SF restaurants are suffocating
medium.com
medium.com
She's comparing apples and oranges, and doesn't even realize it.
$3,447 is the asking price for apartments now on the market. $1,600 is the median rent price people are actually paying, including people with rent control and affordable housing. People who have been living in rent-controlled apartments for many years pay a fraction of the current market rate.
As a result, her second and third conclusions don't follow. If this is the kind of critical reasoning that comes with "an MBA from a top school, the rigor of an engineering education and a decade and a half launching and managing some of the most successful businesses for Google and other tech companies," it's worrying.
In fact, it's easy to find actual market rate rent prices from 2016. According to the sites below, it was around $3,500, so rental prices have remained very flat over the last few years.
[1] https://www.zumper.com/blog/2016/05/zumper-national-rent-rep... [2] https://www.rentjungle.com/average-rent-in-san-francisco-ren...
Which is why this problem is a slow burn. It's not like everyone was evicted and the worker pool cratered overnight. But as existing low/middle income workers leave for whatever reason, they cannot be replaced. Their numbers are on a one-way ratchet downward.
I think the median rent also includes people sharing a 2/3/4 bedroom home. There aren't that many 1 bedroom apartments to go around in SF, as I understand it.
On the labor side, there's enough labor competition to drive salaries of line cooks to $50k/year. That's about $38k post-tax, which even after spending spending $19k/year in rent (split a two bedroom maybe 40 min from downtown) leaves $19k. Not great, but mind you the average line cook in the US is pulling $30k/year pre-tax (24k post-tax) -- the COL difference is pretty much compensated for.
Where things break down badly is with older, more experienced workers that have/might have families (e.g. the cook with 4 kids in the intro paragraph). Space comes at a premium in the Bay Area and if they prefer to not be crammed in to a small place, the salary an experienced worker can make isn't going to cut it to cover the desired marginal living space.
The final piece in the puzzle is that the desired salary multiple of these experienced workers (over entry-level ones) is higher than their productivity gains. That is, if the experienced cook needs twice as much take-home ($110k pre-tax) as the entry-level one (due to family needs), unfortunately, there is insufficient customer demand to pay 2.2x as much for food for this higher quality. (but mind you much more base demand in SF than elsewhere!). Result is that experienced folks move to areas where housing costs (per-sq feet) are lower as a percent of salary.
Net effect might be that the dominant strategy for someone in the restaurant business is to start out in SF but later move to a somewhat lower COL area. With such a strong economic incentive, restaurant composition will likewise follow; city policies, etc. are likely secondary.
In your example, you have the worker coming out okay or possibly slightly ahead (compared to lower COL areas) by spending half their net on rent. But by this 3x rule the landlords renting a property that costs $19k/yr would want to see an income of at least $57k and the worker wouldn't qualify.
If working class adults with families aren't able to afford to raise a family in San Francisco and therefore move to lower COL areas, what's the future of San Francisco?
Where will future inexperienced workers come from if not from today's working class families?
Or, in even shorter terms, high land rents divert value away from skilled workers and towards largely parasitical speculators.
> My reactions were mixed on my first visit, but by the third, I was a major supporter. Flavors blossomed, and I could sense the kitchen becoming more confident.
I went early on, found the food to be reasonable but not great, and ultimately didn’t return. Roughly, she shot for Mourad-level prices, but without the track record or execution. I grew up with this food, and while (again) it was okay, it simply wasn’t great. For $16, that should be an amazing dish of mujadara.
I assume many people felt that they’d rather get tastier middle eastern food, rather than feel hip with the pretty decor. I’d love to see an upscale middle eastern restaurant succeed, but the food has to come first.
[1] https://www.sfchronicle.com/restaurants/diningout/article/Ta...
Presumably other restaurants are thriving? Are we sure this particular one just didn't have the right business model, like most attempted restaurants don't? The restaurant industry is notoriously competitive, and the customer is always right -- you've got to give them the food they want (not the food you think they should want) at the location they want at a price that's competitive.
As long as plenty of other restaurants are managing to pay their staff enough so that they'll commute... and it doesn't seem like restaurants are disappearing from SF... then isn't this just the case of a bad business plan, or product-market-mistmatch, for this one particular restaurant?
Maybe some are, but a lot are not. From my experience the vast majority in SF only last a few years. I talked with a friend who lived in SF for 30 years and he said it's pretty normal to see restaurants regularly go out of business. Supposedly because renting the space is so insanely expensive. But there's always another sucker who thinks they can win this game.
I think it’s because it has relatively low barriers to entry, is something a lot of people want to do, and it seems easy.
This is how the restaurant industry works everywhere. It's how most small businesses work.
Once they do start to disappear en masse the city will be a less desirable place to live in, rents will drop and restaurants will be able to move back in -- AKA the flip side of the law of supply and demand.
Right now there's a major imbalance with all the Silicon Valley folks wanting to live in the city causing the pricing structure to get all out of wack but eventually it will stabilize as these things tend to do. Just sucks if you're the one trying to keep a service oriented business running in the current market.
Not paying peanuts still doesn't mean it's enough.
If your friend can't find enough people then the wage he's paying is less than the market-clearing price.
Doesn't matter if you or I think their pay is peanuts or not.
Prices are high enough now, where we almost never eat out anymore. Even at the movie theater, I skip the 8$ popcorn and bring some snacks in a bag.
Not really. I haven't eaten from a restaurant or a takeout in four years, maybe a few times in the last decade. When on the road I sometimes eat ready made food from a supermarket, but mostly bring something home prepared. Restaurants are a convenience, a luxury even.
It isn't an austerity measure for me though. I enjoy the process and get most meals prepared by someone who really cares about what I want and is the world's leading expert on that subject.
I'm seriously not trying to poke fun but do you mean your mother?
