Trying to open an S.F. ice cream shop, was no match for city bureaucracy | Hacker News Reader

Trying to open an S.F. ice cream shop, was no match for city bureaucracy

sfchronicle.com

126 pointsjseliger143 comments

The article does not do a good job of explaining the issue, as far as I can tell what happened is: 1. SF allows neighborhood objections to new businesses, in this case his potential competitors used the objection process to cost him 6 months. 2. After making it through the objection process, it took another 6 months for the city to issue all the permits that he needed.

Rent on the space is $7300 a month so this cost him $87600 in addition to whatever he spent on lawyers and his own energy.

For one of my real estate projects, I have a competing hotelier that has tied me up in court for 6+ years now due to an arcane wording in the town's ordinances distinguishing zoning for "motels" rather than "hotels". The ordinance's wording was amended years ago shortly after the lawsuit was filed (for approving me for a hotel even though it was only zoned for a motel).

Every single person involved knows it's bullshit, every variance and zoning committee meeting has been in my favor, but my competitor is notorious for using the legal system to to keep others tied up long enough in the hopes they bleed enough money to give it up. Or at least enjoys a competitive advantage in the meantime.

So far, that project is 7 figures in the hole.

I grew up with the notion that we had local government and regional judges precisely to provide a human shortcut to sane decisions when things get crossways in the legal system.

Stupid, naive me.

I suspect this was rhetorical but I'm feeling positive this morning. You're not stupid, many civic ideas I was raised to believe turned out to be folktales.

> Every single person involved knows it's bullshit

In many countries, this is a sure sign that palms need to be greased.

Not in this case. We already had the connected lawyers due to needing various variances. Since the competitor is technically correct in their original lawsuit, remedying it has to go through all the proper channels. At least, I'm not at the level of influence where superior courts can be bypassed.

Even the town hates my competitor, as he's been wasting valuable resources of everyone, but at the end of the day, the ordinance was what it was.

What kind of avenues exist for a competitor to stall committee hearings like that?

For one, the competitor waited until after the town approved all the variances and permits. That process alone took a year.

There also aren't strict schedules with these zoning and permitting decisions, it's a "we'll get to it when we get to it", and if the hearings run late into the evening, and they don't get to your issue, then maybe you have to wait a month or two until they reconvene.

So once the approval was given by the town, the hotelier, who had been watching all along, files a lawsuit against the town and my company, claiming it was granted improperly (which is technically true).

Once that happens, you're now in the thicket of the legal system, and as the saying goes, "the process is the punishment". You win one battle, competitor appeals (waiting for the last day to file the appeal each time), you win that one, competitor appeals again. Your lawyer makes a mistake, go back to square 1. And months go by between decisions. Meanwhile, you're paying property taxes and legal fees like nobody's business.

That sounds absurd and so wasteful.

Sounds like a place that really doesn't want small businesses.

There are 4 or 5 other small-business ice cream places within 3 blocks of that location.

As far as I’m concerned the more the merrier, and it sucks that this particular project became a nightmare for the owner, but objectively this is already one of the most small-ice-cream-shop-friendly neighborhoods on the planet.

To do a proper analysis, you need to look at more than just the number of existing businesses.

How many total groups attempted to open a business? How long does it take to open a business? What are the costs? Have these factors changed across time? And so on.

But sure, using that as a rough heuristic, I agree it doesn’t seem likely to be the worst place to open an ice cream shop.

Here is a city zoning map: https://sfplanning.org/sites/default/files/resources/2019-02...

I think the biggest problem is that like 3/4 of the city is zoned as low-density residential (pale yellow areas), only allowing detached single-family homes or – in some places – duplexes with low building height limits, and not allowing mixed uses like small ice cream shops, bodegas, bookstores, or cafés. As a result small businesses get crowded into a few streets zoned as “commercial corridors” (purple areas), and both residential and commercial rents are much higher than they would be if more parts of the city allowed construction of low-rise apartment buildings with bottom-floor storefronts (e.g. to RC3 from RH1/RH2 zoning). The real winners are large-scale property owners, who end up skimming a substantial margin from all economic activity in the city.

If the rent weren’t so punishing, an extra couple months of permit bureaucracy wouldn’t be nearly the nightmare it is now, and existing small business owners wouldn’t be so desperate to protect slim profits. (A once-in-a-century pandemic still might kill many nascent businesses, but it’s hard to plan for that one.)

