San Francisco is notorious for making it difficult to open and run small businesses. For Juliet Pries, who just opened The Ice Cream Bar in Cole Valley, it meant months of red tape and rent to realize her goal. (This piece originally published online for The Wall Street Journal).
By Maggie Beidelman
For decades, San Francisco has been a difficult place to set up and run a small business—especially a restaurant. Eager to keep entrepreneurs on their feet and attract new ones, the city is trying to make it easier.
The Board of Supervisors in January proposed an ordinance to reduce the number of restaurant definitions, each with its own zoning regulations, from 13 to three—Restaurant, Limited Restaurant, and Bar.
“There are all these really contradictory rules,” said City Supervisor Christina Olague, who proposed the ordinance along with Supervisor Scott Wiener. The board is expected to consider the measure in the coming weeks.
The move is one of several in San Francisco aimed at helping small businesses start up and keep running.
Mayor Ed Lee announced an additional $1.5 million for the city’s Small Business Revolving Loan Fund in January, and the Board of Supervisors recently approved it. That follows the establishment in 2008 of the Office of Small Business, a program to help potential business owners navigate the city’s cumbersome licensing and permitting requirements, which include a lengthy review process in which neighbors get a say on any new business plans.
The goal is to avoid the kind of experience Candace Combs recently had with her day spa, In-Symmetry. When she decided in 2010 to move her nine-year-old business from one location in San Francisco to another, Ms. Combs ran into zoning regulations and other city rules that dragged out her search for a year and a half. She took on five real-estate agents to find a space with the appropriate zoning and paid roughly $15,000 in permit fees before reopening in December.
“San Francisco is a nightmare,” said Ms. Combs. “You’re constantly butting your head up against the most ridiculous city bureaucracy.”
Restaurants face some of the most onerous rules. An eatery in San Francisco typically completes up to 12 permit applications and filings. The entire process of opening a restaurant usually takes nine to 14 months, sometimes longer, said Regina Dick-Endrizzi, director of the Office of Small Business.
In contrast, a restaurant in Oakland could open in as little as four months, with only three permits, not including county permits, according to Oakland’s Planning Department. The process rarely takes longer than nine months, and Oakland’s planning code has just four definitions of restaurants, compared with San Francisco’s 13.
“In San Francisco, you could spend a year or two paying rent through the permit process,” said Rob Black, director of the Golden Gate Restaurant Association, a nonprofit trade association. “In Oakland, they will bend over backwards to help you open a restaurant.”
The city of San Francisco acknowledges the thicket of regulations and even pokes fun at itself for it. Last year, the Planning Commission created a YouTube video, “Hello City Planner,” quoting directly from the planning code. One sample line: “How big is the space you would be renting? 1,000 square feet or less would make you a Small Self-Service restaurant. Above that, you would be a Large Fast-Food Restaurant. …Wait, it doesn’t matter in this district anyway, because neither one is permitted here.”
Overall, there were 71,000 small businesses in San Francisco as of July 2011, not including insurance companies or banks, according to the Office of Small Business. Small businesses employ about 50% of all employees in the city and contribute about 52% of the total sales tax.
San Francisco’s layers of small-business regulations date to 1987, when the city rezoned its mixed-use neighborhood corridors into neighborhood commercial districts, allowing for a more detailed review process. Before the rezoning, the city approved 97% of the permit applications submitted for small businesses, according to the San Francisco Planning Department. By 2007, the latest year for which data were available, only 30% were approved.
The situation began to change in 2008, when then-mayor Gavin Newsom launched the Office of Small Business. The office is a one-stop shop for small businesses looking for help on how to open and operate in the city. It now handles 140 to 185 inquiries a month, 65% of them coming from people who want to start a business.
In 2009, the city started the Revolving Loan Fund with $670,000, to help create jobs and get small businesses access to capital. Microlender Working Solutions distributes the fund and provides five-year assistance for borrowers.
“I can think of nothing worse than seeing vacant storefronts,” Mayor Lee said. “We must make capital available to entrepreneurs to open up shop and support existing small businesses through the revolving loan fund.”
Ron Miguel, a member of the Planning Commission, cautioned that “you’re never going to do away with the bureaucracy,” but added, “We can always come up with a better way of doing things.”
For some small-business owners, the new moves are coming too late. Juliet Pries, 44 years old, said she opened The Ice Cream Bar in Cole Valley in January after spending nearly $300,000 and two years to get her zoning-designated Full-Service Restaurant off the ground.
“I thought I had all the information. But every step I took, there was something more,” Ms. Pries said. If the proposed restaurant ordinance had already been in effect, she added, “I would have been open a year and a half ago.”