Just be honest, the meal needs to cost more because the cost of production is more.
At the end of the day, it's all about execution, and unless you're able to fully commit to abolishing tips, don't bother trying.
The "healthy SF" 4% mandate is especially egregious. It's simply a common way for restaurants to falsely advertise prices. When I see it, I'm left with a strongly negative impression, and I tip significantly less as a result.
However, that said, restaurateurs need to realize that it changes the business model. Their waiters are no longer de facto independent contractors that have aligned incentives. Instead they are regular wage earning employees that need more management attention. It's fairly easy to see the impact if you go to a restaurant with a service included threshold (e.g. party of six) and try it both ways.
Maybe some day we'll get it and sales tax to be part of the list price. But that will probably take legal force.
The problem is that every actor - from the diner to the server - is so used to the tipping system. Diners won't factor in the fact that they don't have to tip, because they will probably still want to tip (as mentioned in the article, a lot of people like the feeling of control tipping gives them). Servers won't like it because unlike a service charge or tip, that 20% baked in isn't only for them and they will feel like the owner is shorting them compared to tips (even if they aren't).
Path dependence is hard. I don't know how to fix this situation.
That said, a friend who runs one of my favorite places in SF posted this article to Facebook and said it's really spot on. Diners expect food to be cheaper than the labor market permits.
Since you lived nearby, I always felt that the location was unlikely to succeed. Is there actually a lot of foot traffic there?
The places that are succeeding are all second or third efforts - maybe experience really pays off?
Plenty of restaurants are doing fine; she simply didn't produce what people wanted.
Think of a restaurant owner more like the founder of a start-up. They're literally responsible for everything. Or should be, if they have any sense. Outsourcing every single aspect of a start-up isn't a great idea, is it?
Ideally, a restaurant owner creates the concept, menu, picks the location, hires staff, trains staff, sets service standards, cooks or interacts with guests, orders product, sets prices, etc... You can't just hire people and expect success. If you're a first time owner and not in the restaurant at least 70 hours per week, you're probably going to fail.
SF has incredible 4-5 star restaurants of all price levels. So who wants to eat at a very expensive 3.5 star one when there's a Michelin Star place 5 minutes away?
If SF's problems are so insurmountable, how do other good restaurants do it, even ones not owned by some major group?
I've always wondered where the food in a Blade Runner-like future would appear first and what it would taste like—and I genuinely believe it's here.
Partly that's due to a demographic reality: By some measures, Houston is the U.S.A.'s most ethnically diverse city (a bunch of New Yorkers just choked on their halal kebabs reading that, but it's true), and when you get a collision of immigrants, the food scene is guaranteed to be bonkers.
Houston also has cheap commercial and residential rents—oh, and no state income tax—which means broke-ass cooks and chefs can afford to live and open here. Zoning laws are more permissive than an Amsterdam brothel. And customers have cash to spend.
Source: https://www.gq.com/story/david-chang-houston-food-city
Added disclaimer- I grew up in SF and left in 2005. I live in Houston now.
Houston is a crossroads of different food cultures. It is the South, the West, and the bayou rolled up into one. At first it was Cajun, Creole, Soul, Mexican, and it has been like that for 50 years. But in the last 25 years, lots of more has mixed in like Vietnamese, Central and South American, and a significant New Orleans diaspora due to Katrina.
Plus, you have a car culture where it isn't uncommon to travel 20 miles in 25 minutes for a weekday dinner out. There's so much money sloshing around that lots of folks eat out every night. That plus a healthy supply of labor means it is a very good restaurant city.
Illinois is also home to some of the most violent and poor metropolitan areas in the country. East St. Louis which ranks in around 18x the national homicide rate and South Side Chicago which is consistently one of the most violent places in the country.
The way that some restaurants blame their success and failure on the high cost of labor makes about as much sense as when people review restaurants on Yelp and complain how surprised they were by the bill at the end of the night. It's a math problem. Other people are managing to balance their costs and revenue and stay in business.
[1] https://www.sfchronicle.com/food/article/2017-wasn-t-the-gre...
Hypothetically, restaurant A and B are the same except A is better organized and your food gets to the customers table faster and at the right temperature. Or restaurant B’s staff doesn’t notice when your wine glass is almost empty and doesn’t sell that second or third glass. Little things can make a huge difference in revenue and ratings, and yet you can see restaurants making stupid mistakes all the time.
Q: Is keeping up the quality going to be enough, though, when it appears crowds seem to demand "the next shiny thing" above other factors (including, perhaps, quality)?
She doesn't realize that she has a role in this as well? How much did she pay for her house/rent? Did she outbid someone in cash?
Yes, I realize the supply side is a major issue to. SF should build more.
It's just the finger pointing (those evil landlords with their Ellis evictions!) made me chuckle a bit.
More specifically, why does the cook only make $24 per hour while the waiting staff gets $42-48?
I understand that San Francisco is an expensive city, but doesn't that simply mean you should raise your prices? Of course that will mean poor people won't be able to eat at your restaurant, but it sounds like poor people have trouble affording anything at all in San Francisco anyway. Clearly the only viable market to focus on is the rich people who can afford to live there.
I don't mean to be callous about this: it's terrible when a city is so expensive that only rich people can afford to live there, and kicking poor tenants our of rent-controlled housing should be illegal. But if your employees are leaving because you don't pay them enough, the solution seems obvious: pay them more. Raise your prices correspondingly. If the market can't bear those prices in such an expensive city, then clearly there's not enough demand for restaurants in San Francisco, which would be sad, but it may be the reality.
Meanwhile, the city would do well to invest in some affordable housing if they don't want to turn into a rich people's ghetto.
Many expensive restaurants in SF are packed and it is quite difficult to get a reservation. There is clearly market demand in that segment.. if the food is good enough.