Big businesses are banned too, so really it's just about making sure those who were here first are sheltered from any newcomers.

It's like Trumpism for liberals.

edit because hacker news won't let me reply:

Big Businesses are literally banned from most places in San Francisco. If a business is over a certain size, they cannot open a franchise in around 90% of San Francisco. Last I heard, the cutoff was 6 franchise locations -- any bigger any you can't get approval. There are a couple of areas in the city where exceptions are made, but that's a very small part of the city.

Please make your substantive points without flamebait.

https://news.ycombinator.com/newsguidelines.html

Let me be crystal clear then -- there are large groups of people in San Francisco who use intolerance and fear of newcomers as a defense against competition. They use regulatory capture to prevent people from moving here, and from opening businesses here. It's massively toxic behavior.

I find drawing a parallel to Trumpism to be apt, since these are core defining traits of Trumpism. Yet despite all the valid hatred that Trumpism gets, the people abusing the same things in liberal cities get no criticism at all.

I'm sure you have a good underlying point but this comment is not a step away from flamewar.

My favorite example is that Blue Bottle a san francisco based coffee company that started as a super tiny shop ended up becoming one of the big companies and had a difficult time opening up coffee shops in the neighborhood due to the 6 franchise location.

To be fair - it did take a lot of VC money to build out the company and it has a pretty impressive footprint. Still kind of funny to get kicked out of your own home turf.

FWIW - as a former SF resident I love the diversity of stores without all the large chains coming in.

Big businesses can afford to swallow upfront costs like that. Individual people using their savings to start a small business can't.

Big businesses are more likely to be able to clear that cost of entry.

> this cost him $87600 in addition to whatever he spent on lawyers and his own energy

Wasn't there a commercial rent moratorium during this time? Why did he keep paying the rent?

I'd have been very up front with the landlord. The lease is signed with an LLC that will be worthless if the city doesn't approve the licenses. The cash is there. But it won't go to the landlord or to the LLC until the earlier of the (a) city approving or (b) moratorium expiring.

I understand this is unsavory, but it's what these sorts of licensing processes force. There is a reason the New York restaurant business is notoriously scummy, and it's not because restauranteurs are bad people. (Far from it.)

I think rent still accrued while eviction and without getting into whether that is right or wrong (landlords didn't get an expense moratorium), I think whatever specific solution may of applied to this instance due to the pandemic is beside the point. The issue was there prior to the pandemic.

Prior to the pandemic, I saw a boba tea shop in our SF neighborhood take well over a year to open (only then to have the pandemic crop up); there's a small specialty grocer is going into the second year of construction and waiting on city issues, there are other shopfronts where they started work and just stopped not to speak of empty storefronts that just never even rent for years at a time and all of this prior to the pandemic. This in a neighborhood which still gets some decent foot traffic.

From my perspective, and I do have a fair amount of experience in retail, I wouldn't touch San Francisco as a small independent proprietor; it's risky without these hurdles and with them you'd better be packing substantial investment, be already well connected within the city bureaucracy, and have some sort of prior reason to think you'd be successful in the market (business already known from elsewhere, famous chef, etc. )

> Wasn't there a commercial rent moratorium during this time?

No. The eviction moratorium is not a rent moratorium.

I'm a bit astonished - is the 7300/mo accurate? Retail space isn't cheap but it will usually run less per square foot than residential space and that feels like he was either way over-charged or else was trying to create a restaurant with a pretty big footprint.

A 140 square feet room in that area with shared kitchen and bathroom goes for 2000. 7300/mo for that corner is probably accurate.

Can you go through some of this process without actually leasing or somehow deal with that?

It would be interesting to hear how other folks actually, do this thing.

Everything is up for negotiation. But high demand places might not agree to provisions that subject them to extra risk.

This isn't even the first ice cream parlour in SF that has had this happen: https://boingboing.net/2012/02/04/on-the-horrors-of-getting-...

He was one block away from Garden Creamery and across the street from Smittens. The article mentions that a competing shop was the first one to object, but that didn't work. I wouldn't be surprised if the same people were "motivating" the city to be strict with permits the whole time.

You see that very much anywhere where an outsider wants to disrupt entrenched market participants - they have a friend on the city council while you do not. This sort of corruption isn't at all confined to San Francisco.

In my corner of the forest, someone tried to get permits for an apartment complex that would have relieved pressure on the rental market and cut into the profits of the established landowners. No permits for him, and the rent remains too high!

