There is Something Afoot…

At a party this summer, a guy I met said, “Listen to what people say, but pay attention to what they whisper.”   I’d in fact been whispering that it has been a very strange year in the Bay Area restaurant/bar industry. We’ve seen strange levels of business and have heard from far too many people in the industry discussing the same. This has been the whisper of the industry since the spring and it’s now starting to hit the papers

Earlier this summer, a survey by the Golden Gate Restaurant found that 2/3 of the respondents (SF restaurants) have experienced a reduction of sales this year, and the decline from spring to summer was sharper than it historically is. The NY Times did a piece about it this summer as well, and just a few weeks ago we saw it more plainly on the page locally: the SF Chronicle’s Jonathan Kauffman wrote a piece titled “Rash of new restaurants folding in short order.” It feels inevitable that the landscape is about to change, perhaps dramatically.

This is not to say that there aren’t places that aren’t doing just fine, or even killing it. We are still seeing places open up by the dozen…for now. But what seems inevitable is an increase in closing announcements from restaurants throughout the region.   The truth is that it takes a million things coming together in the right way for a restaurant to succeed, and survival in these parts is dependant on the up or down tick of just a few percentage points. This could easily spell trouble for many. And having personally gone through a closing in 2015, I know how painful it is for everyone involved – ownership, staff, devoted customers, all – and feel compelled to shed a little light on the situation, to discuss it from this perspective.

Two forces are working against the industry right now, one internal and one external:

  • The internal force is the squeeze restaurants are feeling from the cost of doing business in SF (though the surrounding area’s costs have been catching up in a real hurry the last five years). Contrary to what is often the public perception, profit margins in this industry are extremely small, and these internal costs shrink that margin even more. The end result is that prices go up to cover theoe costs, and suddenly $18 is simply how much a top-notch burger costs in the city. It’s certainly not an impossible market to make a profit, but it’s a hell of a lot trickier to do so than it once was (and it was pretty tough back then).
  • The external force is the current economic climate in the area. Costs have also been increasing on the personal level throughout the region (million dollar condos, $18 burgers) and from the view of this industry, it just feels like everyone has less money left over than they used to. I say this knowing there are neighborhood-sized exceptions, and it’s not as if no one is going out, but the mere mortals among us are doing significantly less spending now because the bills just got too high. At the end of the day, it’s a smaller pool of money being shared between a lot more places than ever before.

When Umami announced its closing earlier in the summer, they wrote in a statement: “Call us another casualty of a changing San Francisco.” Going further, owner Nate Valentine gave a warning: “the city needs to be very careful not to erode away what made it great to start with.” The San Francisco Bay Area thrives on its culinary tradition—it is an industry that is integral to the fabric of this city and region—and there are major issues to address if we want it to continue to thrive. The recipe right now is not one that will work long-term, and we’d like to see a more sustainable path forged in the future.

In future posts, I want to delve deeper into several aspects of the situation: discuss some of the economic forces at work in the Bay Area restaurant industry, shine a light on the personal side of these larger issues and brainstorm about solutions.


Until then…

Written by Christian Albertson
Edited by Nat Cutler
Proprietors, The Monk’s Kettle