Le Cordon Bleu — A French Cooking Name Americans Borrowed Against, Then Lost

Summary

Le Cordon Bleu's United States culinary schools were a chain of 16 for-profit campuses operated under a licensed brand by Career Education Corporation (CEC), the Chicago-based company that had affiliated the schools with the prestigious French name in 2000. On December 16, 2015, CEC announced it would discontinue the entire US Le Cordon Bleu operation: new enrollment would stop in early January 2016, and all 16 campuses would teach out their existing students and close by September 2017. The French parent institution — Le Cordon Bleu, the genuine culinary academy founded in Paris in 1895 — was unharmed and continues to operate around the world. What closed was the American licensee, and with it the implied promise it had been selling.

The cause was the collision of two forces. The first was regulation: the Obama administration's "gainful employment" rule, finalized in 2014 and taking effect in 2015, cut off federal student aid to career programs whose graduates carried heavy debt against low earnings — and culinary school, with its high operating costs and its graduates working as line cooks and baristas, was squarely in the rule's sights. The second was a corporate decision to leave the sector entirely. CEC had been retreating from career colleges for years; it tried to sell the Le Cordon Bleu campuses in 2015, failed to find a buyer, and concluded that closing them was faster and cheaper than continuing to run them under tightening rules.

The numbers explained the exit. In 2014, Le Cordon Bleu North America generated roughly $178.6 million in revenue but $70.6 million in operating losses — a business hemorrhaging money even before the gainful-employment rule threatened its aid pipeline. CEC's CEO blamed "new federal regulations" that made the future of high-cost career schools impossible to project, and chose the orderly exit.

For students, the closure was, by the standards of the for-profit-collapse era, comparatively humane: a genuine multi-year teach-out let enrolled students finish their programs rather than stranding them mid-course. But the deeper indictment had already been entered in 2013, when CEC paid $40 million to settle a class action alleging it had oversold the value of a Le Cordon Bleu diploma — leaving graduates with large loans and $12-an-hour jobs that required no training at all.

Timeline

A Licensed Reputation

The Le Cordon Bleu that closed in America had never really been Le Cordon Bleu. The genuine article was a Paris culinary academy founded in 1895, a name that for more than a century signified the classical French training that produced serious chefs. What Career Education Corporation acquired in 2000 was a chain of American career colleges, to which it then attached the Le Cordon Bleu name under a licensing agreement — affiliating its US culinary schools with the brand in June of that year. The prestige was rented. The schools were CEC's.

That arrangement was, commercially, the entire point. A culinary education is an aspirational purchase, and the Le Cordon Bleu name carried more aspiration than any homegrown trade-school brand could. CEC scaled the chain to 16 US campuses and marketed associate and diploma programs to students who dreamed of becoming chefs and who were reassured, understandably, by a name that connoted Paris kitchens and white toques. The schools ran, like CEC's other career colleges, substantially on federal Title IV aid: the students borrowed, the government paid, and the prestige of the licensed name helped close the sale.

The problem was the distance between the name and the outcome. A licensed brand can be marketed; it cannot be made true. The Le Cordon Bleu diploma a CEC graduate earned was not a passport to the French-kitchen career the name implied — and the gap between what was promised and what was delivered would become, in court and then in regulation, the schools' undoing.

The $40 Million Admission

The reckoning arrived in court before it arrived from the regulator. In 2013, CEC paid $40 million to settle a class action brought by former students who alleged the company had oversold the benefits of a Le Cordon Bleu diploma. The complaint's arithmetic was brutal and specific: graduates who had borrowed heavily for a culinary credential were working as line cooks and baristas, earning around $12 an hour in jobs that required no training at all — let alone the prestige education they had financed. The settlement was not an admission of guilt, in the legal sense, but it was an admission of exposure: the company paid eight figures rather than let a jury weigh whether the diploma was worth what students had been told.

The settlement crystallized the structural problem with for-profit culinary education. The cost of attendance was high — culinary schools carry expensive kitchens, equipment, and ingredients — while the earnings of the jobs the credential actually led to were low. That is precisely the mismatch that turns federal student aid from a ladder into a trap: students borrow at the high end against incomes at the low end, and the difference is debt they cannot service. The Le Cordon Bleu name had sold them the high end; the restaurant industry paid them the low end.

What the $40 million settlement demonstrated to the company, and to Washington, was that the business model produced foreseeably bad outcomes for the people it enrolled. The regulator was about to make that demonstration binding.

The Five Factors

Aftermath

The students caught in the closure fared comparatively well, which in the for-profit-collapse era is faint but real praise. The multi-year teach-out meant that those enrolled when CEC made its announcement could complete their programs at the campus where they started, rather than scrambling to transfer credits that other institutions would refuse. Faculty and staff lost their jobs as the campuses wound down through 2017, but the students — the people a closure most often strands — were largely allowed to finish.

What they finished with was the harder question, and the $40 million settlement had already answered it: a credential whose market value had never matched its price or its prestige. Many Le Cordon Bleu graduates carried debt for a diploma that left them in the same low-wage restaurant jobs they might have reached without it. The brand itself simply withdrew across the Atlantic; the Paris academy that lent its name to CEC continues to train chefs worldwide, untouched, while the 16 American campuses that traded on that name became a closed chapter in the larger story of how federal aid, a prestigious license, and a publicly traded operator combined to oversell an expensive education to students the math was always going to fail. The gainful-employment rule that helped end them was itself later weakened, then revived — a regulatory tug-of-war over precisely the harm Le Cordon Bleu's graduates had lived.

Lessons

References

• Career Ed Closing Down Le Cordon Bleu Operations Inside Higher Ed
• Career Education Announces Planned Discontinuation of Le Cordon Bleu Operations Business Wire (Career Education Corporation)
• Le Cordon Bleu Will Close All U.S. Schools BuzzFeed News
• Le Cordon Bleu culinary school to close all 16 U.S. locations, 3 in California KTVU FOX 2