The low or mid-range segment demand is likely shrinking. Why go out to get mediocre food when it is increasingly easy to have food, groceries, or meal-packs delivered to your door?
That was my takeaway from the article as well. Does anyone know if this par for the restaurant industry? Does FOH make more than the line cooks?
Lack of affordable housing is doing the suffocation. America was built by a strong middle class, and SF is setting an example of what happens when people stop caring about the middle class and $70K/year becomes low income.
I’m not holding my breath for my European government retirement benefit to actually be useful in thirty years, to be honest.
Engineers outside of American tech centers are generally highly underpaid.
That said it's easy to look over the skills of some of these folks. Being able to be gracious and provide a good customer experience for 8+hrs/day in a hectic environment requires skills that take effort to learn and maintain.
"With the service charge, our servers were making $38 per hour (hourly base + hourly service charge) or the equivalent of $70,000 to $80,000 a year if you were working for us full-time."
In comparison with my more experienced co-workers that were offering cut-rate deals, I garnered more respect and support, had higher client satisfaction, and almost every client I had decided to stay in my book of business during transitions.
Charge a lot. Be good enough to deserve it. Use that impostor syndrome to up your game.
Part of my issues also were ADHD made it really hard to stay on task and focus but now I'm on meds for that and I'm super focused when I'm in my office, I'm also really neat and orderly around the house lol.
I picked vue because I prefer it's templates to jsx, and I like vuex and it's sort of well documented for use with laravel. But if I hadn't picked vue, I'd have gone with react because of market domination.
I'm currently even thinking of pivoting from laravel to node based backends because it seems js devs make all the $$... and I'm not so locked into laravel that I can't move or jump to other frameworks.
The more you know the more you can charge...I have many friends who target a specific vertical like Fintech that charge between $100-200/hour for js/node development as freelancers. Working on teams I've made around $35/hr, solo depending on the client I've pitched 40-60... I work w/ a lot of small businesses who that's on the high end for them --they're used to wordpress devs at $25 or less per hour on upwork.
Clojure being a bit obscure though, I think freelance would be harder to secure, but a full-time gig at a shop/agency or startup who's apps are built on that framework would be easier, as long as you have a good portfolio and very active github showing activity w/ that.
What industries do you understand? How can you add business value?
How do you pay for housing in SF with $900/mo or less?
If it's a standard 40 hour work week then I agree - it's much higher than I thought.
Not to mention, good waiters know about food, wine, spirits and have the soft skills required to put up with people who frequent restaurants.
Anyhow, barrier to entry is a bad excuse. Education does not equal a good living.
Wow. Or you could actually pay them a living wage that doesn’t require public subsidy. If this were Walmart making this statement they would be crucified.
https://www.learnliberty.org/wp-content/uploads/2016/08/welf...
If you are a single parent with two children you get the same net income at $30,000 as at $80,0000 due to benefits getting cut off above $30,000/year income.
The logical policy would perhaps be to equalize income to a certain treshold depending on available funds and budget on a particular year. This would also make investments in transits and housing more stable for everyone involved, simplyfing business decisions and quite possibly increase long term profitability.
It has this effect, but I'd blame the need to simplify over malevolence.
SF's below market rate housing is a great example of a huge welfare cliff. Make under $60k? You can get a 1 bedroom for $1600/month. Don't? Join everyone else fighting at $3k/month or what not.
So yah, it's a bit ridiculous that we have a system where someone making $59k does better than $70k.
But it's really hard to administer everything as a phase-out system, especially with non-cash benefits. (currently the apartments are required to charge X rent.. so what should happen to the person making $70k/year?)
Hence, these blunt-edge qualifications.
The original paper[2] is interesting for a few reasons. First, it identifies the problem on page 15 as steep drop offs in some welfare programs, instead of a more tapered reduction in benefits. Second, it's apparent that the linked image is the most extreme scenario - which applies to only a small segment of the population. Indeed, once you look at the 2-parent household example on page 30, the cliff is much less severe. In the end the paper recommends giving individual states more power to set benefits in a way that tapers off the benefit received and removes the welfare cliff.
What neither of these sources mention is the other, tried and true way to address the problem: making many of these benefits universal. The obvious example is healthcare, where those making 30k/year and 120k+/year get access to the same public system. But other public benefits like public childcare are not unheard of[4].
[1] https://www.learnliberty.org/blog/the-welfare-cliff-and-why-...
[2] https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2014...
[3] https://www.learnliberty.org/blog/the-sweet-cakes-case-let-t...
It's a problem if you have children to support.
Paying restaurant workers a 2-3x living wage is a fine idea except that it would raise the price of a pork chop to $45 and close the restaurant. Darn macroeconomics!
I'm not sure it is technology folks or millennials, but I find there are increasing amounts of people who want the "best of" everything...shoes, falafel you name it. People aren't okay with just a "good experience", they want the best experience. As a result, I think there are plenty of people who aren't very forgiving. Especially if you eat out regularly and have a lot of things to compare it to.
Oh yeah and the housing situation is broken.
A similar problem with sky rocketing housing cost occurred in the 70's True rent control was established in the communities that needed it and the threat of it in other communities stabilized prices. And California 1972-1995 is unambiguously a success story. In '95 Costa-Hawkins passed, and prices have been rising faster than the 1970-1995 period ever since. With an accompanying rise in homelessness.
Particularly interesting about Costa-Hawkins, it was soundly defeated when written as proposition measure and only passed the legislature by one vote and with strong backing from the real estate industry. But today it has somehow become politically impossible to repeal. Unless California has become a lot more conservative since 95, it is clear money in politics and political advertising are to blame.
Rent control, which Costa-Hawkins limits, is a form of artificial price controls that remove a bunch of housing inventory and the incentives to create more. But it's a mere footnote in the margin of Prop 13, a state wide regime that has been in place twice as long and has the effect of removing a bunch of housing inventory and the incentives to create more.
