Transcripts For SFGTV Small Business Commission 20240713

Welcome. It is our custom to begin and end each Small Business Commission Meeting with a 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 raising the money and going through the permit proce process. You think of the kitchens in commercial areas might make sense to me if i could find the staff to staff them. Thats a positive thing. So to wrap it up, theres a lot to consider but i understand this a lot more than i did. So thanks for calling this. I never would have sat through all of the these meetings. I think we can add values to the members and the community as a whole and thats it. Thank you. Thank you. Thank you, laurie. That was a wonderfully comprehensive overview of everything thats considered here. If you could stay up for just a second. Commissioners, do you have any questions for laurie . Are we asking them now . After each presentation, well have a couple of minutes if you want to ask some questions. I just have a chicken and egg questions. And i think im the only Small Business operator that has a restaurant within the space so this is something ive thought a lot about. You mentioned very well all of f the things that made it harder on the revenue side. I wonder if you think, also, the kind of very shortterm increase in the trends that people have in terms of how they eat, having food delivered to them, have been a large stressor and im trying to figure out, is part of the squeeze that so many people are using these apps . Yes. So now youre using the apps to get more revenue because of the squeeze . Im not sure what drives the behaviour, but we know for sure that the millennials and i do it, too, right . I order uber eats when im exhausted. Ok, ill pay the fee and do it. So its not just the millennials. Im 53. I think im a babyboomer. But i think its hard to tell, but i think that behaviour is here and i think as Business Owners we should be careful what we ask for because, you know, while we might stand here and say, you know, thats 30 too high, i dont want you to come back in two years and tell me, you know, you cant price your hamburger at 25 because thats too much. But i need that to survive, but thats not fair for everybody. So i think its a very tricky thing and what i encourage we do is do what i did and get educated and certainly address some of the zoning and permit issues. Lets make this a level, fair, safe, Playing Field and lets educate our partners on the delivery side. I commend everyone taking time to meet with us and listen to us and to tell us stuff and take some feedback and so thats great. We need to do more of that and weve hit, like, maybe three of them, but i think we need the dialogue and then we become educated. I dont want to have a kneejerk reaction because something things these are bad Tech Companies or something. So thats my two cents. So one thing i just kind of wanted to zero in on here, you mentioned that we talked you discussed ghost kitchens and commercial corridors the virtual kitchens are in the corridors. So for our purposes today, weve co combined those terms. I would separate them. Ok, well, then, maybe you should clarify that. So my understanding, and somebody else can speak to me. Cloud kitchen is the one i havent spoken with anybody other than that. My understanding is that is a large commercial its located by sixth and ryan. Its a large, more commercial style. I think of it more as an apartment model. Sorry, im going to interject quickly. So the complexes of multiple ghost kitchens, and for this meeting, were referring that as a complex. That would be cloud kitchen like an apartment kitchen . Yes. Just so keep everybody on the same page. Whereas a ghost kitchen is a facility that creates food for delivery only. It doesnt have a storefront. Ive read about restaurants that have a ghost kitchen arm to facilitate delivery, but, basically, it is if the food is made in a place where the general public cannot walk in and buy the food right there on the premises, then were calling that a ghost kitchen, for the purposes of this discussion. And so, the question, i guess, i was driving at, is we have heard of ghost kitchens opening in or near commercial corridors. Correct. And as you outlined, theres kind of two sides to that. Yeah. One is that from the perspective of activating a commercial corridor and increasing the amount of foot traffic, having a business is not accessin accessible to the d not as desirable as a business that is accessible to the public. On the other hand, if you have a vacant storefront not used at all, certainly having something is better than having nothing there. So the question is, you know, where do we draw the line and i just where i wanted to come in over the top and say, i hope we can all agree and recognise that restaurants play a role in our communities that are above and beyond just the employees they hire and the tax revenue they generate. They have externalities that extend beyond the businesses yourselitself to have communitie we can see our neighbors and visit with friends and we can visit with people. So there is something its not a purely economic decision, at least from my perspective. Neighborhood corridors are complicated and i dont know the answer, but thank you. Commissioner ortiz. Thank you. That was great and i know you being involved that well get knowledge. I grew up in a restaurant, my mom had a restaurant on 24t 24th and im an advocate for brick and mortar restaurants. Its a golden cage. Youre the accountant, cook, dishwasher, everything. Based on the limited research that youve had currently, do you feel that these ghosts of virtual kitchens currently the way policy is in the city has an unfair advantage against brick and mortars . Well, i mean, i dont what do you mean, unfair advantage . You talked about a level Playing Field. Oh, yeah. If, for example, they dont have to go through the same permit process that a brick and mortar business would have to, then we need to take a look at that. We need to loosen it up on the brick and mortar side or tighten down on the other side. Theres two ways to fix stuff. So that would be my thing. Mineif we all have to jump throa ton of hoops to get something done in a brick and mortar restaurant, then Everything Else should need to go through that, because presumably, theres policy reason were doing that. So we would ask, whats the policy reason. In the case of foodborne diseases, i hold a food and manager safety permit. I sat through the class and i passed on the first test. Theres a lot of really comly complicated stuff about how stuff can sit out and the times are for foodborne illnesses. We want to make sure the food is safe and if we jump through those hoops, Everything Else should jump through those hoop. Thats where im coming from. From and optics, the Delivery Services, who do you think they partner most with in the city, regarding, like, tiers of restaurants . And im talking about, maybe, the cafes. I think certain types of foods that travel better, maybe more ethnic foods, would be more obvious for Delivery Services, right . For example, if you order a pizza at roses cafe, down on union and striner and i wont do it. I wont order and have them send it to the valley because its inedible in 30 minutes. It tasted like cardboard after 30 minutes. Will i order the Roast Chicken . Sure, that can carry 30 minutes. So restaurants like mine have a limited rest. Italian food, some people do it well and doesnt do it well. Ethnic food, thai food, korean food, anything that has sauces and stuff lends itself more to delivery. Youre looking at more fast casual, doing it more than fine dining, i would say probably, maybe, thats possible. But i havent seen the split of i think thats something you could ask the delivery apps. Theyll have the data. Thank you, laurie. Ok, were just ill remind the commissioners that were short on time and we have a lot of folks to get through and i know im the worst of all of us. So this is a reminder to myself. Can we have the ceo and founder of dosa by dosa. Thank you. Thank you for coming. Good afternoon. Im the ceo of and founder of dosa. Please bear with me. Ill give you some background so it will help you understand. I grew up in bombay, india, moved to the sf in 1989, about 30 years ago, lived in six different neighborhoods across the city. Ive worked in Tech Industry for 16 areas. I opened my first location in 2005. My second location was on filmore street in 2008 and i chose to open a restaurant as a fast, casual concept and i opened commissary. I was in the Golden Gate Association with laurie and legislation kept coming in, which drove a lot of the decisions i made six, seven years ago. Please bear with me,fy seem longwinded here. Im raising two daughters here who attend school here. I consider myself fairly liberal. Please allow me to provide background for Small Businesses because i think it drives some of the decisions hopefully you guys will make. As you know, Small Businesses are struggling in San Francisco and closing down at an alarming rate. I closed the valencia the end of last year. They include high commercial rents, labor shortages, inadequate transport transportat to work and the economic pressures for Venture Capital food tech company, approaching workers that lead to shortages. Pressure due to the proliferation of online Delivery Services and as much as we love San Francisco, and we still believe its the premiere in west coast, it is not longer the subcultural and culinary influence in the bay area. However, the primary reason Small Businesses are failing, i believe, is the high cost of labor. Please allow me to explain. Our staff in San Francisco, many whom are students and artists are in three primary areas, healthcare, housing and education. So with the Business Model for Small Businesses is entired to carry that. I believe these are necessary and excellent for our staff and places an unsustainable burden on the restaurants. These are issues that cannot be solved by minimum wage because if we increase the minimum wage to 35 an hour, San Francisco would be a unaffordable to them. We believe the city of San Francisco, a budget of 2. 