Reminder that the office of Small Business is the only place to start new business in San Francisco and get the best answers. The office of Small Business should be your first stop when you have a question about what to do next. You can find us online or in person here at city hall. Best of all, all of our services are free of charge. The Small Business commission is here to voice your opinions and concerns about policies that affect the Economic Vitality of Small Businesses in San Francisco. If you need assistance with Small Business matters start here at the office of Small Business. Thank you. Item one, called to order and role call. role call . You have a quorum. Apparently, a computer went down and we didnt have sound. So i appreciate everyone being flexible. I want to thank everyone for the virtual kitchens known as government kitchens and i would like to thank all of you tuning in on sfgov tv. We know its not easy take time away from your business to participate in opportunities like this but be assured your impact is counted. We also would like to thank the departments who took time out today to present to us. Your time is valuable and we appreciate that youre here to help educate the commission and public on this emerging industry. This is a topic that has been on our commissions mind for quite some time and weve heard many reports from the Small Business community regarding the opportunities that delivery platforms are providing Small Businesses. Weve also heard from many about the challenges that they have posed. We hope that at the end of todays hearing, well know more about this emerging industry and well be able to offer thoughtful findings to the mayor and board of supervisors. Before we begin, i would like to briefly explain some of the terminology that will likely be used throughout the hearings so the public can follow what were talking about. As is often the case in emerging technologies, terminology changes. Last night the Commission Secretary and i were having a debate about the techthonomy and this is what we settled on and this will be the definitions were using so were all talking about the same thing. When we say delivery apps, were referring to thirdparty deliver platforms like door dash, grub hub and uber eats and well be using ghost kitchens which some refer to as virtual kitchens, but for our purposes, well be calling them ghost kitchens today. Ghost kitchens are food preparation facilities that are oriented towards delivery only on these delivery apps and otherwise not accessible to the public. Ghost kitchens come in different voters, rick and mortar are in a permanent building and maybe in a warehouse or Industrial District or might be in a papered over storefront in a commercial corridor. Mobile ghost kitchens are in a food truck or some other temporary structure. Invisible ghost kitchens are of unknown origin. When you visit the address listed, theres no discernible business listed there. I would like to highlight a few of the models wore hopin were h can refer to. Its businesses that host a number of ghost kitchen tenants in a facility. The operator may offer Specialized Services or shared equipment to make it easier for the ghost kitchens to get this to drivers. Delivery hubs are places where food is stored until it is ready to be delivered. These can be lockers, trailers or even small storefronts themselves. I think it is safe to say that the commission has a lot of questions regarding ghost kitchens as well as Community Apps and were looking forward to being educated by all of you and i think were all in agreement, were seeking a balanced discussion. We know that the relationship between the Restaurant Industry and ghost kitchens is complex and we respect that complexity. We know that there are different views on these services and Business Concepts and all were hoping to do today is to learn from you so that we can provide guidance to the board of supervisors and the mayor and that it be thoughtful and on strucktive guidance that ultimately helps to make the Small Business community in San Francisco stronger. So with that, i would like to invite Laurie Thomas to present in her capacity as owner, general partner as roses cafe and ceo of nice ventures. Is this on . It is. So i basically wanted to read a statement that will take ten and a half minutes of my 14 that was allocated and i will set it up and hopefully, then, if you want copies, im happy to submit that into the record afterwords. You can interrupt me if you want, im fine with that. So good afternoon, my name a Laurie Thomas and im to present as a Restaurant Owner of roses cafe and theyre both longtime restaurants, 13 and 25 years in San Francisco, operating. I also represent the larger San Francisco community of restaurants as the new acting director of the Golden Gate Restaurant Association and in the interest of time, well combine both things because im speaking with a restaurant hat in general. So thank you all for taking the time to hold this hearing so we can learn more about the growing industry and becoming more educated and to understand all of the different stakeholder perspectives, issues and concerns. Just to set the Playing Field. Our industry is large, pure the bureau of labor statistics. Many people are struggling with the online economy. We help provide unique experiences and one of the key reasons if you ask sf travel why tourists will fight for visiting San Francisco is to go and sit and dinein restaurants. So now we switch to a more negative set of news here. Our brick and mortar industry, our Restaurant Industry in San Francisco is in a serious state of decline from my perspective. Five supervisors sat in and