S.F.’s tasti­est bar­gains.

How ris­ing wages, rents, food costs and in­fla­tion pad the bill on your big night out

San Francisco Chronicle - - FRONT PAGE - By Jonathan Kauffman

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.”

Ja­son Henry / Spe­cial to The Chron­i­cle

Prime rib at the House of Prime Rib in S.F. costs $43.85 now, up from $19.75 in 1995.

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