12 billion, and the federal government, a budget of 4. 4 trillion need to take financial responsibility for the services listed above and not place the entire burden for these services on neighborhood businesses. Restaurants do not have the powerful lobbies or the luxury or operating at a loss, as do many Tech Companies that are financed for growth. In conjunction with the recalledly rising costs of doing business in sanfrancisco, which is higher than the restaurants and other bay area cities or even new york city, we have to compete on price. These wellintentioned laws that were in place many, many years ago can have devastating conventions in the londevastati. It is my responsibility to look around the corner. As a result, you know, i realize Small Businesses can no longer afford to be sustainable in San Francisco. It is impossible for me to open restaurants or Small Businesses in San Francisco. We are accustomed to taking risks but now the risk has become insurmountable. For a few years now, i have said toman who will listen that San Francisco, a city that i still love very much, will start to lose to local businesses and define the fabric of each neighborhood. It is not surprising that as the Business Climate fully changes, these neighborhoods are becoming ghost kitchens. This is the new reality of business in San Francisco. We believe kitchens must be well run but are the future of Small Businesses. I do not believe by chasing them out, other Small Businesses will take their place. We have seen storefronts everywhere that will get vacant in the coming years. Im not required to invest capital of the highest labor cost in the u. S. And any regulations you create, must be sensible and fair or the city will be left without too many options for the residents. I believe the ghost kitchens and Delivery Services need sensible regulation to make them safe for the public. But wellintentioned laws can be devastating in the long term. Just to give you background about what ive done so far. Ive opened a commissary and partnered with virtual kitchens and they burying the capital arr costs and i have been moving into the retail world to supply whole foods and ive gone through Detailed Health audits. We follow all of the health laws and the health ordinances, not just for, like, restaurants but retail stores. We deliver in the refrigerated trucks. I think people do use the word ghost kitchens interchangeably and i think there are different Business Models within that and the Cloud Kitchens Business Model, i still have a core amount of capital, use my own labor and pay a significant amount of money for the consolidation of delivery of services, which is one of the services they provide the reason i should partner with a company with virtual kitchens is because they took on the entire burden. They are Venture Capital funded and how that model expands is up to them. What im doing, i provide them with the food, im providing them with the license and capability of using my brand in a way that works well for us. And we do have very limited menu with them, a menu that works within our cost structure and they are planning to expand to 15 different cities across the bay area. That is the Business Model that makes sens sense because as laue said, its extremely risky for me to now open another restaurant in sanfrancisco and i feel like many seasoned entrepreneurs are feeling the same way. So thats my story and if you have any questions, id be glad to answer them. Im sure we will. Thank you. Any commission questions . Just so youre aware, enjan has a hard stop at 2 10. I am. Thank you for coming and you have a really important perspective in terms of how we look at this. You know, obviously we see the articles in the paper and you know, in my industry, which is car rental, you always see the people complaining and you never see the people that are making it work or actually excited or happy because thats just not the culture. People tend to complain more. Youve. A brick and mortar Restaurant Operator and a ghost virtual kitchen operator and you have a clear and good understanding of the dynamics that might choose one versus the other. And the Tech Industry, too. Is the Tech Industry, too. I can speak for most of us in San Francisco, where we have a complicated relationship with tech. I think we all recognise its created extraordinary opportunity and enormous wealth and also created a lot of inequities which government has tried to address and in the result of addressing it has created Collateral Damage. And Collateral Damage has often been Small Business and restaurants and thats one of the things that were obviously keenly did interested in trying to protect. I guess my first question is, so you operate at dosa. I had a nonreligious experience there. Thank you. I still think about it sometimes. [ laughter ] so you talked about the citys budget, which is large. Of course, a lot of it is nondinondiscret irkionary. In a sentence or two, what do you think the city could do to make it easier for brick and mortar restaurants . The three issues that i talked about which is housing, education and healthcare, i dont think these can be solved at a microlevel by the Small Businesses and these are laws that apply to private law practises that make about 500, 600 an hour and they apply to Tech Companies that have global businesses that are based out of here. Those laws cannot apply to Small Businesses. I mean, there are a lot of legislation everywhere at the state level, federal level, city level that have exceptions. And i think if you want to have neighborhood restaurants, we have people that dont make the same amount of money. The margins are very different that apply to both types of businesses where you have a high margin in the businesses. Youre asking a Small Business that doesnt have powerful lobby to some complex issue. Its at the federal and state level and dont pass the buck down to us. We dont have the powerful. Thats the point. This commission, i believe, whole heartedly, endorses that perspective and one of the things were agitating for is to make it easier on the smaller businesses. The millennials, theres certain Consumer Habits you cant change. They want the highest quality, the chiefest and they want it now and that wont change. Plus, the millennials dating is changing. People prefer more of a casual motto. These are changing and we cant fight that. But what is real, companies that came in and they were funded to over a billion dollars and came into the city and they took over our restaurant workers and massive capitalist was poured into that and many have failed and they wreaked havoc. Theres a clip about that, never underestimate. With respect to ghost kitchens and virtual kitchens and i might be asking somebody that has a biased or slanted perspective, but nonetheless, ill ask it, do you think they are a net positive for the Restaurant Industry . Its another way for brick and mortars to survive . Or do you think its a negative in the current iteration and there needs to be Additional Guidance to maybe change that bottom line to a positive number . So from my perspective, at least and someone who has been doing this for awhile, i did not want to take on the risk of opening another restaurant. I didnt make any sense to me. I didnt want to take on the burden of trying to open restaurants in different cities because the labor shortages and challenges are very high. So the way i modeled it and my relationship with virtual kitchens, you guys take on all of the risk. You build these ghost kitchens, wherever