New York has had rent control for most of the 20th century with 2 million units still under rent control. Yet it has plenty of development.
And as I point out, housing prices rose slower and housing supply was greater before Costa-Hawkins than they are now.
Furthermore, renters favor rent control while landlords oppose it. So whatever the mechanisms, clearly it benefits renters at the expense of landlords, clearly by reducing housing costs.
And while it is definitely worth adding as much housing as possible, all new housing will price at the top of the market. And at this moment there are thousands of high end units with vacancy in SF and essentially no low priced. So clearly this does not relive pressure on middle or low end housing.
Repealing prop 13 would raise revenue, much of it from large land holders (of which Howard Jarvis was one) so that's nice. It would lower mortgage payments by the amount which property taxes rise thereby converting some mortgage interest into tax revenue. So that's nice. And it makes it easier for new buyers by driving those who can't afford the higher property tax out of their homes. The advantage of this is less clear.
The main problem is that it is difficult for people to believe that which is in their financial interest to disbelieve.
this is a questionable line of reasoning. it's not uncommon for people to unknowingly support policies that don't actually benefit them.
the only group of people who rent control clearly benefits are people who already have leases. it's not at all obvious that it helps new renters or people who want to move to a different place at all. it seems plausible at least that people in the business of renting buildings (ie landlords) are the group with the most information about the market, and are therefore in the best position to see the distortion.
Could you point to the evidence that you think disproves this?
Also, there is no mention of trying to raise the prices of their products in order to pay their employees a living wage. I guess that could mean you go out of business if your competition offers a similar product but doesn't raise prices. But I would personally be ok with that. Otherwise what's the service you're really providing? Guilt free eating for your customers who you shield from what those prices are paying the welfare dependent cook? I'm ok with not being in that business.
SF needs to adopt more Japanese style ordering machines. You choose and pay up front. When you are done you just leave. It's beautiful.
Sure, a few places that have those machines have tables but it's still a different vibe from a restaurant.
The bigger issue with those particular machines is they aren't compatible with western or in particular USA culture. Japanese generally don't ask for exceptions. Westerners often ask for tons of exceptions and substitutions either for medical reasons, religion reasons, personal convictions, or preference.
Go sit down, order from kiosk at table (or from kiosk up front). Panera for instance pretty much does this now.
It seems to work. We Americans can adapt!
SF needs to adopt more Japanese style ordering machines, density, public transit...
I went there last night. Looked like there was one guy working by himself. He poured my drink and gave me a buzzer. When my food was ready, I went back to pick it up.
It looked pretty clear that the owners figured the cost of the pager system was cheaper than having a second person working.
This is at an indoor soccer place, where he could have somebody from the front desk help cover when he needs to use the restroom, etc. Cooking is mostly putting stuff into a deep fryer.
At a different restaurant, the pager system still might mean going from cashier, cook, and runner to just cashier and cook.
I feel like North American restaurants are only willing to implement these with awful touchscreen UX, like the McDonald's touchscreen displays.
I don't know how the economics work out in Japan. I'm sure a large part is cultural and shared knowledge.
Maybe there's an opportunity for vendors of Japanese ticketing machines to jump into the San Francisco market??
It's the supermarket self-checkout UX horrible -> I'm automatically treated as a criminal because I can't checkout the next item before bagging the first. I have two hands darnit!
My annoyances are particularly as compared to Japanese-style ordering machines, which in my experience are simple, reliable, fast, and easy to use. My complaints, off the top of my head:
* Responsiveness to touch feels about a decade behind consumer capacitive touch displays.
* Gratuitous animations are slow.
* For a simple order where you know exactly what you want, there are far too many steps. (IIRC, for a black coffee, the button tapping flow goes something like this: English -> Hot Beverages -> Coffee -> Small -> Add to Cart -> Checkout -> Paying with card -> Paying with Bank card.) And you have to deal with the slow/bad touch response and animations for every one of these screens.
* There's no way to avoid the machine spitting out a BPA-covered thermal paper receipt. (Other than the receipt dispensation being out of order, which happens pretty frequently.)
> It's the supermarket self-checkout UX horrible
Oh, we have our own egregious example of that up in Canada, where the largest grocery chain in the country got rid of most of the text on self-checkouts in favour of just icons: https://www.blogto.com/tech/2018/05/loblaws-self-checkout-sy...
You shouldn't have to waste mental bandwidth on that needless bullshit - the only reasons are price point sleaze.
Personally, I prefer the ticketing/ordering machine. Katz's Deli in NYC famously uses a ticketing system.
Maybe the state of the restaurant economy is fine – I don't doubt that – but what about the service staff who make it up and work there daily? Or is the solution just to get a job in tech?
If we're advocating for market-based approaches, though: lower the cost of housing by building more housing, and building it fast. Both affordable and market rate. That would solve a lot of the Bay Area's problems.
Economics is a tool we can use to improve our society in equitable ways, not some omniscient diety we have to worship blindly.
And that’s still my belief after studying economics, too.
Family and friends. Support networks are vital for every human.
Familiarity with local transportation. SF/the Bay Area’s bus and rail network makes it possible to live without the expense of a car, a necessity in most other cities in the US
Professional networks and contacts, which exist even for blue-collar workers, and, admittedly with no data to back this claim up, may be more localized for someone who doesn’t hold a college degree and hence doesn’t have a name or reputation to fall back on when starting from a clean slate.
Demographics. Sure, many places may be cheaper to live, but most of them are definitely not as welcoming or safe as San Francisco for, say, a trans woman of color or a gay white male
And, last but not least (unless you think everything must have some quantifiable value that is): sentimentality. Would you really like to be forced out of your home involuntarily?