helped to host this and 41 restaurants showed up, that we thought that the decline, the more closures versus openings and San Francisco in 2018 were 9 . Theres between 2,000 square feet and greater than 2,000 square feet. To give you numbers behind that, what are we talking about, 536 restaurants closed in San Francisco, closed the Health Department permits and only 384 opened. Another way look at this is if you compare the 2018 numbers and we have numbers going back five years and weve asked them to go further and to expand to look at mobile trucks, but theyre a little busy right now and so we have to give them time to produce the numbers. But if you look at it, 106 less restaurants opened and six more closed than they did in 2019 and 100 more closed and six less opened within excus. Excuse me. What does that mean in terms of lost jobs. We dont have the job losses because the department of Public Health doesnt report but if we were estimate on the low side an average number of employees was, say, 20, youre looking at losing over 200 jobs. The higher side and say, 50, and i dont have the one to one numbers, that would have been close to 5,000 jobs restaurants would have accounted for. If you compare that to the earlier labor number for workingclass jobs, thats close to 8 of the total working class jobs and we need to be paying attention to this, ok . I know we have a 1. 9 Unemployment Rate in the city but we need to look at the working class jobs. Our restaurant members and myself are worried in 2020, and well see a greater number of closings that many do that due to many several factors were aware of, the lack of workingclass housing, the permitting process, the extreme homelessness on the trees streed the economic pressures many are facing from the ordinances passed from a policy perspective seven years ago but are coming home to roost. Lets move into the delivery apps and ghost kitchen discussion. I want to thank you for calling this and i want to let you know that in the past week and a half, ive spent ten hours meeting with several Delivery Companies, meeting with many of our members and i also met with one of the guys who is the gm of cloud kitchen and this is an informed commentary, ok . So i see that we have si circle stakeholders. We have the brick and mortar restaurants. Theres uber eats, grub hub, postmates and a bunch more. I got three that i didnt return calls to this past week. Theres the government kitchens and the virtual kitchens and these are the production and distribution facilities for this industry. Theres the consumer or the customer and theres the residents, people like myself, you know, that live neighborhood corridors of people that use the roads and frequent the neighborhood and commercial corridors and the Government Entities with enforcement of rules and permits toen sure to e Public Safety. Lets go through five key issues and i can take any questions. The first issue i think where were coming from an a restaurant and where im representing my restaurant, members and community, is the prospective of why are we seeing this new industry emerging and i think from talking to a bunch of people and myself included, its coming because brick and mortar restaurants and these are fall service restaurants, for the most part. Theyre not the fast casual and theyre not they include but less of the super highend, you know, thousand dollars for two for dinner. Its the core of the restaurants, like my two restaurants. Its just becoming less and less sustainable from a numerical perspective to make the businesses run and you guys have heard these numbers but ill repeat them for the record. These costs, thats one component of it, include labor and permit fees and taxes and also the time it takes to open a restaurant have significantly increased. Dinein restaurants have seen the payrolls jump by 52 . Not the minimum. Everything has gone up. Revenues have essentially stayed flat and maybe gone up, maybe 3 a year, maybe not. And weve seen the healthcare costs during that same sevenyear time frame and i personally can show you numbers, have gone up 37 and Small Businesses take the brunt of that. I see my husband who is a teacher for 15 years and kelpers has a hell of a lot more negotiating power and so we take the brunt of the cost increase. Then you guys know the permit fees, the time it takes to address any issues to fix the facilities, even if its an exist improvement. I heard a horror story the other day about somebody had to make a change and how long it took. Im encouraged by the new legislation peskin put forth to give him additional use time and thank you. Im excited to see that. Lets move on. What else is changing . Obviously consumer behaviour. We cant ignore that, right . New buying behaviour, myself included, sometimes, not to want to go to a restaurant and eat but to order in and we have to be aware of that. That wont change. So why are restaurants, including myself, and ive used caviar for a couple of years at roses cafe. Why would we move to Delivery Services . To capture incremental revenue and to offset some of the costs that are fixed costs that keep going up or labor costs which are not fixed but variable, technically, but they keep going up. So we have to find more revenue. And also, we have some customers who want to purchase that way from us, to be honest with you. And then we want, you know, to continue to try to function so we do this and most restaurants that i talked to, i talked to several, theyve had positive experiences. Ive read the paperwork, and they do it to increase revenue. Many folks are doing a large percentage of their business through delivery. Were not, but were limiting the