they are and you pay for the Delivery Service. I wanted to license some of my recipes to they can make it myself. Its licensing fees and its purely profit for me and i sort of mitigate any of my risk. These companies are not brand builders, not designed to build local restaurants and i dont expect virtual kitchens to make south indian foods. They need to go to people like laurie and myself and use the expertise in the culinary areas and mitigate the risks we have. We lose the neighborhoods, which is something that we actually, you know, inevitable. And so, based on the laws that we currently have, a fundamental change and i cant make those changes, but i fell like this was something bound to happen and something i felt five or significance years ago when i opened the commissary which was a huge risk for me. I had to raise money and it took me a listening time to sort it out. Cloud kitchens actually expect us to put in the capital and labor and im not willing to do that based on the numbers ive worked out. So putting on my ill get to you in one second, putting on my dont hate the player, hate the game hat, the question im asking is, i understand why you made the economic decisions. They make absolute perfect sense from an economic perspective. Obviously, from a policy perspective, were trying to protect these brick and mortars and i think my gut is to not try and further regulate, make it harder for a ghost or virtual kitchen but rather to make it easier for brick and mortar. [cheers and applause] and im not trying to influence any of the other folks on here, but thats just my particular perspective on this. With that being said, do you have any sort of creeping sense in your gut that, you know, the business that youre building is in some ways exacerbating the issue and its becoming a bit of a vicious cycle . No, because i dont think the relationship i have with virtual kitchens is the issue. I think the issue is the legislation that came in four or five years ago with the permitting fees. The difficult it is to actually sort of allow Small Businesses to open. When insay this, unless you change that, you cant go off of the virtual kitchen or solve a symptom of an issue that was created five or six years ago. You are solving the symptom but you want to solve the issue if you want brick and mortar services. Regulating virtual kitchens will not help virtua brick and morta. I wont open a restaurant in a city if its difficult for me to get a permit or if the city cant manage whats happening in the corridors, in the sense of Everything Else and i dont have to go into it explicitly. So i think solve the issues that are being created over here, i think the city needs better leadership. I think the state needs better leadership. Going after virtual kitchens will not solve the problem. Even if you go off of that and you dont allow virtual kitchens in the major corridors, who will open a business over there . Some of the storefronts have been vacant three or four years. please stand by . There is one in the marina. Can people walk into that or is it closed to the public . It is delivery only. So i couldnt. The space which is a block from my house is where you sellout of so people cannot walk into it. How many people so the employees are not bees of yours, they are employees of the company . Not bees of mine. You provide guidance and recipes. I provide food and review how it is packaged and delivered. You are making the food. I make the food in San Francisco. I built it when i had to mitigate labor cost. I supply food. I had the commissary. How often are you delivering this amount of food to four locations. On a daily basis. In the morning before they open they are kept hot or cold in the establishment . We actually deliver to almost like 50 stores around the city besides the kitchens. We make them in warehouses, put them in refrigerated trucks and they are delivered and heated up there. Is that fulltime staff . They are my fulltime staff. How many of them do you have doing delivery . How many. Doing delivery from the commissary. Two or three. Is there a quality check when they are delivered . We have been audited by whole foods an and amazon. The food from the virtual kitchen to the consumer is it using plastic or is there anything that is using nonsingle use . They dont use plastic. They use recyclable containers. Do you have control over that or do they decide in. We have a sain it. I strongly feel you should have someone from these companies talk to you. We tried. You tried. I would be glad to connect you with the c. E. O. Of virtual kitchens. I did actually. I was concerned about the way it was represented. We dont use plastic. Well, i will take that back. We use containers that were in recyclable containers. Two quick questions. Do you get the customer information of the folks buying your product from the virtual kitchen . I do not. Do you get feedback from those that get it from the diamond street that purchased your amazing food. Are you receiving that feedback directly . We have asked for that feedback and right now they dont have a formal Feedback Mechanism like yelp. They are working on that. If someone ate something and it made them sick they cant tell you directly that it happened . They probably tell the customer. So they are designing a way to provide feedback. If someone gets sick absolutely. That feedback does not exist currently. It does exist. It is not as formal as it needs to be. This is a relatively new company. It is anecdotal rather than a star system. Thank you very much. Appreciate it. I know you have got to pick up your kids. Superquick question. Unrelated to ghost kitchens. With respect to the thirdparty delivery apps, do you have a position on whether it should be optin or opt out . It definitely should be optin. No question. No one should be posting feed without agreement of the restaurant. It is a process. A lot of restaurants in San Francisco change menus weekly. It has to be optin. No question. I want to mention the person i am working with, the c. E. O. Of virtual kitchens. I would be happy to have him come and talk to you guys. Were they invited . They were not invited. He is conscientious how he interacts with neighborhoods. From my perspective, i want my brand to be represented well. I have been doing this Health Standards and we have massive audit trailings of what we do. We do logs when we load the truck and offload it. We provide a lot more paperwork than any other restaurant in San Francisco. There needs to be regulation around healthcare. Those are obvious. I think if we want the restaurants, i dont think going after virtual kitchens is the way to do it. Commissioner huie. In terms of what people want now in their restaurant experience kind of made me think about something i have been giving thought to as to what do our neighborhoods do really well . What are they going to look like in the next two to five years . Given the current landscape, what you have said in terms of if we regulate hard on the ghost kitchens, we are not going to see the neighborhood problem solved. Do you have a sense of whether the Restaurant Community or the Tech Community, who is really imagining what the neighborhoods are going to look like . Does anybody have a good sense of what that is going to be . I think for me i had lived in the city for 15 years. I opened it with the perspective this is what i think the city needs. There was no indian food that i was looking for, not the indian food experience i was looking for. A lot of the neighborhoods need to be driven by individual entrepreneurs to come up with their own ideas. We can think on macro level but no one can create what laura has done or the other people have done. We have to allow these individual entrepreneurs to do what they want to do and get out of the way as far as laws. That is my point. Going after the virtual kitchen is going after the symptom right now. In my mind, we cant stop delivery. We want to make sure the Delivery Companies are following Health Standards. They deliver hot food without putting it in hot bags and so on. I think if we want to have restaurants and brick and mortar places in Small Businesses we need a Business Plan that is amenable to them. It is liberal. Someone who is, you know, i feel like this is something that needs to happen. What it looks like, i dont know. It is not going to be defined by a macro level. It is going to be defined by individuals who open interesting retail doors that is what defines the neighborhoods in San Francisco for many years. You say i have never seen a store like this before. That is not a Planning Commission or tech company doing that. That is individuals coming in to take the risk. What happened in San Francisco is the city has made the risk so difficult and so insurmountable it is people that dont want to do it. Thecisiothe seasoned entreprenet