?

"I can't explain that," Cox replied. "Clearly we need to do a better job in articulating what the differences are."

The bureau announced this month that it would change its ratings to a letter grade system from the previous "satisfactory or unsatisfactory" system.

"We wanted to get rid of any ambiguity," Cox said. "A letter grade speaks to our degree of confidence that a business operates in a trustworthy manner. We're talking about business integrity."

If that's the case, the Better Business Bureau may want to get its own house in order first.

The majority of the bureau's funds come from selling accreditation to companies. Depending on the size of the business, accreditation costs between several hundred and several thousand dollars a year, Cox said.

Accredited businesses are expected to uphold the bureau's standards for good conduct. In return, the companies can use the bureau's logo in their advertising and marketing materials.

Panos Haitayan, co-owner of Cafe Santorini, said his restaurant's A-plus rating reflects its high-quality food and service. "We earned it," he said.

Does he think Cafe Santorini would be rated A-plus even if it were unaccredited?

"I would say so," Haitayan said.

Nope. Cox said the highest grade an unaccredited business can get is an A. Only an accredited company -- in other words, one that pays an annual fee -- can receive an A-plus.

This isn't spelled out anywhere on the bureau's website. The site of its Los Angeles office says only that "the highest rating assigned to a company is A-plus; the lowest is F. Between those two ratings are nine others in order from higher to lower."

A B-minus, according to the site, "may relate to length of time in business, a past problem that's been corrected, or something else that does not cause problems for consumers."

In Spago's case, length of time in business wouldn't seem to be a factor. The original restaurant above the Sunset Strip opened in 1982. (Cafe Santorini opened in 1993.) If there were any past problems or other issues associated with Spago, the bureau doesn't name them.

Puck couldn't be reached for comment -- he's in the process of opening yet another restaurant. But a spokeswoman said the B-minus grade was a surprise and that the company would be taking up the matter with the Better Business Bureau.

Some companies get lower grades just for being in a certain industry. Businesses deemed to be rife with scammers -- overseas lotteries, for instance, or online casinos -- automatically get lower grades.

The same applies for companies in what the bureau calls industries with "inherent problems," such as payday lenders or credit-repair services.

A variety of criteria are applied to the grading of a business, Cox said, including an analysis of its advertising and the amount of background information available. He was unable to say how these criteria might be weighted in the case of companies that receive no complaints from customers.

Aside from paying annual fees, accredited companies are required to fill out a questionnaire detailing their business practices. Cox said the bureau might approve accreditation without actually visiting a company or experiencing its service firsthand.

"A visit to the organization could happen," he said. "But it could be a telephonic process."

An accredited business automatically receives a half-grade boost to its rating. A B-minus business, in other words, will become a B.

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