It’s exacerbated by the fact that those against it will go and bitch to the city, but those who don’t care will do and say nothing. It’s rare to find rabid fans of a new building to come out in support.

I wonder if there are any ways to modify processes to account mitigate dynamics like the one you describe.

Entrenched market participants often participate in the regulation process, and use it to build a defensive 'moat' around their business.

Such a moat is possibly to their own detriment, due to the success business clustering can bring.

I think it's unimpeachable to say that this sort of anti-competitive behavior is to the public detriment but companies continue to pursue it due to the fact that it is an effective (if slimy) way to protect revenue.

Successful may not mean optimal, business clustering is generally considered to provide mutual benefit. I would guess there is a point of diminishing returns, so maybe there’s rational motivation to gatekeep when the cluster hits a certain size.

https://www.npr.org/templates/story/story.php?storyId=121304...

https://www.planetizen.com/node/65765

It seems like it did work end in end, by sapping his funds until he was unable to enter the market.

When I read stories like this I am always curious how "real" they are... surely San Francisco would fall into the ocean if everything was like this story. But... when I talk to people in San Francisco it sounds like this sort of thing is somewhat normal.

Any SF people want to register an opinion?

I think there are two strong factors here:

1. Nostalgia is a hell of a drug and change is scary.

2. I got mine - time to pull up the ladder.

SF is a really weird place to live where people want to keep it locked into a scenic ideal that isn't scalable to the population that wants to live and work there. There's also a weird conflux of geographic constraints coupled with a whole boatload of money. Additionally, all of the businesses established in SF have a strong motivation to keep more businesses out to protect their revenues, even if more business would contribute to a stronger economy through long term growth. I think it's fair to say that SF is slowly falling into the ocean, but there's still enough demand and money flowing in that it keeps pushing itself up periodically.

SF resident here: stuff like this is absolutely real and commonplace.

If anything, stories like this actually undersell the situation since a lot of the "brokeness" isn't just due to incompetence but rather straight up corruption. DBI and Planning in particular are notorious for bribery[1], but the problem is extremely pervasive throughout the city government.

[1] https://missionlocal.org/2020/09/rodrigo-santos-dbi/

This is by design from the SF preservationists. The more development they can prevent, the better. The attitude I've heard is that SF is like Yosemite and it must absolutely not be allowed to change in any way.

San Francisco is one of the most conservative℠ cities in the world.

If you allow development to happen in SF, think of what will happen to the historic laundromats[1]!

[1] https://missionlocal.org/2018/06/the-strange-and-terrible-sa...

To be fair there is a balance on preservation and development. Development run amok in the city is pretty bad while underinvestment also creates some strange pressures.

> Development run amok in the city is pretty bad

Legitimate question:

Do you have any examples of 'development running amok' ruining a city (or life for a significant part of a city's residents), that did not involve mind-blowing amounts of corruption?

It may be that I just don't have a proper understanding of what development running amok would hypothetically look like, because I can't even really envision it. What would it look like?

My town is gambling on a number of developments,

- 16 M Ferry Building; ferry commute to Manhattan

- Luxury condos on the water

- condos downtown above new (unoccupied) business spaces

Meanwhile:

- stalled condos next to housing projects

- vacant downtown office spaces

- local side streets are badly maintained

- rent prices are looking bananas; home prices I dunno.

- commute to Manhattan is slow on LIRR train (1h 10-20m) direct. Direct runs only once in the morning and once in the evening (otherwise it’s a transfer adding up to 15 minutes).

- LIRR is expensive ($300/mo) and ferry is supposed to be more expensive, but not faster

https://www.liherald.com/stories/glen-cove-moves-ahead-with-...

https://thebeacongp.com/

https://villagesquareny.com

Couple examples:

Development run amok would be the city green lighting every project that comes through and/or some degree of corruption in the process.

Poorly constructed high density buildings in the middle of a city - in which the developer takes a large profit and squeezes all the tenants.

Running highways through public land value another.

Suburban sprawl hollows out the core of cities and increases the carbon foot print significantly.

I think he meant named places where this has happened with a large impact, not general scenarios.

SF preservations say they don't want their city turning into Hong Kong. So it's not objectively "ruined," just radically different from its current state. They are essentially conservative.

They might not personally like it, which is a personal preference, but I wouldn't describe Hong Kong as 'pretty bad', which is a value judgement.

By most metrics, Hong Kong is a much more livable than just about anywhere in the United States.