If you take one of these people out of their community they grew up in and throw them somewhere in the middle of the Midwest, do you really think they would thrive there lacking everything they had in San Francisco? Do you think displacing the problem until it's out of sight is both sustainable and humane? It's a fallacy to think the majority of people who can't afford to live there are the one's moving there – it's usually the peoples whose livelihoods were long established there that are being forced out.
A much simpler solution to trying to tackle all of these problems at once is to, well, build more housing.
Make a better product that the market will reward, and then either go high volume and lower costs or go high price lower volume for a premium product and increase your margins. Either way, you have to have a viable business model that works for the market as it exists not some fantasy market that the author things it should be. No one is saying rents in sf aren’t high, or that there aren’t real problems like the author is pointing out. There is a crisis of affordability. The question is, can your business model work in those conditions? Sounds like the answer is no. Sorry to be harsh, but the market is harsh. That’s the point.
Wow, the charitable impulses here are overwhelming. You'll pay him more, as long as it doesn't lift him out of poverty. Wow. Wow.
If you want more staff, pay staff more. This easy equation has been understood for thousands of years but business owners find it difficult to comprehend when it is their business.
If a salary increase makes him ineligible for the services that he's using to stay in the city, the higher salary could be an effective cut in pay.
While it's possible to pay him a large enough salary to make up for those services, it's likely more than the business can afford.
I wouldn't call that innovative. Innovative would be paying a fixed salaray which allows your staff to live in SF without relying on tips.
Others have done it in the US too. In lots of countries the world over, tipping is a plus, not a requirement.
https://www.nytimes.com/2015/10/15/dining/danny-meyer-restau...
I personally think that to get zoning approval to build an office tower in this area, you should need to get someone to agree to build an apartment tower nearby with a similar number of units. I mean, I'm not saying they need to be owned by the same people or that those apartments will be occupied only by people who work in that office building, but you need housing nearby where there are jobs.
Incidentally, I think the young new-money transplants that the author trashes in her article are likely to be more sympathetic on this issue than SF native homeowners.
The next recession is going to be brutal.
[1] https://www.politifact.com/california/statements/2018/dec/18...
> Cheryl Young, an economist for Trulia, found that in nearby San Francisco, only 0.1% of restaurant staff can find affordable housing in the city, with the average monthly rent for a one-bedroom apartment at an insane $3,447.
$80,000 is vastly too much pay for restaurant servers.
It's understandable that if one-bedroom rent in the bad part of town is $2447 that restaurants simply can't exist in this economy. That's just the way it is.
It probably doesn't help that San Francisco has been shooting themselves in the foot over housing for years. This link from a couple weeks ago has a lot of details on that: https://news.ycombinator.com/item?id=18778496.
If the author meant 2+ hours round trip: Lots of tech employees making 200k+ do this regularly. For example, driving from your house to the Fremont BART station and taking the train into downtown San Francisco can easily take 1 hour and 15 minutes one way.
If the author meant 2+ hours one way: There are affordable areas outside of San Francisco's borders that have a reasonable commute. This is especially true if you're willing to have roommates, although that would be more difficult if you have four children like one of the employees mentioned in the article. Oakland comes to mind - you can take the BART from Oakland to the Mission (where the restaurant in the article is located) in ~35 minutes.
While I do think that there is a housing issue in the Bay Area, I don't think the lines you quoted from the article are fair.
At most you could claim: "A worker in food service with family will not be able to afford living in SF, as a restaurant will not be able to pay the needed salary without raising prices above what the market will bear"
Here you go: https://techcrunch.com/2014/04/14/sf-housing/
All the numbers and data have gotten worse in 2014.
Oh yeah, and SF's onerous rules are making it even harder to expand the housing supply: https://www.bizjournals.com/sanfrancisco/news/2018/12/19/hou...
Long commute times makes it far more difficult to hire. Why wouldn't an employer care about that?
Me: Think about what you just said.
My takeaway from the article is that all "middle class luxury" businesses are slowly being priced out of SF, which is a non-issue for everyone living outside of that bubble but should be of enormous concern to those banking on the future success of the area. Eventually no one will want to move there for a price employers can afford to pay. In the grander scope of things, I'm actually supportive of the concept of fast food and cheap dine-out businesses going under because the habits people form around them are killing us as a people.
For the sake of argument, let us imagine that skyrocketing labour and housing costs make the traditional sit-down restaurant extinct in SF (or reduced to a handful of ultra-high-end establishments). This in turn makes being a waiter or a line cook no longer a viable profession in SF.
If - and I recognize this is a gigantic if - enough of the massive amount of wealth being created by the SF tech industry can be taxed and shared with the people impacted by the loss of those jobs, so that they can continue to maintain a decent standard of living, is there actually a problem?
When a waiter loses their job, I don't imagine it's the loss of waiting on tables that puts them in a tough spot. It's losing their income and their ability to afford food and shelter. The problem now is that the externalities of the tech industry fall upon low-wage workers whose jobs become economically unworkable. The rich are getting richer and the poor, poorer. But on the whole, total wealth is increasing.
Why can't we redistribute some of the tech wealth to these put-upon low-wage workers and leave everyone better off?
But on to the main point. It seems obvious Bay Area restaurant prices need to come up to keep pace with everything else costing more. But if you're going to charge more, you make it part of the price. You don't tack on an "extra" charge of any kind; that's madness, and sends the wrong message psychologically to the customer. The same people complaining about a service charge will gladly pay a higher base price exactly equal to that charge. It makes them feel "upscale." Paying a service charge makes them feel penalized. Or something. Anyway it sounds like the type of thing that has reasoning or an explanation attached to it. You want to be in a business where people pay more, and either the reason/explanation is obvious, or even better, there is no explanation and they just pay more anyway. Like Apple. But either way, you don't want to be in the business of explaining/justifying a charge, ever.
It's tough to make money? Your workers can't survive? The food sucks?
