San Francisco “Among the Toughest Places” to Run A Restaurant

It’s no secret that California and its flagship cities have become notorious for burdensome mandates. California also has the highest state minimum wage in the nation at $16 per hour effective January, with many of its cities raising rates even higher.

San Francisco currently requires a minimum wage of $18.07 per hour, with no tip credit allowance. That rate will be adjusted even higher in July based on inflation.

For years, restaurants have begged for relief from a constant uphill battle to survive, calling the city’s regulations and mandates “death by a thousand cuts.” Eater San Francisco even characterized recent waves of restaurant closures as a “death march” caused by excessive mandates.

Now, the San Francisco Chronicle says the city is “among the toughest places to make restaurants work.”

Through years with one of the highest local minimum wages in the country, San Francisco restaurants are speaking out about the stark realities of opening a restaurant and surviving in the City by the Bay:

Azalina Eusope (owner of Tenderloin) details her rising expenses just to keep doors open:

“Because she cares about them, and because it’s incredibly difficult to find staff, she pays her employees well: the biweekly payroll for her six employees is $8,000 to $10,0000. The water bill is $2,000 a month. Credit card fees and tech, like Spotify and an online reservation system, add $600 or more per month. A state tax on “unsecured property” like tables and chairs (which she already paid sales tax on) cost her $3,000 a year. Compostable, environmentally friendly serviceware for grab-and-go meals amounts to $1,000 to $1,200 per month. Since it costs roughly $17,000 just to apply for a liquor license that you might not even get, her restaurant serves just beer and wine. Applying for this license costs $1,000 and renewal is $600 annually. On top of all that, the costs of raw ingredients, like cardamom and fresh ginger, has skyrocketed since the pandemic began.”

“Eusope needs $70,000 a month in sales just to cover her expenses and break-even — a Sisyphean task that is only growing more difficult.”

Tracy Goh (owner of Damansara) on how to adjust to increasing costs:

“Raising prices has proven to be a non-starter. It’s hard to imagine how a person can make this work.”

Blake Kutner (business development director for restaurant “incubator” La Cocina) on sales falling short of rent prices:

“For many places, rent is close to what it was pre-pandemic even though sales might be half.”

Encapsulating the increasing difficulty of staying afloat in San Francisco, the Chronicle’s Soleil Ho writes:

“The impossible realities of trying to navigate this city’s economic and bureaucratic challenges have downstream effects…I think of this whenever I dine out at bigger restaurants and see the “SF Health Mandate” tacked onto a bill as a separate charge in relation to the price of food: Owners don’t fold it into the menu because, similar to Goh and Eusope, they’re afraid customers will criticize them for raising the prices.”