Wouldn't go that far. HK has people living in cages: https://allthatsinteresting.com/cage-homes-hong-kong

I support HK in their freedom but yeah not sure I believe your statement about more livable than anywhere in the US (which is a highly subjective statement). It also sounds like you have never been to the US.

As an ex of SF it seems to me this person vastly underestimated just how hard or expensive setting up a new business anywhere might be, especially a food business.

And in SF of all places…

Seems like in America (or the world, or capitalism in general), incumbents have a strong grasp on everything, from business to government to land. In SF, it's magnified with the amount of space being scarce. People who were there first, whether they are homeowners or business owners, and benefit from obstructing newcomers.

It's a huge breath of fresh air to go to other countries that are not this way and realize how much opportunity there is.

I seriously thought about setting up a business in Argentina when I was there, and friends have braved Zimbabwe and are doing well. Obviously there are plenty of other pitfalls, but the barrier to entry is essentially non-existent.

Coming back to Canada after spending years abroad I can't help feeling like everything here is "done" and there's no room for more.

Capitalism? Socialist countries such as Cuba and North Korea are far worse in terms of state-mandated incumbent preservation. Their economies are lifted directly out of 1950 in the best parts, and the feudal era in the worst parts.

The incumbent control is executed through regulations. Cities more friendly to regulation have this type of problem more often. I see this sort of thing attributed to capitalism all the time when, really, it's just corruption of the regulatory process. Corruption isn't a bug in capitalism, it's a trait of humans. Corruption has crippled bodies of all types, from the UN to my HOA.

With zero regulation this problem wouldn't exist. The guy would rent the space and open an ice cream shop in days, if not weeks. There might be rat feces in the chocolate chip but he'd be selling it.

Well, with zero regulation this guy would open up his shop and the other business owners would just dump trash outside of his door until he's forced to move away (or, like, worse).

Regulations work both ways and even the regulation here (restricting the opening of a new business) is something that can and has benefited small business - lest we forget when Walmart aggressively forced out competitors with heavy market saturation before consolidating services into infrequent super-stores.

That's why I mentioned the rat feces. It's certainly a give and take but you can't have regulatory capture without a regulatory mechanism.

It could take weeks instead of years to sort this out, SF just doesn't want to do it.

This is not an SF thing, it's a 'Almost Everywhere' thing, some places being worse than others.

The level of systematic dysfunction, fraud, bureaucracy etc. would be shocking to many of us, even though in other areas, cities and services are actually under supported.

It's a little more hypocritical with SF because the the amount of wealth and hints of virtue signalling that come out of there, but really it's a broader problem.

Wealth is created by our ability to organize efficiently. This stuff should be a 'primary' concern for citizens and voters but none of it makes nice headlines.

It's literally probably easier to go to Mars than it is to clean up city/state legislative and operational dysfunction. I wish there would be legit press outlets that open up specifically to focus on these things.

Third world countries can also has surprisingly complicated bureaucracy. But at least in a 3rd world countries you could grease some of the bureaucrats to expedite the process.

Not everywhere. I live in a well run suburb of a well run city. Same with family, who are spread around the country.

There’s plenty to complain about, especially in “other places.” But except for when I lived in Chicago and San Francisco, municipal government was fine. And that includes other parts of Illinois and California.

building in SF is all but illegal. related; "San Francisco Man Has Spent 4 Years and $1 Million Trying to Get Approval to Turn His Own Laundromat Into an Apartment Building"

https://reason.com/2018/02/21/san-francisco-man-has-spent-4-...

> When Tillman said he saw his project as necessary so people like his daughter could afford to come back and live in the city, one particularly motivated activist said she wished his daughter was killed in a terrorist attack

Jesus. I thought Reason was being melodramatic but the less partisan Curbed was even more explicit:

> According to Tillman, the commenter asked him where his daughter lived and, when he answered Boston, she reportedly said that she wished his daughter had been blown up (presumably in the Boston Marathon bombing).

After looking through the San Francisco Planning Department Discretionary Review (Abbreviated Analysis)[1] on this case, I feel like the article in the San Francisco Chronicle did a very superficial job of covering the issues involved. Like many other news stories, there is quite a bit more detail to the story that was not addressed.

[1] https://commissions.sfplanning.org/cpcpackets/2020-000909DRP...

