So-so restaurant year
The openings and closures of eating establishments in S.F. were uneven — by neighborhood and cuisine
If you asked San Francisco’s restaurant industry how it’s doing as 2018 begins, the answer might mirror your 85-year-old great-uncle’s: Not bad. Could be better.
Consider the data that Yelp has provided on San Francisco restaurant openings and closures as a lab test. According to the San Francisco-based user-rating site, from last January through the end of November, 277 restaurants and food trucks in San Francisco opened, while 350 closed. The Yelp data also suggest that restaurants are feeling the impact of San Francisco’s rising minimum wage.
In the broad spectrum of the city’s dining scene, data
show that small restaurants — the ones that specialize in banh mi, takeout General Tso’s chicken, eggs over easy — made up the bulk of the business turnover in 2017. Most restaurants in this genre do not have liquor licenses, which can drive profits but are expensive to purchase. Such restaurants keep prices down for their customers. Their business depends on people who live around the block, those who wouldn’t Uber across town for a meal.
Given that Yelp lists 4,785 open restaurants in San Francisco, a closure rate of 7.3 percent seems rather stable. “I believe we benefit from density, and the fact that we have full-blown neighborhoods,” said Gwyneth Borden, executive director of the Golden Gate Restaurant Association.
And yet the fact that closures outnumber openings seems significant, too. San Francisco’s 5.7 percent drop in the total number of restaurants mirrors what is happening nationwide: In February 2017, market research firm NPD reported that the number of independent restaurants in the United States decreased 4 percent from the year before.
The city is experiencing a number of culinary shifts: While the ranks of Filipino, Korean and Hawaiian restaurants increased — the poke boom is real — restaurants tagged “sandwiches,” “traditional American” and “burgers” fared the worst, closing at nearly double the rate that new ones opened.
French and Italian restaurants in San Francisco showed steep declines as well. In particular, Italian restaurants closed at five times the rate they opened.
Laurie Thomas, owner of the recently shuttered Rose Pistola and the still-open Terzo, credited the fact to a restaurant generational shift.
“Italian was one of the first cuisines to make it big. If you look back 25 years ago, there wasn’t as much sushi or other stuff then. Twenty years is a long time to have a restaurant,” Thomas said.
The strengths, as well as the ills, of the restaurant industry are unevenly distributed across the city — though not where people might expect. Hayes Valley, which many food publications have declared the buzziest restaurant neighborhood right now, is merely holding stable in terms of the number of restaurants. A few neighborhoods showed signs of very modest growth in 2017, including the Tenderloin, Noe Valley and Portola.
But many other neighborhoods saw at least 30 percent more closures than openings, including the Mission, Union Square, North Beach, Bernal Heights, SoMa and Russian Hill.
Debi Cohn, owner of a Mission bar named Asiento and director at large of the Mission Merchants Association, thinks oversaturation is partly to blame, especially in her neighborhood, which saw 25 openings and 38 closures.
“I don’t think that there are that many new customers to accommodate the new restaurant openings,” Cohn said. “People have children, move out of the area, work for companies that pay for food, and pay more in rent. I think the available pool of customers is the same. (The Mission) cannot support an additional 10 to 15 new restaurants.”
With every neighborhood it’s possible to come up with theories for what is happening:
The temporary shutdown of Moscone Center stripped SoMa restaurants of expenseaccount diners and might have been felt as far away as Fisherman’s Wharf; Port of San Francisco sales data confirm full-service restaurants on the Wharf saw a 5 to 11 percent drop from 2016 to 2017.
Ripped-up roads and subway construction affected traffic in Union Square, Chinatown and North Beach.
Thomas and several other industry people also said that the constant rain in early 2017 kept diners away.
Yet openings and closures kept apace until June 2017, when closures flew upward like a kite caught by a gust of wind. The gust may have been the latest bump in San Francisco’s minimum wage, which rose from $13 an hour to $14 on July 1.
“People make business planning decisions when they have to do a minimum wage increase,” Borden said.
Each increase doesn’t affect just workers at the bottom of the pay scale; workers paid above minimum wages often expect a bump in pay. A 2017 Harvard Business School study of Bay Area Yelp rankings found that after each $1 increase in the local minimum wage, restaurants with the average Yelp rating of 3.5 out of 5 were 14 percent more likely to close, and that closure risk rises as the stars drop.
San Franciscans are still going out, flooding into new restaurants, keeping delivery drivers rushing from apartment to apartment. “There’s definitely a slowing of consumer confidence,” Borden said. “The popular places did fine, but for everybody else, the word I heard was that they just weren’t as busy as the year before.”
In short: Not bad, but could be better.