want to do it. Thank you very much. Thank you for coming. I know you have to pick up your daughter. Thank you for coming. Department of Public Health. Can you step up, please. We dont have your name on the agenda. Let us know who you are. Good afternoon, commissioners and director. I am patrick, assistant director at the Environmental Health branch. It is a Regulatory Branch for the Health Department. We enforce over 40 health code himself. Environmental health codes also enforces the Health Code Article 8 which is what we regulate the Food Industry with, which is why we are invited here today. Our piece of the discussion this afternoon has to do with health and preventing foodborne illnesses as they pertain to these Business Models we are talking about. As you are aware, San Francisco is a hotbed of innovation. We have constantly been working with Business Owners proposing to do something completely new. We have seen robot vending machines, popup restaurants, cottage food establishments to name a few. The latest wave is what we are talking about this afternoon, the ghost or virtual kitchen concept. Is this has required us to be age gill. The health agile. These happen faster than we are able to change the health code to keep up with it. We are constantly meeting with entrepreneurs or Business Owners proposing something new and making the existing health code work for that until we are able to update or make changes to it. I have with me this afternoon two food program managers. They are going to provide an overview of these merging Business Models and the Health Departments role in regulating those. Please come up now. Good afternoon, commissioners. I am mary, one of the managers in food safety. Our distant director mentioned the ghost and virtual kitchens fall under our regulatory purview. Several of the models mentioned today have Health Permits to operate. For example, the cloud kitchen model which was mentioned. We recently did introduce a new code to article 8 of the San Francisco health code which is a shared kitchen complex that was to address this new emerging type of food model. It means a food facility that provides services and restrooms to food preparation and establishments for the purpose of disposal and storage. The complex itself has to have a Health Permit to operate. That is because they may be providing shared refrigeration, cold holding, rest rooms, garbage services. The complex has a Health Permit to operate. They did have to undergo plan check with our department and other agencies in the city. In addition what is called in the model is the tenants. At one of these cloud kitchen models they have 23 licensed and permitted tenants operating out of individual kitchens which are within that complex. One of the other models that was mentioned today, too, and i am not sure if this exactly fits. You mentioned a delivery hub. There is a virtual kitchen in the valley area just permitted in our department. That did go through plan review to ensure they met all structural and equipment requirements based on the California Retail food code. They went through plan check and have recently been permitted. Apply my understanding is that they partner with locally permitted food facilities and they receive food at this location. This food is typically precooked and prepackaged, immediately goes to refridgation and the food is reheated when they get the online order for it on the app. They basically do use Online Platforms partnering with many different permitted food facilities. We are working with these trends as were mentioned. There is a lot of innovation. We have been working with several new ghost and virtual kitchens to address these upcoming needs. If you have any questions. Sure. Commissioners any questions . Yes, i have a question. Thank you. I appreciate your patience, also, this new developing industry. We are reactive in government agencies. I had a particular question. There is a mobile setup in the Mission Behind the theater with six restaurants. Is that permitted with the dph currently . Yes, it is permitted and inspector can speak to that. That is within his program. It is a considered a mobile food facility, and it does have a Health Permit to operate. Does that facility have to move or could be permanently affixed without moving from the parking location . As the mobile food facility it is required to go to the commissary for cleaning purposes and exchange of wastewater, yes, it does have to move. It is considered mobile. I have a couple questions. With respect to a mobile food facility versus any of the, for example, restaurant or takeout establishment. Are the Health Requirements the same . Thats correct. They have to comply with the requirements so that would cover any type of food handling. Is the code sort of dependent on what kind of food they are making . One can imagine different criteria for sushi versus french fries, for example. That is something we look at during our plan check phase when the facility is first built out. We look at their menu to ensure they have the equipment mess for that particular Business Model and the type of food they are serving. At least from the department of Health Perspective there is no material difference between food made in a mobile truck or bus or restaurant. The standards would be the same. Commissioner artez. Two quick questions. Who verifies these mobile facilities are actually moving and not staying stationary permanently. The Health Department. About the scorecard given to regular brick and mortar restaurants, how do virtual or ghost kitchens let consumers know the score . We are moving to a placarding system. For either mobile or brick and mortar they would be required to post in a location within the food facility that patrons can see. In the patrons dont have access because it is a ghost kitchen. It only lives online. Part of our inspection process when we do the reports. It will state that it was what the placarding condition was. Pass or condition pass would most likely be Available Online for us. If you are at a location where people would not be able to walk in. My question or recommendation is like a brick and mortar would have to post in a conspicuous location. Is there future legislation they have to post on the website where the consumer shops . Currently there is not anything for on the website. It would be on the Health Departments website. If someone wanted to look up that information they would access it from our website. If the brick abmortar post their score they would be fined . Yes, there is a requirement to post it. Commissioner huie. For the time it is stored there is department of health oversight. Is there oversight or rules or anything in terms how the food is delivered, how the food is kept warm or cool . Who is watching the food between the kitchen to the consumer . If it is being delivered from a kitchen to one of the virtual locations, then part of our process would be to require Standard Operating Procedures for the delivery from that regulated kitchen to the other regulated kitchen. What about from the kitchen or i guess i am not sure. Currently the California Retail food code does not address regulation of delivery. They dont have any sort of relationship with the relationship with the department of Health Relationship between the delivery app and department of health . Currently, no. Our relationship is with the actual brick and mortar food facility. Let me follow up on that. In your experience as food inspector, is there, you know, lets take sushi. Is there a moment in time where a particularly long delivery process, half an hour, an hour on a warm day, could put consumers at risk . Typically there is something that is called time as a Public Health control. That is a time period basically four hours where if something can be held at that temperature for less than four hours, then it would not fall into the normal temperature regulations. As long as the item can be delivered quickly as you mentioned within one hour, the concern or the risk would not be as high. Okay. Thank you. A followup. Have you seen from the delivery app some sort of internal regulatory like standards for themselves. Have they published we will deliver this type of food within a certain timeframe. We refrigerate our food this way. We make sure our drivers clean their cars. I think we have read about the germs in private vehicles. Is there any sort of selfregulation you have seen on the parts of the Delivery Companies . I believe some of those companies have their own internal standards and written procedures. However, again, that is not regulated by the Health Department or required from the California Retail food code. Thank you. You are welcome. Any other questions . Let me just doublecheck to make sure we covered. Hong from dph in case there are other specific questions. We have talked about the delivery