Charge more. Pay the workers more. Make better food. Nothing about "the economics of a small business" prevent this.
You may still fail. The macroeconomics of the Bay Area are difficult. But you'll fail for sure if you under-charge, under-pay, and under-produce in complete disregard of those economic conditions. In a tough market it's always the mediocre who fail first. But if you survive, and enough other restaurants fail, eventually the few that survive will be able to... you guessed it, charge even more, pay their workers even more, and make even better food.
tl;dr: Hot water is cheap!
If you want to count gaps, the entire East Bay has a single Michellin Star restaurant; South Bay has 3 (4 if you are willing to count Palo Alto in the South bay)
* Don't want to tip
* don't want to see taxes added at the very end
* Don't want the service (seating, waitering, etc)
If restaurants don't evolve they will die yes
In the meantime, retail and restaurants are going to have to come up with a transportation system for their workers. Time to helicopter in the help... then shuttle to where they need to go.
Until there are robots that can do the work either remotely run by chefs/cooks/retail or removed entirely, there needs to be better transportation systems to allow people to live elsewhere and work in the metro/city if the metro/city is unwilling to fix the rent/housing problems.
I'm curious what the author is actually adding to the restaurant's value? In the current economic climate in the US, there's more capital than places to put it. Everyone wants to open a restaurant. Not everyone knows how to run one. If she's not cooking, managing the front of house, etc..., what is she doing?
> culinary cultures of Turkey, Greece and the Levant area
There's shawarma shops everywhere in the western world. They all offer Mediterranean/Levantine cuisine, what does this restaurant offer beyond that?
> Over the past two years, it was quickly and often apparent that there’s nothing that a small and young business in SF could do to make the city a living option for its employees.
Yes there is, pay more. And to pay them more, raise prices. If people can afford to pay rent and they still want to go out to eat, they'll pay more. That being said, you need to have a compelling product. Not sure someone with no restaurant background selling a commoditized product is going to be able to produce a compelling product.
> As alluded to earlier, the mass exodus of individuals from this workforce leaves fewer people and less reason for those people to excel.
Yes, people leave because they're not paid enough. Pay more and maybe they'll stay.
> The impact is seen when we tried the aspirational ‘Service Charge Inclusive’ model. Diners were so dismayed by it.
Of course they were. No one likes add-ons that they weren't told about. Instead of adding a 'service charge', just raise the menu prices. You know, the same as in Europe and other places where service is included.
All I see when I read this article is someone who knows nothing about restaurants, adds no value to her own restaurant, claims she's innovative and knows better but then reverts to the restaurant status quo and claims it doesn't work.
This is what I don't get about restaurants. Some of us work in them for 10-40 years. Do our apprenticeships in restaurants that win awards, have Michelin stars, are top 50 in the world, and work 80 hour weeks for decades on end. And then someone who got a little money from Google thinks they can just open something, hire people and be successful. Just imagine if Sergei Brin and Larry page were restaurant managers who thought they could hire a few programmers, rent an office and create Google?
Innovating.
I don't disagree with your core claim that cooks are more valuable. anecdotally, when I worked at a takeout pizza place the main pizza guy got paid about twice what we made in the front, even including tips.
The notion that a city should not change and keep it's "feel" across sunch long times is backwards thinking. Cities grow.
I say this because the same people who want lower rents seem to also vote down big new apartments because it will ruin the atmosphere. But I can't for the life of me understand why anybody would want to preserve the current atmosphere. The one you think you are defending is long gone.
I was raised in my hometown in a part, which was build up from the ground. Everything was new. The very same people who are now living there since 30+ years complain that the city wants to develop a new part of the city from scratch.
So the very same people who benefited from the scratchpad 30+ years ago now complain about future generations.
Added bonus: think about ancient cities. A beauty for sure, however also a burden. What was once build 1000+ years ago still defines the present.
Yes. Here is an awesome video documenting one persons struggle to create an apartment building:
Exactly, damage done.
Take it with a grain of salt because it's reason.com, but this video does do a good job of conveying a sense of how ridiculous the situation has gotten:
calle24sf for the mission:
United to Save the mission:
Survival of the fittest. Plenty of great restaurants in Tokyo and it's almost as expensive as SF.
1. The vast majority of people on HN are in complete denial about the impact of a massive sudden influx of demand on SF housing.
2. They will exclusively talk about supply constraints and also totally ignore the concept of price inelasticity due to inexhaustible levels of demand.
3. pg himself had noted the importance of a vibrant restaurant scene for startups.[1]
4. This truly is a widespread problem for all SF restaurants. Nopa, one of the most prestigious midrange restaurants, has been advertising for cooks in their menu for years now.
5. In order for the market rate price of housing to become affordable to cooks and servers, it would first become dirt cheap for tech workers making 2-4x their compensation. Therefore all of that worldwide demand for SF tech worker housing would need to be satiated before the market solves this problem. (See point 2.)
6. Most tech workers don’t give a shit. They are here to hopefully make their fortune or at least get their career started in the next 5-10 years. A vibrant restaurant or working class community is not a priority. If they burn through it, it’s fine. Long term community development goals are a “nice to have”.
7. Only reserved means-tested housing for the working class will solve this problem. This is what divides the “market YIMBY” and “affordable housing PHIMBY” political groups in local SF politics. It’s not just about ethics.. If you want a vibrant city rich with interesting restaurants and cafes then you need to provide housing for the service industry. Otherwise you face a real macroeconomic problem.
It's clearly not true for me. I just bought a house here and plan to stay for the long term. Why would I not care about the long-term health of SF?
