S.F.’s tastiest bargains.
How rising wages, rents, food costs and inflation pad the bill on your big night out
Didn’t this used to be cheaper, you ask your spouse as you flatten out the receipt to examine the pale gray figures near the bottom. Looking up from the menu, your dinner date exclaims: When did a plate of pasta start costing $28?
It’s a curious time for diners in the Bay Area — we have always prided ourselves on our affordable neighborhood restaurants. “Yeah, you could get an amazing meal in New York if you want to spend the money,” we’d tell each other, half smug and half apologetic, “but here we eat well every day.”
In the past five years, we’ve stopped looking to New York. The economic boom has funneled new wealth into dining rooms around the area, and new restaurants — great restaurants, complicated and beautiful restaurants — are appearing at the rate of Beyonce thinkpieces. Last year Bon Appetit magazine named San Francisco “the best food city in America right now,” and Eater’s national critic Bill Addison called the Bay Area the country’s “top fine dining destination.” According to a January 2016 report from market research firm First Data, restaurant sales in San Francisco grew 6.6 percent in 2015, almost twice as fast as in New York.
At the same time, San Francisco has passed more laws than any other major city to improve the lives of low-wage workers such as dishwashers, bussers, line cooks and waiters; Berkeley, Oakland and other Bay Area cities are not far behind.
Our success on all these fronts now comes with a cost, though — one that could reshape the way we approach dining out in the Bay Area.
How much more expensive is dining out becoming? To get a sense, The Chronicle examined 20 years’ worth of menus from restaurants that hold steady spots on the annual Michael Bauer’s Top 100 Restaurants list.` After tracking 22 signature dishes or prix-fixe menus from 14 restaurants, we found that prices have risen, on average, 26 percent since 2010 and 52 percent since 2005 — up 7.5 percent in the last year alone.
Granted, this list isn’t the most representative of the Bay Area’s dining scene. The restaurants on the Top 100 list skew heavily to the high-priced and the European-inspired. Signature dishes in this stratum are rare, since many chefs rearrange their menus with the frequency of an interior decorator’s showroom. The dishes we identified ranged from steamed barbecue pork buns at Yank Sing ($3.50 in 2005; $5.50 in 2016) to Chez Panisse’s Saturday night dinner ($75 in 2005; $125 now).
Comparing their prices to inflation measures shows our buying power can’t keep up. The U.S. Bureau of Labor Statistics’ Bay Area consumer price index, for instance, has risen 13.6 percent from 2010 to 2015 and 27.6 percent since 2005 — only half as fast as menu prices.
The reasons for rising menu prices
Yet, to charge San Francisco restaurateurs with entree scalping may be missing the point. It isn’t just getting more expensive to eat out. It’s getting much more expensive to run a restaurant here, too.
“Quite honestly, it’s amazing how expensive it is do business,” agrees Annie Somerville, chef of Greens, which has been open since 1979. “We’re really lucky to be here and so fortunate to be in this place — and it is a very expensive place.”
To the restaurateurs whose menu prices we tracked, the story of higher numbers is actually one of spiking food and labor costs.
Most menu prices are calculated according to a formula: this percentage for food costs, that percentage for labor, this percentage for rent and other expenses, with 10 percent profit if you’re lucky. When one factor goes up, so does the figure on the receipt.
Food costs have gone up significantly, say all the restaurateurs we spoke to. House of Prime Rib owner Joe Betz says he’s paying much more for dairy and egg products, but the real culprit is beef; his meat costs have doubled in recent years, the effect of widespread drought across the western half of the country.
Slanted Door’s Shaking Beef is an eye-opening 79 percent more expensive than it was in 2005. Yet owner Charles Phan says the dish, which requires a halfpound of grass-fed filet, consistently surpasses his upper limits for food costs. When that happens, he says, he has to switch to flank steak for a while or ask waiters to sell more vegetable sides, which are more profitable.
Other commodities spiked in 2011 when high gasoline prices led suppliers to charge more for delivery, and somehow haven’t gone down. And, as Somerville adds, “Any restaurant that is using locally sourced ingredients is just going to have to charge more.”
Other increases that budgets have absorbed: Linens have gone up. City and state permits have gone up. Garbage costs have gone up, partly because Recology has made it impossible for the independent trucks that used to cart away cardboard and glass to sell recycling, forcing businesses to pay the larger company for pickup.
While many of the longest-standing restaurants on the Top 100 own their own buildings, given the pace at which commercial rents are rising, those who rent have faced some harrowing moments. “We just renewed a lease for seven years and we’re really excited,” says A16 owner Shelley Lindgren, “but to get to market rent meant a 40 percent increase in rent.”