hubs, ghost kitchens, obviously, this is a rapidly changing environment. Are there other emerging services you guys have your eyes on we havent addressed or covered here . Not that i am aware of, no. With respect to the mobile food facilities, commissioner ortiz was driving at this. The understanding is the food preparation vehicle has to move to the commissary for deep cleaning every three days or 72 hours . It depends on thetic facility. Some facilities are allowed to have a support unit that can come to that actual location and henry move wastewater or provide fresh water. There is not an actual requirement the vehicle itself . Vehicles are required to report for deep cleaning, yes, they are. How is vehicle defined . Like a trailer on like wood blocks. Is that considered a vehicle . It should be mobile. If it was a trailer that was on blocks, it would have to meet the requirements for brick and mortar. If somebody put up a storage container it would have to meet the same requirements. As brick and mortar. Commissioner ortiz. Hong. How many current permits for mobile ghost kitchens exist in the city and what are in the pipeline and where is the biggest concentration. Good afternoon, commissione commissioners. I have context for the exact topic you are talking about. In regards for the ghost kitchens or mobile ghost kitchens, i would say from the perspective of the Health Department, we treat them like a mobile food facility, but you are right. You pointed out one think about the context of the food. It is true we dont differentiate between the type of food only that it is safe. It is lost in clarity is you asked when can a mobile food be stationary versus taken back to the commissary. Nine times out of ten they have to be taken back nightly. Exception when they are serviced by the mobile preparation of service. It is not easy threshold to make. Currently the ghost kitchen, eight in the city and i am not aware of more in the pipeline. They have to downgrade what they are permitted to do. They are like a restaurant on wheels. They have to entertain a mobile sport unit to support them they have to give up a lot of al allowances because they are permitted as a kitchen on wheels. We would handcuff them in a lot of ways. There wouldnt be any slicing and chops, no thawing, cooling, no reheating of hazardous food and no washing of food. It is suggested that some of these mobile food facilities are thinking about becoming stationary they have to meet that. I will say that the mobile prep unit is not a small endeavor. You have that fully permitted with the ability to service the water needs as well. In one person is the case we are referring to. Eight of them owned in the city. If we felt one i am sorry i lost track of the questions. Out of the eight mobile ghost kitchens, what is the concentration, which neighborhood or corridor . I would have to look at it. Chair affection question for the record. You would say traditional mobile food like a taco truck are on the same Playing Field as the ghost kitchens currently. Yes. Do you have any questions . Thank you very much for coming. One last question. If somebody violates a permit, what are the next steps . Do they just get a warning or shut down . Talk to us about the continuum between being warned and taken off the map. I will say they are treated like anyone else a ghost kitchen or brick and mortar. One question from your hypothetical wha what is the intensity of the example. Mysel. You are right we want to k with Small Business. There is there is a progressive enforcement action to go through. In a generic sense first violations would be written and we would come back in the hopes they would have corrected that. We would suspend the permit on that day. That is far and few in between. We have good restaurants. We have been commissioners here today. That does happen. To take after they would be written up for violation depending on the severity of the violation and Historical Context of the file, this is the same situation six months ago we may go to hearing. If it is first time give them a week. At that hearing process there are options for us. We can require food Safety Training class or require those who have not renewed food certificate to take it. We want the three chefs in the back to have it. We might interject a bilingual class in spanish or chinese, there are other resources when we cant address a language we cant teach it in russian. That is fantastic. If a food preparation facility does have a violation outside of the placard system that we are moving towards, is there any other notice to consumers or customers about any current or unmitigated violations . The most powerful is a placard. If the doors are closed, no one can go in. If the doors are open and i speak for everyone at the Health Department. We hold our standards to the same. There is a distinction between green and yellow. They are working on things we pointed out. They corrected them. We havent closed to the public for business. Green things are going good at least at the snapshot in time when the Health Department was there. Thank you for coming. We learned a lot from that. Can we have sf planning step up, please. Good afternoon. Corn retee with the corey tee. We appreciate being invited today. Objective overview how these facilities are viewed in the planning code. Unlike some that use the planning code this is straightforward in the sense that anytime of commercial kitchen, whether it is a large one or down to your small mom and pop catering business with a band. All of that falls under nonretail use. It is not open to the public. There were no retail sales there. Indicatorring uses are permitted without conditional usen most of the commercial use districts are pdr. 32, downtown, market street, going motor from there as well. Mixed use are soma going in to parts of mission, dogpatch. Our pdr districts are generally bayview up through Central Waterfront and do parts of the mission. They are generally prohibited in the neighborhood commercial districts. They are smaller scale in the neighborhood. Or union street or clement. Thousands in the neighborhoods, the uses permitted on the ground floor are to be neighborhoods serving. Catering uses are generally not permitted in those district. In 2018 the board of supervisors passed legislation to allow existing restaurants to have second or thirdparty Food Companies or other restaurants use their restaurant kitchens as a separate commissary in a limited way. They could not do deliveries out of that. If one of you had a restaurant and i wanted to use your kitchen on the weekend goes to keep my meals. I could do that but i couldnt do direct delivery there as well. If someone want goes to create a catering use in the city, it is the same as any other Building Permit process. Sometimes there are additional requirements like conditional use authorization approved by the Planning Commission. Generally, they are a conditional use. If you want to start a katetering use in the city it is a Building Permit. Are the restaurants retail uses. That is land uses for retail are open to the public. They are regulated differently in the planning code. To that issue it was raised earlier about several years ago when we had male purchase and Delivery Services. They had taken restaurant spaces and converted them into the commercial districts. That was an enforcement challenge. Those arent usually permitting where you have a neighborhood commercial district with a restaurant space that is a caping use. There would be a code issue there. There was a question about the policy question. Do we want to be more flexible . That is appropriate conversation to have. Now the uses are not per splitted in commercial districts. Another key between brick and mortar and catering use. Use it is subject to retail controls or chain alcohols. It is not a retail use at all. It is not female to casetering for some company that is a formula retail use, there has been conversation about the mobile ghost kitchen. That is interesting. We had eight of those last summer that came to the Planning Department to our counter and obtained temporary use for mobile food facilities. We did get a couple complaints about these. We looked into it and determined these had gone through the temporary use requirement like they should have but they werent open to public. They were ghost and only doing delivery. We reached out to clarify the situation and looked at the language in the planning code for mobile food facilities. We realized it wasnt as clear as it could be. It didnt explicitly state it was a retail facility open to the public. However, in my position as Zoning Administrator i looked at the totality and the language and it seemeds clear that was the intend to have these mobile food facilities be retail facilities to provide restaurant type services. We issued a issued