S.F. Eyes Relief Package For Retail, Restaurant Sectors

San Francisco's retailers and restaurants, long stymied by the city's burdensome permitting process and now the coronavirus pandemic, have some hope of a relief package in November.

Proposition H, placed on next month's ballot by Mayor London Breed, is the most comprehensive of several passed or proposed initiatives aimed at saving the city's retail and restaurant sector. If passed by voters, it would open up many businesses to new and temporary uses, and it would also limit to 30 days permit approval processes that currently take several months or more. It could be a big difference-maker for businesses across the city, according to retail experts.

"There's a huge wait right now to get over-the-counter permits," said Maven Commercial partner Pamela Mendelsohn, an S.F.-based restaurant and retail broker. "I’ve heard from various architects, contractors, tenants, landlords. Everybody is up in arms about this.”

Alongside e-commerce, street conditions and construction costs, retailers have for several years complained of slow-moving approval processes and inflexible zoning as significant detriments to retail and restaurant businesses in S.F.

Now, more businesses are in even greater need of quick ways to adopt outdoor operations and modify uses. Already, one out of every 100 S.F. metro area businesses has closed, according to Yelp. In S.F. itself, as many as 50% of all restaurants could close permanently because of the pandemic, the Golden Gate Restaurant Association has estimated.

“Many small businesses were struggling to survive even before the pandemic, but the challenges they’re facing now are unprecedented," Breed said in a statement. "We’re doing everything we can to provide financial and staff resources at the local level to work with our small business community to help them navigate both reopening and often fundamentally changing the way they do business."

Prop H, which requires a simple majority of votes to pass, could join measures implemented or proposed amid the pandemic meant to help the city's retailers and restaurants. 

Last month, the city's board of supervisors moved to waive outdoor business permit fees until 2022 in a vote that also refunds such fees paid since April 15. That followed the city introducing its Shared Spaces program in May, giving restaurants and retailers the ability to do business on sidewalks or in parking lanes with a free permit. 

Golden Gate Restaurant Association Executive Director Laurie Thomas, who owns two restaurants in the city, said she applauds both initiatives.

"I would have owed $5K in renewal permits for outdoor seating, and there were about 350 people in the city that had permits like that before," Thomas said. "Now, we have over 1,235 applications and permits that have been issued in the Shared Spaces program, and none of those are being charged fees."

Thomas and GGRA are also supporters of Prop H, which she said "really streamlines a lot of things that should be streamlined" but faces its fair share of neighborhood opposition.

“I do think, unfortunately, there is a lot of opposition to it from neighborhood activist groups because it does streamline the permitting, which, by definition, means people have less time to weigh in and oppose stuff," she said.

Though opposed by the Haight Ashbury Neighborhood Council, Prop H has had no paid arguments submitted in opposition to it.

"This piece of legislation didn't have any process at all," Christin Evans, a HANC board member, said in an interview. "There were no presentations by [the Office of Economic and Workforce Development] or the Mayor's Office to community groups, including the Haight Ashbury Neighborhood Council, which we would have welcomed."

On top of quicker permits, Prop H would remove neighborhood notice requirements for changes to uses already permitted by zoning, saving businesses from a process that can take up to six months. It would also expand permitted uses in many parts of the city, allowing restaurants to offer workspaces.

Each of the above would apply to businesses in the 43 Neighborhood Commercial or Neighborhood Commercial Transit Districts around the city, which are used to give the city more specific controls on how it regulates certain commercial corridors. 

Another part of Prop H would allow for pop-up retail in vacant commercial storefronts for 60 days. 

Notably, Prop H does not amend any part of existing formula retail rules, which make the establishment of chain store locations difficult in the city. In their current form, which applies to chains with 11 or more worldwide locations, formula retail rules are opposed by the city's CRE industry, including Mendelsohn. 

For retailers and restaurants, outdoor operations remain crucial for many businesses catering to customers that may have lasting reservations about indoor retail and dining. Since Sept. 30, 25% indoor capacity has been allowed in S.F., but restaurateurs say that won't be enough for many restaurants lacking available sidewalk or outdoor space.

For Francesco Covucci, owner of Il Casaro Pizzeria, it has been a tale of two locations. His North Beach restaurant became busy since outdoor seating was first allowed in June, but his Mission District restaurant has faltered because it doesn't have the same outdoor dining option. 

“For restaurants that don’t have many seats outside and have to base the business on the inside, 25% [capacity] might not make any sense," Covucci said. "With a restaurant, it’s tough to make money even when you’re at 100%.”

Jing Chen, a co-founder of Bay Area retailer Therapy Stores, said their Valencia Street location, which is normally their best-performing store, is now their worst-performing one out of 11, only seeing about 30% of normal sales. Chen said the store has tried to offer the curbside pickup option now allowed by the city but hasn't found success.

"The traffic is so, so different, probably 10% of what I did in the past," she said, attributing the difference to a dearth of office workers and tourists that normally lead to most of their sales.

Both Covucci and Chen cited looming rents as a future threat, even with commercial evictions still prohibited. Chen said she would like to see more low-interest-rate loans for small businesses made available by the city. Covucci said that without some federal or state relief, which could have come in state Sen. Scott Wiener's failed SB 939 bill, and if business in the Mission doesn't pick up, he will have to close if asked to pay full and past-due rent. 

"Once the eviction moratorium is lifted, I don’t know what is going to happen," he said.

Thomas, who also said 25% indoor capacity simply still doesn't cut it for many restaurants around the city, said she hopes the city continues taking steps in the right direction, including passing Prop H.

 “The landscape is pretty brutal right now," she said.