The biggest factor: labor
These changes all appear minor when compared to labor costs.
San Francisco’s minimum wage is one of the highest in the country. As of July 2015, it stands at $12.25, an 11 percent hike over the previous six months and a 42 percent increase over 2005 wages. As the minimum wage climbs to $13 in July of this year, and $15 by July 2018, each step produces ripple effects across the industry.
“Most responsible restaurants should have been paying way above minimum wage,” says Gilbert Pilgram, owner of Zuni Cafe. He’s referring to non-tipped employees, of course; California does not have separate minimums for tipped and non-tipped employees, so a waiter and a dishwasher can theoretically earn the same base salary, which the waiter supplements with tips.
“Nobody works for minimum wage in our place,” adds House of Prime Rib’s Betz. “You can’t. You make more money on unemployment than minimum wage. There has to be fairness.”
Despite voters’ collective efforts, wages can’t keep up with the skyrocketing cost of living. Phan says Slanted Door has recently lost longtime employees to tech companies and gentrification — several employees who had moved to Hercules finally gave up on making a daily three-hour commute.
Wages are only part of labor costs, however. There’s workers’ comp insurance, for instance, which is going up, too, and the cost of covering sick days, which San Francisco, unlike most urban areas, requires.
And, of course, there’s Healthy SF.
Providing health insurance for employees was rare — though not unheard of — across the restaurant industry until 2008, when San Francisco’s Health Care Security Ordinance went into effect.
Since then, businesses with more than 20 employees who work eight hours a week or more must spend a certain amount on health care per employee per hour worked. For smaller businesses, that requirement is $1.68 an hour; for larger ones, $2.53. The money can go toward health insurance plans or some kind of medical savings account.
The Affordable Care Act, which went into effect in 2013, layered on another set of health care requirements for restaurants with more than 50 full-time equivalent employees. The effect of San Francisco’s Health Care Security Ordinance, coupled with the Affordable Care Act, “is disproportionately impactful because restaurants are labor intensive compared to other types of businesses,” says Gwyneth Borden, president of the Golden Gate Restaurant Association. “With a retail store, you could have two people work all day and do as much sales volume as a restaurant with 25 people or more.”
The question of public opinion
Studying profit and loss statements and jiggering menu prices is the very meat of owning a restaurant, but talking about it publicly makes many restaurateurs skittish. That’s because diners have wildly differing opinions about how much their food should cost.
As San Francisco discovered a few years back when a culture war broke out over $4 toast, one
“Quite honestly, it’s amazing how expensive it is to do business.”
Annie Somerville, Greens chef
person’s modest pleasure can represent the height of preciousness to another. The $8.50 you spend on a carnitas burrito at La Taqueria might seem like a good value to you; someone else will forever begrudge the restaurant for charging more than the $4.25 she used to pay in 2000.
Zuni owner Pilgram sums up the disparity between costs and perception: “People sometimes ask, ‘If I can buy a chicken at Safeway for $6, why am I paying $50?’ Well, my chicken is better than Safeway’s. Then there’s the wood for the oven, there’s the person manning the oven — who is going to be making at the least $17 an hour — plus the linens, electricity, gas, the art on the walls, the building gets painted so it looks nice, there’s a cleaning crew, and at the end of the day, you go home and you don’t have to do the dishes.”
In all those years when we were priding ourselves on our affordable restaurants, was that self-congratulation based on illusion?
We may have been willfully ignoring the fact that inexpensive food isn’t possible without low wages. Even when we’re eating at the higher end of the scale, we often confound the illusion that restaurants sell diners —that we’re more urbane as we sit in the dining room, a little richer — with the reality of owning a restaurant. You can easily pay $80 for a meal at a bistro whose multiple-starred chef drives a 15-year-old Honda and boards with three roommates.
When ogling our credit-card receipts, perhaps we diners are finally realizing what happens when skyrocketing rents — for businesses and workers — intersect with our collective willingness to improve workers’ lives.
Perhaps these high prices are, in part, a measure of our political success. But they may also mean many of us can no longer eat out in the manner we have come to expect. The economic boom, and the constant stream of tourists, is currently mitigating the effects of rising prices. If there’s a tipping point, we haven’t reached it yet.
Or perhaps we have. “I feel like there’s a limit to how many restaurants can sustain being in business. That sustainability is something to consider,” says Greens’ Somerville. Her restaurant has been open for so many years that she understands the rhythms of the business cycle and how they have responded in the past. New restaurants don’t have that luxury. “A lot of people have great ideas and make fantastic food, but it may not be a business model that works.”
Prime rib at the House of Prime Rib in S.F. costs $43.85 now, up from $19.75 in 1995.