the facilits to be open for the public and have the food for sale. Two of those went away. There are six now with one year temporary use authorization. Those expire in august or september of 2020. Then they wont be able to renew for a. Authorization for a mobile food facility because that is there. My understanding it is their intent to move forward to establish those spaces as catering uses. You wouldnt be able to get the temporary use at this point going forward. I want to clarify our controls are different than if the department of Public Health. We regulate use. Public health regulates the operators and specific types of operators. Where we may have one permit to change the land use to catering and that goes into effect, that is the land use unless something happens in the future. You can have operators turn over. When that happens Public Health sends health referral. We refer to make sure that use is permitted. They cant have this food service. We send that back to Public Health. We still have that role in the new system. We dont regulate the operators only the land use. That is a straightforward way to look at these types of kitchens. It is a large category for catering. Maybe large to small mom and pops and everything in between. I am happy to answer any questions. We definitely will have some. Thank you. Commissioner ortiz. Thank you for that. A couple questions. I want to get straight. Catering use does not trigger retail . Correct. It is not retail use. It is nonretail use. Not open to the public. You cant go there and order a sandwich and get a sandwich. There is no retail transaction at that space. It is closed off interior function. It is not retail use underlying. For formula retail controls within our retail uses there are only certain lists of retail uses within the larger umbrella subject to retail controls not listed there. I wanted to say it on the record. They dont have to go to formula retail. Second question. Is stationary or mobile ghost kitchens are they like retail and brick and mortar, ada, do they trigger the same things when they build out . They trigger whatever is required are permitting. If you are coming in for ghost kitchen catering it is going to go through the permitting for catering use. That may be different that what is required for a restaurant. In our neighborhood commercial districts sometimes new restaurants or bars and those types of uses require neighborhood notification. Catering use in those districts is not permitted. Not apples to apples. When it goes to c2 or c3 downtown it is not required notification. They are not required to note fiin those areas. They are not the same use. They are different uses. It is hard to make that direct comparison. Last question. Just for a sense of if i was Small Business would it be easier for catering use or retail use . Which has the most requirements . I think generally speaking retail is very broad. If you are a restaurant you have a lot to think about because you are open to the public. Do you have a back patio without door activity area with noise to affect neighbors. They are different be uses with different purposes. Sometimes in a mixed use district in soma and other places it may require neighborhood notification. When the notice goes out there is a new catering business in a warehouse, that doesnt generate the same interest as new restaurant does. Catering use is typically easier in the city . It is hard to label it exactly, but generally speaking it is not requiring notice as often as a restaurant would. Thank you. Commissioner. I have a lot of questions. If burger king wanted to open up a spot in the virtual kitchen at 24th and diamond which our friend has a location. It wouldnt trigger formula retail, burger king could deliver out of that location . If burger king or any other formula retail use uses a commissary that is not a retail use and would not trigger formula retail controls. Okay. I do know there was a ghost kitchen located in a neighborhood commercial district that wanted to be formulated as a limited restaurant. Can that be classified as nonretail sales and service . That is a retail use. If you have a restaurant use limited or full restaurant and you convert without permits to commissary, that by itself is an issue. At minimum you need the permit to change the use. From the neighborhood commercial districts generally speaking i didnt look at everyone. We have many. I looked at a bunch of them and they are generally not permitted. If you have converted the restaurant in a commercial district to catering, that is not permitted. Where it gets a little confusing. If you have a restaurant you can have your kitchen be used by one or two other Food Companies as a Commissary Kitchen but you cant do direct delivery from there. I will get technical. In certain neighborhood corridors there are specific controls what you can and cant do. On valencia second stories cannot sell food and beverages. Caters is not allowed but are there specific codes when catering . Can they operate on second floors and exits to the alleyways behind the streets, side streets, loading zones . Not that i am aware of, especially on the ground floor. If you are a stand alone catering use it is not permitted in neighborhood commercial district. My last piece is about how the Planning Department and i know we have a new director, how you think about what percentage of a neighborhood commercial district is considered open to the public and what is not open to the public . There are things acknowledged to be open to the public. Walgreens, then there are things closed to the public. Office spaces, coworking spaces to pay a membership. Only if you have tha that do you come in. A dentist, chiropractor, Something Like that. How does the Planning Department when fi it looks at the neighborhood commercial district what do they consider on the streetscape if it is open or not. They inform the planning code. Distinction open to public versus not. What does that mean . Reservation only open to the public . Dentist you can walk in and make a restervation. You are going to be appointment only. That specific issue open to the public versus not and appropriate concentration to my knowledge that is not addressed in the general plan and not taken up by the Planning Commission. The general plan takes up concentration of uses like food and beverage but not being open to the public. As you mentioned neighborhood commercial districts vary. Some you might be the lowest level, not intense. If you are nc1 no matter where you are on the city. Valencia has its own set of rules and polk street has its own rules. There are patterns on what is permitted and what is not. Some districts dont like to permit professional services on the ground floor because they may not be as active. They may pro provide services on the district by district level. There is not any guidance in the general plan or any policy at the Planning Commission that looks at open or not open to the public distinction. This body voted to recommend the board of supervisors go ahead with naming many new districts in the city 30 or Something Like that. You could see more commercial districts with special zoning controls to prevent this. This is my last question. I promise you. It is about and i dont know how much you can opine on this. We talked about having a level Playing Field. We own a restaurant and looking to increase revenue and there are certain things about neighborhoods and competition to think about. Do you think that it is the right policy that these kinds of facilities should not be located in neighborhood commercial districts. If yes, where do you think in the city these kinds of retail or nonretail establishments should be located to ensure the best city we can have . My answer may disappoint you. I think the policy question around these types of using is an important position to have. I am not here prepared to have that discussion for the Planning Department about future policy. I am here to chat about how we regulate them now. There is a lot of discussion that needs to be had. Are they different . Where should they be permitted . That is a discussion that started. It is not really a policy where the Planning Department has put a lot of effort into yet or has any position that we could speed to. Thank you. Couple questions. Quite a few questions. Strap in. We always under sell with just a couple questions. I guess my first question is. Does the planning code i am curious about what makes catering nonretail. One can imagine a Catering Company that serves bar mi parts which is our traditional thinking what a Catering Company is versus one serving to the public. It seems like from the public perspective it is retail. How do you guys square that . I think this is a challenge as we move into more digital and cloudbased models. Land use regulations as they say we