Minor issue of lies on the application

That is takes $320k and 12-18 months to stand up a new retail space with a full interior refresh in a city like San Francisco is not that surprising. Also, not that it takes anything away from the point of the article, but it seems like Mr. Yu may have committed more cash up front than was necessary. I could be wrong but rent, legal, and architect seems like it could have been half that. Sweat equity excluded of course.

Rent alone was almost $200k. You're saying that he could have gotten the space for half the rent he actually paid?

How did you determine this?

At $7300/month rent, you would need to average about $243.33 per day in profit just to cover the rent, not counting staff wages or other overhead.

Restaurants are notoriously hard to start. They have slim profit margins and other challenges. It's part of why franchises thrive in the food industry: A franchise has a proven model that can work and, even so, it's not guaranteed to work.

I know it may be due at least in part to spin -- because the article is about San Francisco and Prop H -- but not one word was said about how much research was done to pen out potential costs, demand, etc.

It says he spent time looking for "the perfect" storefront and signed a lease. How perfect was it when there were two nearby competitors and a process that let them actively hinder its opening?

I'm not trying to blame him. I'm kind of thinking out loud here. I'm not in San Francisco. I don't know how easy it was for any random person to be able to predict some of these critical factors.

But I feel like if you actually pen this out and determine you need $xxx in daily sales in a neighborhood with two competitors, it only makes financial sense if they have lines out the door and down the block because no one can get enough ice cream in that neighborhood.

Green tea ice cream is also something that sounds crazy to me. It sounds like one of those things only the person dreaming it up sees any real value in.

I've never heard of green tea ice cream before.

Now I'm curious where you would find solid info on how to actually plan out a restaurant opening that has some hope of success.

> I've never heard of green tea ice cream before.

Green tea ice cream is quite popular, you should try it! It used to be something you found mostly in Japanese restaurants but nowadays you can find it in grocery stores as well. Mr. Green Tea was one of the first big US suppliers, they've been prominent since the 1990s:

https://www.nytimes.com/1998/10/28/dining/temptation-for-pur...

https://en.wikipedia.org/wiki/Mr._Green_Tea_Ice_Cream_Compan...

I'm not a big ice cream eater. That's no doubt part of why this is news to me.

> but not one word was said about how much research was done to pen out potential costs, demand, etc.

Because it doesn't matter, he didn't even get a chance to open before burning through those 200k on rent for two years when the legal process was blocking him from opening.

He was blocked by two nearby competitors. Everyone here seems to think they are just being greedy and corrupt and don't have a valid objection.

Maybe there simply isn't enough demand to support three ice cream shops.

Alternate story in a universe where he got to open:

"All three shops have died, unable to survive the pandemic and general lack of demand for ice cream. The other two might have survived the pandemic had a third shop not opened in the neighborhood. Now he's just as deeply in debt as in this universe and other lives were also ruined."

You don't know that the alternate path is all happy, shiny success and only did not happen because evil bureaucracy, bwa ha ha.

...or perhaps the addition of one more competitor makes this area become known as "the ice cream district", pulling in ice-cream-seeking customers from surrounding areas and attracting complementary businesses, with the new competition and higher profile making all three shops more successful and better-known than they otherwise would be.

I've never heard of an ice cream district. Supporting articles welcome. (I'm aware of, say, fashion districts or restaurant districts.)

I'm genuinely interested in what kind of research one should do if they want to successfully start a restaurant. I will likely look around myself at some point, but if anyone wants to give me links to good stuff, I will totes give one whole free upvote in exchange.

This is one reason why the "launch now" and "stay nimble" ethos is so powerful. Instead of wasting time and money like this, one could start a simple stall or a food truck and spend some time reducing operational risk and building a brand before going for the big time.

SF is one of the most difficult cities in the country to launch a food truck[1]. It's not atypical to take a year to get the permits to operate.

[1] https://www.foodtrucknation.us/wp-content/themes/food-truck-...

Where do you think this person would be today if they'd tried to open a food truck instead?

It’s pretty likely they’d still be waiting for permits. The “nimble” option isn’t opening a food truck in SF, it’s opening in a different city/state that’s easier to do business in.

> That’s when Yu started having second thoughts. Even after spending $200,000 on rent, an architect, a lawyer, equipment and fees, he’d still need to pay at least $120,000 in construction on his space. And he knew he’d have to hold his grand opening in the middle of a pandemic when capacity is still limited.

The article tries hard to pin the failure of this project on SF’s tedious permitting process, but it sounds like the real reason was poor timing and an unrealistic budget.

