Surviving & Thriving: The Top 3 Challenges Facing San Francisco Bay Area Restaurants

July 21, 2015
This year was the first time in United States history that Americans spent more money on dining out than groceries. Nowhere is that more evident than here in the San Francisco Bay Area, where new restaurants have been opening up almost weekly. The strong economy has allowed pop-ups to become brick and mortars, cooks to become restaurateurs, and others to expand their restaurant empires. However, despite the seemingly rosy outlook, restaurateurs are stressed about a few trends that are looming.

Rising Costs

San Francisco, Oakland and Emeryville have all raised their minimum wages to $12.25, with Emeryville's jumping to $14.44 for employers with more than 55 employees. These jumps were significant particularly in Oakland and Emeryville, where the leap was 36% (60% in Emeryville for the larger employers). And although the San Francisco increase was more modest, because it already had a higher minimum wage than the other jurisdictions, San Francisco's minimum wage will reach $15 an hour by 2018.

And unfortunately, increasing labor costs -- of which health care are part -- are not the only cost-related challenges that restaurateurs are facing. Rising rents, increasing food costs, the drought and greater competition are all impacting them.

These trends have led to restaurateurs and chefs looking at new innovative approaches for dealing with these challenges: creating "fine casual" concepts that don't require service staff; ticketing through platforms with built-in audiences; and all-inclusive pricing. Some restaurants, despite rising costs, are still choosing to grow and expand in the Bay Area. Smitten, Tender Greens, Gruppo Chiarello and Back of the House are all examples of restaurant groups that are facing the challenges head-on and are still investing in more locations and/or concepts here.

Labor Shortage

In the San Francisco Bay Area, as in some other major metropolitan areas, the cost of living is very expensive, making it difficult for people in the industry to afford to be here. Cooks are leaving the Bay Area often for less expensive locales or moving to technology companies with lucrative pay and benefits, making the competition fierce among the local talent pool. Restaurants are sharing or poaching staff, depending upon the situation. And managers are in short supply, as the increase in minimum wage has made it far more lucrative to be a server than in management.

The issue around compensation is a challenging one, and some see being able to control all the revenue coming into a restaurant as a way to increase income stability for the front of the house, while increasing the wages of the back of the house. It also helps in professionalizing the work environment and creates a different culture; employees think differently about their commitment to their jobs.

Because there's no tip credit in California, the disparity between the front and back of house wages is higher than anywhere else.

Restaurateurs like Allison Hopelain of Camino and Thad Vogler of Bar Agricole and Trou Normand have restructured their business models to eliminate tipping, increase their prices and raise all their employees to a higher wage than the existing minimum wage, and provide them health insurance and other benefits. And while there was some initial concern among the team about the change, it has been positive in attracting and retaining staff.

The issue of the labor shortage has also raised the question of how to increase nobility in the hospitality industry. Here in the United States, hospitality work is not revered like it is in Europe. When a young adult tells their parents they want to enter the culinary profession or open a restaurant, they often discourage them. Working in a restaurant, something one-half of all American adults have done at some time, is seen as something you do to earn money while going through school, pursuing a career in the arts, etc.

Industry leaders like Roland Passot of La Folie and Bjorn Kock of Town Hall, who began their careers in Europe, bring the European hospitality perspective to their restaurants. Also, native-grown industry veterans like Pete Sittnick of Pat Kuleto Restaurants have managed successful restaurants for more than 30 years that have provided the platform for rising star chefs to mature in their voices and operate restaurants that have achieved longevity in top-notch food and service.

Mentorship is another key in tackling the labor shortage, particularly since the challenges locally are in two major roles: management and cooks. How can chefs and owners/restaurant management cultivate the next generation of talent? Is mentorship something that needs to be formal or embedded in the culture of business? There are many in the industry who have experienced mentorship and have been great mentors, among them Gavin Kaysen of Spoon & Stable, Traci Des Jardins of Jardinière and Mijita Cocina Mexicana, Sabato Sagaria of Union Square Hospitality Group, and Patric Yumul of the Mina Group. They all think about how mentorship plays a role in retaining and promoting talent.

Continue reading 'Surviving & Thriving: The Top 3 Challenges Facing San Francisco Bay Area Restaurants' on Open for Business.

- written by Gwyneth Borden for Open for Business.

Gwyneth Borden is the executive director of the Golden Gate Restaurant Association (GGRA), a nonprofit trade association representing the culinary industry in the San Francisco Bay Area. GGRA celebrates and empowers the restaurant community through advocacy, education, marketing, events and training. GGRA offers regular trainings, including California's food safety certification, regulatory guidance, casework, access to resources and signature events to market the industry including San Francisco Restaurant Week, Eat Drink SF and Eat Drink SF 365.

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