look at how is the land being used . What is happening on that property . In this case for maybe a Commissary Kitchen working as a ghost kitchen and people are online making orders to that facility, into the cloud it goes to them then deliveries go from there. On that property it is not a retail function. There is no retail transaction happening on the property. It is not open to the public. You cant walk in and conduct a direct point of sale transaction. That is how we define retail in the code right now. Whether or not would there need policy decisions to look at how retail is evolving and craft our land use regulations to fit that better . I know that we have proposed in the budget for the next year a certain amount of staffing to look specifically at retail and changing Retail Sector next year and do more analysis. There is work to be done there. Under the current code that i ts ththethe real distinction. One of the things i have come to appreciate about planning. Obviously, we hear so many complaints about planning. Is the role that it plays in making the city healthy . For instance one of the things that is difficult to change a land use that is for grocery to a nongrocery use because every neighborhood needs a place to be able to buy food and that sort of thing. It does seen there is a role for a general plan to play in ensuring the health and vibrancy of businesses and communities. With that said, does the general plan have any sort of guidelines or restrictions in terms of the number of catering establishments that can exist within a given geographic zone . As you can imagine until a few weeks ago, i dont know that catering policy was really high on the list in the city over the years. I cant say with certainty, but i would venture a guess the word catering may not be mentioned in the general plan. It is a higher level policy document. That is my guess. I would say, no, we dont have a catering concentration policy in the general plan. Do you have a sense of what the intent and purpose was to restrict restaurants and commercial corridors from being ability to deliver . For the accessory . Some of the exact issues came up. When that legislation was formed there were people who needed the space or they needed it to help the business stay alive and the flip the existing restaurants. The margins are thin. If they could lease out the kitchen a few days an week, that is extra revenue for them. There is a desire from the board of supervisors to see what they could do to make that happen, they didnt want the restaurant kitchen that became a delivery Commissary Kitchen and you live next to joeys cafe and next week is 20 delivery vehicles every hour, i dont know what happened. Nisian are for marys. They wanted to focus on operators needing extra revenue and there was demand to use kitchens when they with not using them and demand for more commissary space in the city. It is like we have restricted them from doing that specifically. We seem to have wound out at the same outcome. When i walk to the Chinese Restaurant around the block from my house on the sunny side, they have designated half the restaurant to be seating for the delivery drivers. There will sometimes be 20 or more delivery drivers than restaurant attendees. They have worked out an elaborate system to make sure each driver gets their order, but i think it sort of. We have wound up there but now instead of the restaurant benefiting from creating the Delivery Service, it is a thirdparty. If that is good or bad i dont know. It is funny that it makes you think of life finds away, you know, where there is demand they find a way to fill that demand. Just to be clear. The legislation in 2018 tint change the ability of the existing restaurant to do their own delivery or use services. It only restricted second be and thirdparty from coming in to use the kitchen and doing direct delivery from that location. That the an important distinction. Talk about invisible ghost. Ghost ghosts. It has come to my attention some of the services will list addresses where there is no actual business of any kind. It is to create the illusion of proximity to the folks ordering online. From a planning landuse perspective, is there any sort of concern here . Just kind of looking at this from the 60,000 square foot blue. What is the purpose of planning . To ensure the health and vibrancy of our community. Is there a planning interest in making sure that when people go online. I will order from the place down the street. It is them versus a real legitimate brick and mortar restaurant or ghost kitchen, is there a planning interest in looking at that . Is that in any way something that would be enforced from the planning code . I dont know that issue has come up in the Planning Department to date. If that is happening, i think reasonable people can agree that is not a good thing in general. I dont see how that would fall under the purr view of of the Planning Department and code. It has to do with more Better Business practices and less with how the property is being used. It is definitely not a line drive down planning. I totally get that. I dont say we dont care what happened. It sounds awful and needs addressed. I dont think it is within our purview. You have a property that is under your purview that is being advertised with services for something that doesnt exist at that property. We may grant change of use for someone to be an Attorneys Office and they may be a fraud and not have a law degree. You know, it is not what we are regulating at the Operator Level since we are regulated land use itself. Talk about the difference between getting a catering permit versus a takeout establishment permit. To change the use of a property, it is the same process for all uses. Building permit. We dont have a zoning compliance permit or any permit we issue specifically aside from hey few minor distinctions like temporary authorization. We piggyback on the Building Permit. To be the permit she used to make sure the planning code is implementing correctly in terms of the dotings or land use perspective. If you have an existing use to change to one of those two uses, it is a Building Permit. The code may treat catering different than takeout. You may get a different pass for the Building Permit. In terms of permitting itself, it is the same. There is not a material level at your level. I understand at the district level there may become plexty. In the planning level catering versus takeout establishment. It is hard to speak to directly because there are places where caters is permitted and somewhere it is not and some requires neighborhood notification. You could say the same about takeout facilities. It may depend on the specific site and use. I will try to pin you down a hair. To let you off the hook i will ask your personal opinion. I cant do that. Why are you shaking your head do i am going to wade into dangerous territory for a good benign purpose. Do we know how much Public Comment is submitted already . Five. Thank you for checking on that. You know. We often hear from Small Businesses frustrated by complexities of planning code. At the same time as i mentioned before i can see sort of the benefits of having a general plan and planning code. Do you have a personal opinion as to where we are as a city . Not just your department but i am asking you because you are better situated than most of us to have an informed opinion about this. Do you have an opinion about where we are at a city with the planning level decisions, where we are in just terms of the complexity and that complexitys impact on the health of smaller businesses that are less likely to have the resources to navigate that complexity . I think personally and professionally i dont think they are different. I cant say where we are on the spectrum. I think you want to make sure you are meeting policy goals without over burdening the business community. Over the last six or seven years, the direction has been from both actions taken and policy level actions. Things have moved to making things less complex. In 2013 we took 13 different restaurant definitions and consolidated down to three. There was reference to legislation supervisor peskin introduce the. It is my understanding it is similar to the policy the Planning Commission adopted in 2015. We have been doing that already since 2015. I could real off the ways at the Department Level and planning code we are moving nor to simplify things. It is benefit to us and making it easy to implement as well. Does that mean there havent been complications that created complexity . Of course. There is always that balance. It is always a struggle. Where we land on that changes over time and changes casebycase in terms of policy we are dealing with. On the hole in the los angeles six to seven years there are positive actions taken towards streamlined and less