Suppose you take a fraction S of city's residential surface area and build it up by H times average residential height. Housing volume increases by S * H. Most housing in SF is merely 2 stories high. Let's assume average is 3 stories. Now, pick 1% of city's residential area and build it up by adding 30 stories, say from 3 to 33. Note that 33 stories is actually smaller than a few existing tall residential structures in SF [1]. This would give relative increase in housing volume by S * H = 1% * 10 = 10% which given SF's population of >880k [2] amounts to >88k increase in housing capacity. This is more than the entire global workforce of Google [3].
It's a lot of construction work, of course, but it looks feasible. Many cities build a lot higher and on a wider area than the figures above.
[1] https://en.wikipedia.org/wiki/Category:Residential_skyscrape...
[2] 884,363 (2017), https://en.wikipedia.org/wiki/San_Francisco
[3] 85,050 (Q1 2018), https://en.wikipedia.org/wiki/Google
Edit: formatting and correction
Well, sure, go ahead. The point is market rate construction alone will not solve the service industry housing problem. There needs to be affordable price-controlled housing to support a healthy local economy.
NYC cleaned up and it used to be as gnarly as SF is now. SF is like 80s NYC.
Both London and NYC have excellent networked public transport. The population is all kinds of diverse. We don’t. People are free to move around. We are not.
SF politics is a stumbling block. Any kind of high density building plan will fail unless infrastructure and public transport network is bolstered BEFORE building more.
It would involve tremendous upheaval. Traffic would get worse. Many people would be evicted and have to find new housing before rents come down. Many people would find themselves underwater on their mortgages. We'd have to improve water/sewer/electric/gas infrastructure. We'd have to spend billions on transit. It would take at least 25 years.
I would love to see that happen, but it won't. Too many people are too invested in the status quo. Instead, they'll make SF so unattractive to tech workers that they'll leave. As you say, they're more invested in the tech industry than SF.
Any affordable housing for the service industry would be dirt cheap for tech industry workers. If SF was dirt cheap again and the tech boom was still underway, who in the industry wouldn’t move here or start their next company here? That’s how deep the demand goes. That creates price inelastic conditions. It’s Economics 101 for those who actually paid attention.
If we want a vibrant restaurant scene moving forward, or housing for teachers and homeless and whatnot, we need to look beyond just building more market rate supply. There needs to be means tested and/or price controlled housing for the working class (or homeless, etc), and that’s where the market YIMBYs and affordable housing activists come to blows.
That doesn’t equate to making SF unattractive to tech at all. Marc Benioff came around on a local issue here about funding housing for the homeless (prop c). He saw it as an existential threat to Salesforce. Maybe Salesforce is just a more mature (longer term) company than most startups. But he saw that homelessness was actually threatening their bottom line in SF.. in addition to being this huge moral imperative. It’s kind of the same thing with restaurants and that type of quality of life: you can optimize for lowest taxes and maximum housing for tech workers, or you can see the longer term macroeconomic picture.
What we’re seeing is a shift towards “fine casual” formats like Souvla that have lower labor costs. But there are just fewer midrange restaurants opening due to labor and rent and the ceiling on what they can sustainably charge. The high end and low end / fine causal are doing ok.
But they get into the actual wages below, and while it is absurd to me that servers are making almost double what the cooks are, what’s even more insane is that both of them are paid an absolute shitton by restaurant standards nationwide.
50k per year puts you at the top end of Cooks in the entire country. Hell, anywhere but SF, that is still solid middle class wages regardless of job, and in a field where customarily only the truly high end even bothers to pay more than minimum wage.
I would’ve donated a spare kidney to make that kind of money when I was still cooking. And the idea that that is still not enough to survive even rent should be a massive alarm bell that something is deeply fucked with your economy.
No, that is oversimplified. The "worldwide demand for SF tech worker housing" is actually limited. Why is this supposedly uniquely true for San Francisco and not for other places with Google offices that are more affordable, such as Atlanta?
> 6. Most tech workers don’t give a shit. They are here to hopefully make their fortune or at least get their career started in the next 5-10 years. A vibrant restaurant or working class community is not a priority. If they burn through it, it’s fine. Long term community development goals are a “nice to have”.
Don't speak for me. I absolutely care about a vibrant restaurant and working-class community. I donate to local charities and patronize local restaurants and shops. I just bought a condo for the long term. Why would I not care?
It is exceedingly annoying to be demonized as somehow less of a San Franciscan by your side because I happen to work in tech. You have no evidence to back up the assertion that we don't care; it's just a lazy stereotype.
> 7. Only reserved means-tested housing for the working class will solve this problem. This is what divides the “market YIMBY” and “affordable housing PHIMBY” political groups in local SF politics.
That is a very uncharitable way to describe the YIMBY movement. The YIMBY movement wants to maximize the amount of affordable housing, not just the percentage. The "PHIMBY" movement, by and large, refuses to adequately engage with this argument.
No evidence, just an "actually."
That sounds like a testable hypothesis. If we examine cities with interesting restaurants and cafes, we will find that most/all have substantial means-tested housing set aside for the service industry?
Also, means testing is not the only way of providing service industry housing. In SF what cooks and servers are left are hanging on to rent controlled units. As those are eliminated through gentrification (Ellis Act evictions, etc), the restaurant crisis worsens.
They are the demand. The politics is the supply. Both are at fault for making SF unlivable for the people that were there from the start.
The author seems to have the numbers straight in terms of personnel costs required to run a sustainable business, but what's confusing to me is that this analysis was not run before they decided to start this business. It seems like the numbers were hopelessly unfavorable pretty much any way you cut them. To me, that says that there simply wasn't a business worth creating.
I acknowledge that the problems outlined in this piece are real. The commentary about the SF healthcare plan only being available within the city limits when many of its beneficiaries live far away calls attention to how badly dysfunctional our healthcare system is. Nevertheless, I keep coming back to the conclusion that most of the hardship (on behalf of the author) here was self inflicted. Running a restaurant is generally a very poor means of making a living as the author repeatedly points out. It's great that this person was following their passion, but doing so is usually expensive.
