San Francisco Mulls Legislation for Ghost Kitchens and Food Delivery Services

A San Francisco supervisor is summoning representatives from delivery service and ghost kitchen companies to City Hall next month, for a hearing to determine the new enterprises’ impact on local restaurants.

At a Board of Supervisors meeting in January, District 11 Supe Ahsha Safaí said that he’d decided to convene the hearing to determine the “effects of on demand and delivery companies’ platforms like Postmates, Uber Eats, Grubhub, Caviar, and the impact that they are having on small businesses here in San Francisco.” And the effects, he intimated, aren’t always positive, as “I have heard from countless small business owners that...the rates at which they are being charged for these delivery services once they become part of their business model are having a significant impact on their bottom line.”

Speaking with Eater SF on Wednesday, Safaí took a slightly more equitable tone, at least when it came to delivery services. He says that a lot of restaurants have had the volume of orders they’re fulfilling go up, and that spots like one he frequents in West Portal say that half of their business is from delivery services. But once they join the services, Safai says, “the fees can start to get exorbitant,” and it becomes “harder for the businesses to pull back.”

A local restaurateur behind two fast casual San Francisco spots agrees. (As their restaurants do business with a number of delivery services, they asked to remain anonymous to allow full candor.) “Our food costs are lower than some,” they said, “so the 30 percent commission that Uber Eats charges me doesn’t completely kill our margins — and the volume it brings make it worthwhile.” They say that other services charge around 20 percent, which is more affordable — but that those services (Postmates, DoorDash, and GrubHub) don’t provide as many orders, which makes relationships with them “less worthwhile.”

According to Safaí, city agencies like the Office of Economic and Workforce Development (which is tasked with fostering small business and “making our neighborhoods more diverse, healthy, and vibrant”) will attend the March 12 hearing, as will the city’s Office of Economic Analysis. San Francsico-based Uber Eats, DoorDash, and Postmates are also expected to dispatch representatives. Safai says that restaurant owners are also invited to the meeting to speak their piece. Safaí’s hopeful that all the stakeholders can engage in “an honest conversation,” and after that...

“A lot of things can happen,” Safaí says, resisting Eater SF’s efforts to glean his opinion on the food delivery business. “I’m going to reserve that for now, because I don’t want a pre-determined outcome,” he says. “I really want to hear what small business and the industry propose, and really listen to ideas. We’re going to create policy and legislation based on that.”

But while Safaí remained moderate on the topic of delivery services, the tone turned when ghost kitchens — which will also be discussed at the meeting — came up. Of those businesses, which the anonymous restaurateur characterized as “food from a warehouse with a cute website,” Safaí asked if the delivery companies that work in partnership with ghost kitchens are “fostering an environment where we get people out of their houses,” or “are we going for a model of business where people just remain in their homes?”

A cycle of in-home food delivery from these kitchens could have a “negative impact on neighborhood vitality” Safaí said (some might argue that it already has), and the anonymous restaurateur says that the rise of ghost kitchens also threatens their economic stability. “Overhead-wise, I can’t compete with a ghost kitchen. They’re all huge commercial kitchens that are way cheaper to run than a restaurant, and they have no impact on the community.”

According to Safaí, those concerns mean that the city might be ready to crack down on the ghost kitchen game. “San Francisco’s not going to allow [ghost kitchens] to put our vibrant restaurant industry out of business,” he said. “We will not allow that, for sure. They’ll have seek other environments to make their money.”

The question, of course, is if that’s actually an option. Even the restaurateur admits that the ventures “are legally run businesses, subject to the same rules and inspections that we are.” (It’s true: Every San Francsico ghost kitchen address Eater SF is aware of can be found in the Department of Public Health’s permit and inspection database. All are in compliance.) “I don’t know how the city thinks they can regulate ghost kitchens, or even limit them, without getting into a fight that they’ll end up losing,” the restaurateur says.

Perhaps all will be revealed after the hearing, which is planned for 10 a.m. on March 12, during the Board of Supervisors’ regular Public Safety and Neighborhood Services committee meeting. The meeting will be held in San Francisco City Hall, Committee Room 263. The public is welcome to attend.