Has San Francisco Reached Peak Restaurant? An Investigation

Talk to any restaurateur for a while and two things are bound to come up: the labor shortage and rising wages. It’s what keeps coming up over and over at industry panels, what chefs can’t stop talking about, what is affecting the price of your food. San Francisco magazine’s Rebecca Flint Marx dug deep into the complex issues that stand as the number one hurdle for our city’s restaurants in an impressive 4,586 words. That number make you balk? No worries; we TL;DR’ed the top quotes for you.*

*(Though, for the record, it really is worth reading the entire thing, too.)

The Problems

"From lease signing to opening, we average about 10 weeks in Portland," ChefStable owner Kurt Huffman says. In San Francisco, that wasn’t the case: The Pearl’s permitting process took more than 15 months. "So, step one, plan on it taking five times longer than any other city," he says. "And step two, plan on spending a lot more money in that process than anywhere else."

"I don’t know who you hire to be a dishwasher or line cook in San Francisco anymore, because no cook or dishwasher can live here," Huffman says. "In Portland, keeping chefs is by far our biggest challenge. When I superimpose that on the San Francisco market, I feel like, oh my god, how do those guys do it down there?"

"Everyone is looking around, wondering who it’s going to be. There is going to be a correction in the market at some point. It’s just not sustainable at this level."

"I’ve had three hostesses stolen; they’re being paid $85,000 a year to be receptionists at tech companies that shall go unnamed," Big Night Restaurant Group’s Anna Weinberg says. "And by the way, I can’t tell them not to do it—the lifestyle is so much better."

But there’s also the sense that we’re due for, if not an outright restaurant rapture, what Robert Wright, general manager of Octavia and Frances, terms "a culling of the herd." The numbers aren’t adding up, particularly for traditional, service-intensive, mid-priced-restaurants. "Absolutely, people are worried," the GGRA’s Gwyneth Borden says. "Everyone is looking around, wondering who it’s going to be. There is going to be a correction in the market at some point. It’s just not sustainable at this level."

The Potential Solutions

"When new restaurants open, they have the advantage of writing a business plan where the dishwasher makes 15 bucks an hour," says Wise Sons Jewish Delicatessen co-owner Evan Bloom. "So my dishwasher is like, ‘I can go work somewhere else for $15.’ And I can’t just ratchet up my prices. So you’re forced to decide willy-nilly: Well, I’ve got to give people raises, and I don’t think it’ll work with my cost model, but I’ve got to stay open. So we try to find other places to cut." One tactic Bloom has used is to give a raise that carries with it more responsibilities: "I’ll say, ‘You’re not just the dishwasher now. You’re a prep cook, too.’"

Some are skimping on previously gratis items—"I don’t give pickles to everybody anymore," the Sentinel’s Leary says—while others, like Rose Pistola owner Laurie Thomas, are slashing valet service. "So maybe I lose customers that drive up from the Peninsula because I don’t want to write a check for $4,000 each month," she says. "But there are only a few levers that you have."

"Our service charge–slash–revenue sharing system gives us an advantage and protects us against the increase in minimum wage," says Comal and The Advocate co-owner Andrew Hoffman. And while several Bay Area restaurants have made similar forays in the past year only to revert to a tipping system after being crippled by higher taxes and defecting servers, Hoffman insists that a 20 percent service charge has been a success for his businesses. "Our staff is way into it," he says. "It’s nice to be able to hire people and show them what they can expect their income to look like." Still, he says, it’s come at a greater expense: "We’re less profitable, period."

"You’re going to have to pay double for your steak if you want to live in this fabulous city."

"I’m a firm believer that the ability to do volume consistently and successfully really solves a lot of these issues," says Souvla’s Charles Bililies, who is planning to open a second Souvla on Divisadero this summer. "I truly think it is one of the only ways to succeed in a high-cost environment like San Francisco."

"If we have a team of cooks prepping an order for 100, they can serve them with less labor hours than three employees at the register can serve 100 people," says Matt Semmelhack, whose portfolio includes AQ and Bon Marché. "It’s not glamorous, but it’s an adjustment. If you’re a restaurateur today and not using the hundreds of apps available to you, then, for many reasons, you’re behind."

The Consumers

"People are like, ‘Aren’t you precious, selling $5 croissants.’ Well, no, we’re just trying to pay our bills," says Marla Bakery’s co-owner Joe Wolf. "But try to explain to someone the idea that organic butter is five times the cost of conventional butter. They don’t give a shit. They just see it as being four times as expensive [as another croissant]. People have their limits they’re not going to go above, and they don’t understand why they would need to."

"[Customers are] going to have to stop asking us to subsidize their lifestyle," Weinberg says flatly. "You’re going to have to pay double for your steak if you want to live in this fabulous city. I can’t absorb it anymore."