As a mental exercise to the outraged reader of this article, try substituting the word restaurant with the word yacht and all the positions with various nautical ones. I think you'll find yourself a lot less sympathetic. I'd argue that they're semantically identical in this case.
The GP meant that it's a business people get into because it's their passion, and it is a lot of people's passion when compared against the market for it. I'd say a comparison against "glamourous" creative industries like acting and journalism is more apt -- good profit to the ones people remember the names of, and cutthroat for the 90% fighting over the rest of the market.
> Restaurants have always been run on razor thin margins, but the piece makes a compelling case that it's tipped beyond that.
Maybe it's an echo-chamber thing, but a large fraction of my friends in SF rarely/never cook dinner. Almost none bring their lunch to work. We don't have a shortage of places to buy prepared food.
The cost of eating out will probably scale closely with the cost of running a restaurant. Demand is solid (though not entirely inelastic.) Profits will always be thinner than in other industries.
Lower rents would help, but there would probably also be negative second-order effects of lower meal prices. And positive third-order effects of increased demand because of price elasticity...
I think you're missing the broader context here: employees are maximizing their take home pay at the expense of other benefits, like health insurance and retirement savings.
This is a really awful way of reading this article.
I like restaurants. I like good food. I can buy into the argument that the cost of living is making it really hard for me to get good restaurants.
It's hard to respond to that, as it's not clear to me at all what you're claiming. What's the 'general trend'? Towards everyone running around in a money-making frenzy? Perhaps it's extremely metaphorical and nothing of the kind is meant. Just that people are..constantly trying to increase their incomes. Or something. What is the 'foundational truth' - that there's a general trend towards that frenzy? ..So after 6,000 years, we've reached that state, or are close to it? What you said sounds like something I want to criticize, but I'm not at all clear what that was.
All I can say is, it sounds like you're in the USA, talking like that. One of the parts of the USA that's particularly like that. The whole world is not like that.
That's fascinating-- in exactly that same time span there's been a worldwide trend toward blockchain technologies.
Do you think there's a connection?
median != average
Fun example: In 1987 the average starting salary of University of North Carolina geography graduates was over $100,000. In 1986 Michael Jordan graduated.
Edit: wikipedia (https://en.wikipedia.org/wiki/Average) seems to suggest that they can all be considered "averages".
- Arithmetic mean
- Geometric mean (exp of average of log values)
- Harmonic mean
Mode and medians are measures of centrality, true, but are not equivalent to the arithmetic mean.
Fun fact (h/t John Myles White) the arithmetic mean, median, and mode are the same calculation under different L-p norms.[0]
[0] http://www.johnmyleswhite.com/notebook/2013/03/22/modes-medi...
This makes me sick.
Even if you're right, the cost of making this place more toxic exceeds the benefit.
And they spend the second half talking about how they were sabotaged by a high cost of living, incompetent government, and most of all greedy consumers who didn't appreciate their product.
1. They should have either not had four kids or 2. should train to pick a higher paying job. 3. Or move to a cheaper part of the country.
The question is: how do we train people for better jobs or when jobs aren’t available, how do we make sure they ..well..live?
These are the questions we should be asking and not talking about SF restaurants and housing unavailability.
Where is the ‘Linkedin’ and retraining resources for people like this cook?
This author with a MBA just didn’t make compelling reading.
In terms of children, there are many people who feel very strongly that a life goal to raise children is a moral imperative that supercedes any consideration of wealth or affordability.
Many people who can only get low-skilled jobs also rely on their extended network of family, friends, church, whatever. The prospect of moving to a different place is preposterous to them, because even if they had marginally better pay compared to costs of living it would’t matter at all if they don’t have their grandmother nearby to offer frequent free child care, or they couldn’t see a longtime family friend who helps with hard times or addiction issues or many other types of things.
It’s also quite hard to relocate for most people. It’s not like being a cook 5 hours away is the type of job you scout out and uproot your life over. What if that restaurant goes out of business? How much other available employment liquidity is there after you uproot & move? Who pays the relocation costs? What about uprooting kids’ lives?
Finally, a lot of people have generational and/or cultural attachment to a specific place, and they believe that this also supercedes any market conditions related to housing or jobs. Doesn’t matter if it’s a natural disaster, an economic crash, or being priced out by gentrification... you have to imagine the mindset of “this is where I am from, this is where my family is,” and the feeling that if generational home can’t be sustained, that this is a greater loss than it would be to slide into poverty.
Obviously not all of this applies to the situation of the article, but generally this is hard. A lot of people simply commit to an ideology they believe is literally exempt from being affected by economic conditions, and that those values transcend any other type of decision-making.
Why is being a line cook in a relatively high-end SF restaurant a "minimum wage" job? Especially when severs in the same restaurant are apparently bringing home $80-90k a year?
I don't disagree with your point, but one issue in SF and elsewhere in the Bay Area is that tech worker salaries have skyrocketed while wages for everyone else have been relatively flat. Why is that happening and what if anything can be done about it?
While people like him ought to be responsible wrt procreation and family planning...surely there has to be something from this side of job market too?
Maybe restaurants WILL disappear. Like movie theatres and book stores and retail eventually will..in that case, cooking is a skill. Perhaps there has to be a program where they can cook for students or in offices with ten clients. Regulations has to be relaxed. CA food laws and business licenses are too stringent and difficult to navigate.
I also want to say that in CA..being reliant on undocumented laborers in the restaurant industry has created an artificial pricing. Food is cheap but rent is high. Labour has become the unmanageable variable while in fact, food was cheap because the savings from hiring cheap labour was passed on to the customer.
Or maybe the solution is going to be universal health care and universal basic income. That might be another possibility but whats happening right now isn’t sustainable.