Should it cost 200k in legal fees and 18 months of politics to open an ice cream shop? Is that the kind of world you want to live in?

I could open an ice cream shop in 90 days here... seems a bit more sane.

I think the 200k was mostly rent.

You have to pay rent while you navigate the permitting and inspection process.

Edit: What I'm saying is that if you spend a year paying rent on an unopened shop while waiting on a permit, then that is properly understood as a cost of the permit.

Should it take a year to open an ice cream shop? I get it when you want to build a GW scale nuclear reactor or a vaccine manufacturing plant that it takes a year of permits or longer. But an ice cream shop.

No, obviously not. That's what I'm saying. If you spend a year paying rent on an unopened shop while waiting on a permit, then that is properly understood as a cost of the permit. What did you think I was saying? (I'll just edit the comment to make that clear.)

A year doesn't sound unreasonable. Especially for a person's first time. Even large franchises in midwestern strip malls can take 9+ months to get going.

Restaurants are harder than people are aware.

It was a year just for the permitting process. So its an extra year on top of the 9+ months of time that it takes to set up a restaurant since (if the article is to be believed) you can't do it in parallel.

The article says he started the lease in June 2019, 22 months ago. That means that $160,000 of his spend is rent. I would lay a lot of the blame for this at the feet of the landlord, who had someone who would renovate their building and increase its value but instead drained all their capital and ruined the venture.

Is 22 months too long? Totally. Unbelievably. Though I'm not sure I feel any of the steps listed in the article are inappropriate. The last 12 of those 22 months have been in a pandemic and I'm sure things have slowed. I guess what I'm trying to say is this seems like a poor example to use in judging the system. The landlord has so clearly done most of the damage in this instance.

$200k on legal fees? Outrageous! Let's see what the article says:

>$200,000 on rent, an architect, a lawyer, equipment and fees

Strange.

Yes you're right, it is actually ~ $140,400 on rent. Which you have to pay while you go through the permitting process. So while it's not the city that is collecting the money, it is the city policies that are creating the costs.

To me even 90 days is insane, at least in Indonesia, you could open an ice cream shop tomorrow in your own house if you would like

I think people in the US would generally hold that that's a bit too fast, because at a bare minimum you still want a set of basic inspections. For example:

- Health inspector to make sure that the place is acceptable for serving food (no bug infestations, freezers are operating at a food-safe temperature, proper equipment for hand-washing and cleaning everything)

- Fire inspector to make sure that the exits are accessible and working properly, smoke detectors and other emergency equipment is up to snuff, and that the operators know the allowable maximum capacity of the square footage

- Building inspector to make sure that nobody's knocked down a load-bearing wall or otherwise done any unsafe renovations, as well as to make sure that the shop is following local codes (for example, keeping people from putting up 24/7 flashing neon signs in residential areas)

In Sweden you have to notify authorities two weeks before opening. Not sure why they would need more time than that.

The latter two can be required if the landlord as a condition of renting a retail zoned space.

Regarding health inspection, the big one is sanitation. And that’s not something you just have a guy come in and check before the business opens. You have to inspect actual food, which means you do it after the restraunt opens.

two weeks, max... it is duable, but for a government that has contempt against small businesses, it will never make it happen.

Also, health inspections are recurring, and something that is done routinely

Fine, a week then.

Listeria can be a problem in ice cream shops without proper equipment and cleaning.

But... the reason the budget was unrealistic was because of SF's ridiculous permitting process. So I don't understand your point.

Permitting processes are notorious bureaucratic and lengthy in every major city. The article didnt specifically cite any evidence calling out SF for being particularly egregious.

Part of me suspects some of the negative comments on here are from people seeing what they want cause SF is a popular target to hate on

The article doesn’t even come close to establishing that.

Yes it does...

We know that after 22 months, Yu still didn't have permission to open a business. We know that his rent was $7k/month. And common sense tells us he needed to rent the place before starting the permitting process.

Therefore SF's system placed a $200k+ burden on Yu. And it's obvious that a 22-month permitting process is unnecessary in almost any circumstance.

So the article establishes that SF placed an unnecessary burden, in the realm of $200k, on Yu.

What additional facts are you looking for?

If it didn't take 2 years to sort out the filings nearby shops did to stop his shop from opening he wouldn't need to pay 2 years of rent with no possibility of earning any money.

The ability for competitors to object to you opening up your shop establishes that.

