Health Access Plan: Restaurant Owners Stew Over New Rules
The first big hit to the San Francisco restaurant
industry came three years ago this month -- a $1.75-an-hour increase
in the minimum wage.
The second came last Monday when the city became
the first in the country to require all businesses to provide paid
sick leave to their employees.
The third is due in July when the city's plan
to require health coverage for uninsured residents kicks in --
assuming the employer mandate portion of the ordinance survives a
legal challenge by restaurant owners.
A word to diners: Budget accordingly.
"We think it will cost us $180,000 to $200,000
a year for just those three increases,'' said Dave Stanton, managing
partner of Tres Agaves, the Mexican restaurant near AT&T Park that
opened to rave reviews in October. "I'm going to have to raise
prices for all my drinks and appetizers a dollar and entrees two
dollars. I don't know how else to do it.''
His is a common refrain among restaurateurs in a
city synonymous with fine dining, where tourism rules the economy. The
three new mandates, they say, will have the unintended consequences of
reducing workers' hours and blemishing the city's reputation for
"What eventually will happen is, we will lag
behind,'' said Joseph Manzare, a partner in Tres Agaves and the chef
and owner of three other San Francisco restaurants, Globe, Zuppa and
"We are known as the best restaurant city in
the world, but we are going to start lagging because there will be a
lack of service, a lack of staff in the dining hall. Something has to
give,'' Manzare said.
San Francisco Supervisor Tom Ammiano, a supporter
of the three measures, thinks restaurateurs protest too much. He noted
that a Field Poll in January found that 78 percent of voters supported
requiring employers to provide insurance for employees. And 76 percent
supported expanding government programs to cover uninsured people,
"You get a more loyal workforce when you
provide insurance, you get a healthier workforce," Ammiano said.
"You cannot exploit workers as was done in the
past. But remember, restaurants are in this for profit. This is not a
Peace Corps exercise for them.''
The supervisor added that he was asked to leave a
Valencia Street restaurant recently by an owner protesting his support
of the San Francisco health care ordinance.
All three mandates are for worthy causes, a half
dozen restaurant owners interviewed acknowledged. But they maintained
that the cumulative burden is unfair, particularly on small,
labor-intensive neighborhood businesses that are critical to the
city's economic engine.
"They may call themselves progressive,'' Mark
Pastore, the owner of Incanto Restaurant on Church Street, said of the
San Francisco Board of Supervisors. "But their actions are paving
a path for only large, ruthless, profit-driven corporations to survive
in San Francisco. Is this the San Francisco we want to build?''
When the city's minimum wage law became effective
in February 2004, Pastore imposed a special charge, explaining it on
the menu and customers' bills, "A partial service charge of 5
percent will be added to each check, enabling us to share the rewards
of serving you with our non-tipped kitchen employees.''
The boost in the minimum wage went to Incanto's
waiters, who were paid the minimum but benefited, some very
handsomely, from tips. The increase did not go to members of the
kitchen staff, who were already making a few dollars above minimum
Pastore uses the service charge to pay 100 percent
of health care coverage for a dozen kitchen workers. He expects the
city health care program that starts in July will add an additional
$75,000 to $80,000 to his costs. That about equals his 2005 profit of
Incanto's owner said the restaurant's customers
find the service charge more palatable than higher prices because it
gives them permission to deduct it from the tip.
"I think raising prices up to the sky over
time does not benefit diners or benefit my business, and it won't
benefit my employees,'' Pastore said.”We are like a lobster in a pot
of water. The real risk in San Francisco right now is the temperature
simply keeps going up every year.''
Gayle Pirie, the chef and co-owner of Foreign
Cinema, a moderately priced Mediterranean bistro on Mission Street,
also is staring at potential additional annual costs of more than
She and partner John Clark like to give year-end
bonuses to the kitchen staff. Now those are threatened.
"With these mandatory benefits, we have less
control over giving benefits to our employees," Pirie said.
"You are forced to restrain your generosity in ways that are not
Tres Agaves is a partnership between Manzare, the
chef, Sammy Hagar, the rocker who heads Cabo Wabo Enterprises, and
Julio Bermejo, owner of Tommy's Mexican Restaurant on Geary Boulevard.
Its 38 investors put more than $2 million into the 10,000 square-foot
place. The partnership is considering another location -- but it won't
be in the city.
"I can tell you that as of right now, we are
not looking to expand in San Francisco,'' said Eric Rubin, a managing
partner. He called the city's business environment
The restaurant has a staff of 75. "It's a
labor-intensive industry, and the last thing we need is to get dinged
for it,'' Rubin said.
One option the partners are considering is to set
food and drink prices that aren't round figures -- say, $22.57 for a
steak. That might prompt guests to ask why and give the restaurant an
opportunity to talk about San Francisco's perceived impositions on
"We want to create a groundswell of public
opinion. We want it to resonate with the public that we are having to
pass these charges along to them,'' Rubin said.
"Where we are headed for, you are not going to
see those cool, little local restaurants. You are going to see a bunch
of corporate restaurants, and the rest of the city is going to look
like the restaurant dynamic on Fisherman's Wharf,'' Rubin said.
Many restaurateurs are hoping the suit filed by the
800-member Golden Gate Restaurant Association in federal court last
year will give them relief. The suit seeks to invalidate the mandate
that businesses with 20 or more employees pay for their health
coverage, arguing that municipalities don't have the power to impose
Association Executive Director Kevin Westlye, the
former owner of the Franciscan on Fisherman's Wharf, said guests often
react to menu price increases by buying down. When wild salmon moves
from $22 to $25 they'll order filet of sole at $18 instead.
"The effects of these increases will be that
... people who might dine out three nights a week will dine out two
nights," he said. "The best restaurants will continue to
attract customers. It won't affect the top tier, but it will affect
the next tier down. It will make the difference between profitability
and lack of profitability.''
Ammiano said San Franciscans need health care,
decent wages and sick leave.
"With education and cooperation most of this
can be smoothed out," he said "But these things should have
been taken care of in the past."
San Francisco Chronicle, George Raine