The 3rd annual Golden Gate Restaurant Association Industry Conference is coming up next week! Bay Area chefs and operators will gather for two days of programming around everything from business and policy trends to new developments in service and technology — and we at OpenTable are thrilled to be a sponsor of the event.
In anticipation, we talked to Gwyneth Borden, the GGRA’s Executive Director, who oversees the conference and sets direction for the organization. In short: it’s a challenging time for San Francisco restaurants.
“We’re starting to see a little bit of a slow down in pace from years before,” says Gwyneth. “Residents are concerned about the economy, and that impacts how they spend. The cost of living in San Francisco is very expensive — all of those things are going to factor into consumer behavior.”
Here, Gwyneth outlines some of the biggest issues and opportunities in the Bay Area industry today, plus how restaurants are responding to changes. Read on below, and locals, register for the conference here!
There’s a fear among the industry and from consumers about the current political environment, particularly around immigration issues and the Affordable Care Act. The restaurant industry is an immigrant-dominated industry, including both restaurateurs and workers. Creating protections and a feeling of safety and security is what hospitality is all about and maintaining a workforce in an area where we’ve seen major shortages due to the cost of living is paramount.
From a practical standpoint, with an existing labor shortage and what seems to be a market slow down, we cannot afford to lose workers or see costs rise any higher for labor. We’re hearing concerns about the national rhetoric and what it means for businesses — are there going to be ICE raids on restaurants? What can I do to protect my employees should ICE show up? How will the industry survive a tariff on Mexican products like avocados and other produce? Will there be workers to farm food and create wine, and if so, who will be able to afford the price? There’s a lot of concern about what that rhetoric means about the industry and our ability to continue to thrive.
Other countries are threatening a boycott of San Francisco, and there’s a genuine concern that if other countries that fuel our tourism decide that they don’t want to come here, we’re going to have real trouble. We rely on Canada and Mexico, who are our largest groups of tourism visitors. There are concerns about whether there will be issues with travel visas too. This year the Moscone Center will be shut down for six months for an expansion project, meaning we’ll have no large conventions for a six-month period. Next week we’ll have the CEO of SF Travel speaking at the Industry Conference about what they are doing to encourage tourism visitors, including attracting smaller conventions and trying to maintain great relationships with the general tourist population.
3. Health Care
Rising heath care costs are a challenge for businesses, but San Francisco is a little more unique because we have our own local law. This year is the first time that health care expenditures are 100% irrevocable, regardless of actual health insurance costs. In the past there was a “use it or lose it” capability, and that’s no longer the case. And now the city’s required spend has eclipsed that cost of health insurance, increasing costs exponentially. Because there’s uncertainty around the ACA, it’s hard to seek reform or changes in cost structure. What happens if the ACA goes away? How are we going to provide the health care that people have been able to provide? Is the state going to be successful with their efforts around a universal single payer structure? If so, will that be better for business? All of these issues are very much on the horizon for people in the industry.
What is happening to the full-service restaurant? We’re seeing pressure because of cost issues, leading to the rise of the new fast casual: a healthier, better product in an environment where you want to stay and linger, versus the former brightly lit places where you’re in and out quickly. By all accounts, the fast growing market segment is fast casual and the consuming public is more amenable to interfacing with technology in the interest of expediency, including delivery services. That has created a lot of pressure on the industry in the full-service space: labor costs are rising, food prices are fluctuating upward, and rents are rising. There’s a lot of value in being able to serve more people at a higher price point, which is the new model of the fast casual.
To thrive in the full-service space you can consolidate your menu, offer a prix fixe, reduce your service, or test out a flex model. At this year’s Conference we have an entire panel on the future of service. The Park Cafe Group is representing the flex model, where at lunch time they are a cafe and at dinner they turn into full service. Barzotto is a fast-casual restaurant but has much more of a full-service restaurant feel and food. We have Lindsay Tusk from Quince and Cotogna talking about fine dining vs. casual, and David Barzelay of Lazy Bear talking about his unique concept, a ticketed prepaid meal option that introduces the notion of a dinner party concept. The service model is different because the chefs are making the food and delivering it to the table and telling you about it. It’s an interesting time for looking at the full-service restaurant space and the next level of its evolution, whether that’s experience driven or more fast casual without servers, or other hybrid models.
Additionally, we’re having conversations with the mayor’s office around the tech community and how they can better support the restaurant industry in San Francisco. Tech kitchens have cannibalized staff from restaurants as well as actual customers. You can’t compete against free. Our culture is becoming more lazy, as we get groceries, dry cleaning, etc. delivered to our homes and offices with ease. How can we help get the tech community to shift spending away from full-service food operations and into restaurants?
Thinking about the current tech cycle compared to that of the late 1990s, restaurants that have operated through both cycles say that lunch business is not as strong as the first boom because of tech kitchens. How do you navigate that if you want areas of city to grow and be vibrant? It’s especially interesting at a time when we’re seeing the rapid proliferation of tech solutions to solve the problems of the restaurant industry. Yet many of these companies don’t seem to understand the fundamental business of why a restaurant succeeds or fails, which mostly has to do with getting butts in seats.
7. Consumer Education
We’ve been struggling for a while with the lack of understanding of the true cost of food. In San Francisco, Oakland, and Berkeley, especially, people believe in social justice; they want food from local farmers, picked by well-paid workers, from ranches with happy cows that are grass fed. All of those things are good and important but come at a premium. We have a long way to go in educating the consuming public that if these are your values and you want these benefits to exist, you have to be willing to pay more for your food. You can’t expect to have a $2 taco prepared by a person making $15 an hour. Our challenge and opportunity is: how do we better educate consumers so they understand they should be celebrating higher prices and not condemning them?
Rents are high; you can’t control that. You need people to cook food and work on the floor of your restaurant, so you can’t cut too much in those areas, and you can’t cut food cost without impacting quality. If you can’t cut costs, you have to raise prices.
What I love about this industry is that restaurants are community — and what gives me hope and optimism — is that ultimately restaurants are convening places. Even in times of uncertainty, food is so celebrated. It’s how people connect, how they celebrate the best and worst days of their lives. We have the opportunity to help unite and bring together the fissures in our society today when we welcome people in with the hospitality we provide. That’s so powerful.
When people ask me if with more automation, will the modern day restaurant become obsolete, I answer no. People still want human interaction, especially because we so much time on our cell phones and computers. We’re seeing a trend in retail where stores are adding restaurants or getting into the grocery space and prepared food space. Everyone is trying to capture the experience food provides in the hopes of translating that into sales. Restaurants provide a daily gathering place. The key to a successful restaurant is creating meaningful experiences, and providing an environment that feels warm and welcoming.