I don't think so. It makes sense that people in an area should have some say in the businesses that open nearby. You probably wouldn't want a nightclub opening up down the road from you. Or if you ran a call center, you might not want an Harley Davidson Custom Exhaust shop to open next door.

Even thought the article buried in the article, the objections to opening were not upheld. But giving people a chance to voice their opinions on new businesses does seem reasonable (and is probably very common).

> architect

Why do you need an architect to open an ice cream shop?

Surely there are tons of units ready to go?

Commercial real estate is often leased as an empty shell - while it is true that you could probably find a storefront already outfitted as ice cream store, or at least for foodservice, the tenant is probably still going to need to bring all kinds of fixtures, branding, etc. I'm not sure how the line is drawn between whether you need an architect for that or some other kind of designer, but point is that leasing a space which is habitable but not ready for commercial use is common in the US. Commercial tenants often get really broad license to customize their entire space within the confines of the walls.

Most previously-used commercial spaces have to be demoed inside.

Sometimes, a fixed amount of architect budget is given as a concession by the landlord for prime properties.

Also, if you don't go about architecture exactly how they want it, some cities will often make you use one of their preferred architect buddies and start back at zero in terms of permitting and inspections. (Mountain View, CA I'm looking at you with emoji eyes.)

It's not lying, it's commercial real estate.

https://official-rossmann-merch.creator-spring.com/listing/r...

You still have to submit detailed plans to the city for your commercial space. An architect is best able to help here as they are familiar with the building code, permitting process, etc.

They can also help account for things the prospective ice cream shop owner isn't aware of. For example, regulations around hand-washing stations for food-based businesses.

I happen have an ice cream shop and we used an architect. Their experience designing other retail locations was very helpful.

I'm pretty sure that a random commercial space won't be "ready to go" with ample deep freeze in the back and a counter with freezers in the front. Sounds like custom cabnitry, lots of electrical work, probably some ventilation... putting all that stuff together in a pleasing arrangement is definitely the work of an architect. They don't just do freestanding buildings.

Wherein San Francisco wants to confiscate your ice cream cones: https://www.youtube.com/watch?v=QOreHYVTHGA

(from https://www.dnalounge.com/backstage/log/2011/08/19.html)

I must say I am a tad bit confused why the business has a not insignificant social media presence including testimonials if they were never able to open. I understand that marketing is part of running any sort of public facing service these days but that's got to cost a fair amount of spend to build up.

He probably should have negotiated (ahead of time) with the landlord. The landlord isn't making any money with the building sitting empty, so doing some kind of venture debt or profit share with the landlord w/ lower rent during the permitting phase would have made sense.

The alternative is the landlord had other tenants lined up, in which case the free market problem is more that there is not enough commercial space available in SF (probably true) or that the income from an ice cream parlor isn't sufficient to support a $7300 / month location (which in pandemic times it isn't, hence him giving up).

The city didn't allow his shop to open, the merit of the business was never tested. After two years they still hadn't sorted it out, and he has to pay rent throughout the process. After that he had so much debt he gave up.

I feel bad for this guy. One question:

> He spent several months searching for the perfect space and landed on the 20th Street site in June 2019, signing a lease for $7,300 a month. He hired an architect to draw up plans to upgrade the electrical and plumbing systems, build a front counter and install kitchen equipment. He planned no structural changes or modifications to the building’s exterior.

If you're leasing the space why are you responsible for these sort of renovations? Shouldn't they be on the owner to upgrade things like plumbing, electrical, etc?

I've posted about it elsewhere in the comments here, but it is extremely common for commercial leases to be "shell" leases - basically, leasing an unfinished interior that the tenant customizes to their requirements. Different businesses have radically different interior needs, so if a space can have multiple potential uses the landlord often won't bother trying to commit the space to a particular business like a restaurant space, retail space, etc. Tenants get exactly their finishes and furnishings to spec, landlord doesn't have to guess how tenants will want to use the space. Others have posted about how it is also somewhat common for landlords to cover some of these conversion expenses as a concession.

"Warm shell" would typically be a space which is mostly ready for occupancy, has HVAC and lighting and bathrooms, etc. "Cold shell" means the utility hookups exist but don't go anywhere and there is essentially nothing in the space.

It depends on your agreement with the landlord. He probably negotiated a lower rate in exchange for doing the renovations.

Seems like he had some unrealistic expectations, though. He spent 200k on an ice cream shop without any construction? When you get a lease, you try to get the landlord to offer you free rent until you open or at least 3-6 months.