time and were limiting six items on the menu because were concerned i dont have chinese or indian or some sort of food that travels women. My food, a pizza cooked at roses cafe tastes horrible by the time it gets to noey valley. So personally, we use caviar, we pay 25 to them and we limit the menu. We can start and stop the service on demand. Its a positive thing for us and theres an ipad, the bartender can stop it so it doesnt affect normal diners in the restaurant. We feel the fee but its a business decision that i as a Business Owner made and i want to have the ability to make contracts with people if i feel that makes sense for me and this one did. Now theres some other issues we want to address and i dont want to say bad behaviour. Some people said predatory behaviour but theres been issues you have all seen in the press lately that delivers without consent and you guys have seven that. Im sure youre all aware of the state bill put forth, the delivery act thats interested in getting consumer data as a secondary note. As a Restaurant Operator and ed of the ggra, i strongly believe that listing restaurants without their consent has to stop, ok . And i will mention postmates and tell you the experience and then ill give them and theyre here today some positive feedback, too. We had an issue about a month ago, getting a lot of postmate orders at roses cafe. These poor couriers were showing up with orders we couldnt make. They werent on the menu because the menu had been pulled from a year ago and we change the menu daily. Its a small place. The team would get upset, causing a conflict and it was not good. It was difficult for me to figure out how to get postmates to stop that, but i was recently introduced to the vp at Public Affairs in the room today. We discussed this and he said, i can understand its a problem and gave me a url that in two minutes i could ask them to remove the name and they did. Because im not a merchant, i didnt have any way to know what that url was. There has to be a remove me button or something on a consumer site that means that a business can go to and say, i dont want this, right . So theyre working on that. I think if we can educate why thats a problem, obviously people on site dont pay the fee, the 25 . So some might like that, but ones that dont want it, we want it to be off of that and we had an exclusive agreement with caviar and that was another reason. Lets talk about the other issue. Ive heard a lot about, peeping saying this is a usery fee, which is too much. They shouldnt take that. The fees, i believe, range from 15 if a Consumer Picks up an order up through 30 for the normal delivery model. As i mentioned mine is 25 because i have an exclusive agreement. So here is where i think many Business Owners feel about this, as long theyre not hidden fees or bit and switch fees that could take advantage of somebody less sophisticated, then i think fees are up to a contract that a Business Owner should have the right to make assuming theyre getting, you know, something in exchange for providing that service. But the other thing i think would be great to make and had a meeting with uber eats yesterday and what they do, i think, is great, it only takes 24 hours, they told me for a restaurant to be removed from a platform. So many of us will sign a contract and were locked in for 12 months, say, with the cleaning company. Theyre not doing that. Theyre saying, if you want out, we let you out. Thats something very helpful we try to ask for, somebody tried something, it doesnt work and theres an easy and nonpenalized outclause in the contract. Next issue is consumer safety and Public Health and i think this is really key. I met with the cloud kitchen guys, as well, this past week. And reinforced and told me that all of the facilities are permitted. They follow the Health Department rules, pull the right permits. If we dont have the right zoning and permits, we have to create them as a company. That the Health Department goes and inspects them. It has to happen for these facilities just like restaurants. We need food handler considerates. We need food manager permits on site at all of the facilities for each of the different kitchens. And so we need to make sure thats enforced because we dont want anybody to get sick. The fourth issue, again, along the same line, we have the correct permits and follow the zoning rules. I think one issue that we want to talk about, reggie that and i talked about this and if a kitchen goes into a corridor, pulling that level of permit to do a virtual kitchen, they havent activated the storefront. So thats the cons. The pro is, that was and empty pace anspace and now we say, she let offices in there . I dont know. Zoning isnt my thing but those are things to have a conversation about. Mta is taking a look at this. We have to address congestion, double parking for the pickups by the restaurants and by the kitchens. I saw this in some of the paperwork, we need to be careful not to turn yellow zones into areas where noncommercial vehicles can park because i dont know how you regulate that, even if its a couple of minutes and somebody pulls in. Well have fights over those yellow zones. For restaurants, yellow zones are important. The fifth issue to think about, obviously, is the global level but in the San Francisco level is our environment and does locating a virtual kitchen throughout the city actually help to reduce travel and congestion or, you know, does it make it worse . Is it shortening the distance and those types of things . So there is that and the other thing is that the ghost kitchen models are the shared commisary are positive because we cant go through raisi