I owned and operated an ice cream shop before, I just think 200k is unbelievable. But it should not take 18 months to open a shop either. I fault SF for that.

The actual accusation is that they lied on the application and misrepresented themselves as a business but were actually a franchise

There's an ice cream franchise across the street using the same "trick" they tried to use were they say they operate independently of the other stores. Also Everlane, a clothing brand, is allowed to operate in Valencia for whatever reason, they have seven stores, three of them in malls, and do most manufacture in Asia...

The whole non-franchise thing is completely broken, it's actually used by franchises already on the street to stop competition from settling in.

If so why did it take two years and not two weeks to tell him he wasn't allowed to open? Such a small error should be cleared up in no time.

if you google, you can find a reddit thread that has the full text.

The tl;dr is that he paid $7,500 * 24 months ($180,000) in rent before deciding to give up. 1 year of that was held up by competitors directly nearby filing to block his permits, so he had to wait for court case. The other year was in architecture planning and permits (which included health permits since it was food related). And he then estimated an additional $120k (plus ongoing rent) to actually build, so he gave up.

Prop-H apparently did away with the anti-competitive allowance of nearby businesses to object and it forces the city to respond to permit request in 30 days. But unfortunately, he has already enriched a landlord for two years in the process.

What happens if the city doesn't respond to permit requests in 30 days?

Presumably they can be sued for economic damages.

As a taxpayer, it's kind of like suing yourself.

The only recourse is to move out of SF.

Where was the ice cream shop located? In Hayes Valley or on Divisadero (couple shops already up there)

The funny/sad part about the direct objections by competitors is that business clustering is usually a good thing for all the businesses involved, in part because people more distinctly remember the area ("that block with the ice cream shops", "that place out by the mall with those furniture stores", etc).

Sick paywall

https://archive.is/mNiPp

I read it in Chrome Inspector.

Quit whining and comment about the substance of the article instead

What aspects of this are actually SF-specific ice creamism, is there political chicanery preventing this category of business, not understanding the permitting process/timeframe, or spending lots of money without derisking the project?

Or is it/also a "gubberment regulation always bad," "anarchism/libertarianism small gubberment always good" hit piece?

The SF permit process allowed nearby businesses to object for whatever reason, creating an almost 1 year waiting period for the trial. The city also drags its feet in issuing permits. All that time a tenant has to pay rent, business or no business, so these anti-competitive rules and waiting periods really are bad for starting small businesses. With SF rent prices, 2 year is about $180,000.....and that's before you even purchased equipment and furniture.

I think it changed now that Prop-H passed, but he was already broke and tired by then.

Nearby businesses objecting.. That's like In-N-Out saying Whataburger can't open near it. Wow, that is/was such an incumbent advantage.

Yeah, the rent in Manhattan/SF/etc. is sometimes more costly that the entire staff for a year AND the fixtures. There's motivations to throw those kinds of places together ASAP with contractors working 24/7 until it's ready to launch. Not having the permits together, aggressive timeline, and everything lined-up to launch ahead-of-time is just too risky.

Sooooo idk about this stuff but isn't starting to pay the rent before you have permission a bit questionable?

I imagine it'd be hard to get a permit to open up a shop at a property you don't own/rent.

right but this dude has basically hired a place for a year to do something he isn't allowed to do. Are we looking for reforms that would allow one to apply for a place you don't currently own to avoid this glum state of affairs?

That creates an entirely different set of problems though.

You'd have to predict a space that was opening to apply for the permit. Then "local" businesses can object so you couldn't just get a blanket permit, it'd have to be for the specific place, so you just have to wait around until that storefront is vacant?

If you start while it's vacant, it'd be pretty terrible if you went through the whole process only to have someone else beat you to it. If you only allow one process at a time, you're stopping the property owner from collecting rent during that process.

Any regulatory process that takes time shifts some cost onto someone.

You'd apply for permits on a place you aren't renting just in the hopes that its still vacant and available when you get the permit?

There is Prop H which recently passed which seeks to expedite the process of opening a business in SF when it goes through the planning council phase. I don't think it's realistic to allow people to get permitting when they don't have an address yet for the business, since the precise business location is needed to assess the business application.

The building will be rented out to some other business by the time you get the permits and you will have to reapply for all new permits for the building next door.

If it really takes that long to get permits then why isn't the other business delayed by the same amount of time?

The other business will rent it during the period with deeper pockets than you have.

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