complicated with Small Businesses. I dont see anything stopping that trend from moving in that direction. I appreciate that perspective of positive improvements made over time. I think we can only see where we are at and we love to complain. It is hard to loo look in the pt to see the progress. Any other commissioner comments . Thank you so much for coming. We appreciate it. Before Public Comment, i wanted to let our commissioners know that the office of economic Work Force Development and s. F. M. T. A. Are here in the room and available for questions. I will start just because i know you guys have to take a minute to formulate your questions. S. F. M. T. A. I actually think staff just left. We missed the window. Unless they are just right on you side. Some of the folks in the public own Small Businesses. Hopefully the departments will stay so you can ask final questions. We have to give priority to the department first. Is oewd here or they have left . Oewd is here. Does anybody have any questions for oewd . I think you are off the hook. Thanks for sticking around. Okay. We can move to Public Comment, is that right . Okay. Okay. Three minutes . Yes. Members of the public three minutes. I have speaker card and i will call in the order i received them. Bryan tub lynn, meyer, tim, sam,nate with american Grilled Cheese kitchen. Hello. Good afternoon, thank you for holding this hearing and for giving me a chance to speak to you. I am bryan tub lynn. I own cataba at 16th and mission. We have been open for business two and a half years. Prior to that i got the start working out of a shared Commissary Kitchen by doing catering to farmers market. The coulthe concept of renting t kitchens is not new. I was sharing a kitchen as a white guy with asian neighbor running a business. He was selling escluscivil to offices. He still does really well. The other was an immigrant from france and two latino brothers and sisters that saved up money. What i want to address is that there is a reason why the restaurant businesses are reaching for revenue in the form of delivery and sales and dabbling in the kitchen space. The fundamental economics of the business. Largely due to policies well meaning, but Small Businesses are asked to bear the burden, the city, state, federal government could and should be doing more because we dont have the power to lobby on our own. We are asked to add here to the policies the big Tech Companies are when it comes to the policies. We dont have the same margins. I recommend you address why brick and mortar businesses are going out of business first as opposed to delivery app and commercial commissary relighted businesses. They should follow the same rooms. They shouldnt be given an unfair advantage. If they let that happen, i am not going to say i know it is nor the greater good. We use all delivery platforms. I dont know where it is going to land. To help our businesses stay in business first and dont hinder us by advocating for policy that has detrimental effects by being harsh on the Revenue Streams we are going after. Thank you. Next speaker. I am with the delivery app. I want to agree with the point you made that is restaurants and the streetscapes are important. I think a talk is what makes the city vibrant. I want to explain numbers as to why platforms like ours are helping growth but might have the challenge of partners with us and then nonlisted restaurants aphow we can rectify that. In San Francisco in 2019 we helped facilitate the sale of 39 million worth of goods. The way post mates started in 2011 was an anywhere product. You could send a courier to the local Hardware Store to the pharmacy. The way the industry changed overtime is that more and more people rely on it for food delivery. What changed in our product is a model where you send the courier anywhere providing incremental sales for businesses not seeing that delivery before. You could not get robitusen delivered. Now with partnerships they create choice when you have them. For us you can have a white glove service, data dashboard and analitieand animaland and a. And several things in between. In the city of San Francisco, nearly 85 of our volume today comes from the partner relationships. These are accident to Business Contracts businesstoBusiness Contracts we maintain with the merchant. We switched from anywhere to this. There are nonpartners listed. Would out a doubt we want to be a helpful voice to rectify that. That starts with empowerment and education. There are eight steps. It is important that we have this dialogue with restaurants and merchants. We can tell them what the offices are. They can negotiate on terms that are fair with them. That happens businesstobusiness, not necessarily in city hall. Second give them tools to remove themselves. They will be able to hi hit thee wedge it. Third in terms of safety hot and cold bags. We would love to have the conversation with the city. Fourth. Plastics in the city of San Francisco we default from any plastics on the platform. Thank you. Next speaker, please. Everybody only gets three minutes. I am taking a little credit for being called. I was the one who raised hell on twitter when i found out it was my restaurant that was listed on post mates and door dash and all of them when we dont do delivery. It was our business decision not to do delivery, and i do not appreciate being dragged into doing business with the companies we have no business with. Also, just to address some of the things that vicker raised about how easy it is for them for restaurants like mine to get off their platform. I dont know what your experience is. It is not true. It shouldnt be on us to figure out these people who drag our names along with their Business Model and for us to say, hey, i dont want to be on. I have a lot of twitter followers that is from when i used to work in tech and wrote about food online. When i raised my voice on twitter it was picked up by all kinds of people because i have the voice. Most Restaurant Owners dont. What do they do . They have no recourse. We have had issues with post mates. They show up to pick up food because they took order from our customers online. They come to the restaurant and say we have this order. We dont do takeout. Your customers order them. If you dont fulfill the order they will be mad at you. I will testify to this in court. This happens. We are not making this up. It is sluggish behavior. You want to do this with us. Your customers are going to be mad at you. When we dont fulfill the order they go home and leave in a huff. Before i run out of my clock one thing to bring up no one else brought up before is trademark issues. They are violating our trademarks. They are using the names i have built, reputations i have built and by listing my name and my business and my mission and my awards on their website it looks like they are there which they are not. That is the part that somebody needs to look at it. They shouldnt be allowed to do this. Thank you. Thank you for coming. We cant ask public speakers questions. Next speaker, please. I am sam. I want to comment on two things. Dph talked about delivery not covered in the California Retail food code. That is not true if we deliver food we would be subject to regulation. It is what we talked about time, temperature and food handlers. There is a clear mark where there is a Public Safety maps and something that is not a level Playing Field for us. Vicker mentioned temperature bags. One issue we belt with with another carrier, not post mates. After we had told them we didnt want to be on their site. They said there is a delay when you tell us and come down. We recommend you fill the orders because your customers may be upset. They directed the drivers not to come with bags because it has their trademarks on it so we wouldnt know that is what it was for, which we thought was predatory. There is a lot of discussion of the micro Economic Impacts. There is a big you are issue here. This is a new industry coming in with a ton of capital. It is disruptive but the hallmark to the bubble. It is something new. The way the delivery apps work, it should be that one emerges. In the interim they are cutting into a lot of middle income jobs. If your market is to replace is sales from servers you ar you ae replacing well paid workers with drivers who are not bees and have to purchase their own cars and Safety Equipment and are paid less. Grubb hub recommends not to tip at the restaurant, if they do that it would either mean they have to mark up the food higher or the drivers themselves would have to pay. For the drivers that do tip for Restaurant Service because someone still on the restaurant end, someone is handling that. The drivers are covering that. That is important and not addressed. When this double crashes there will be fewer working class people because they will have been driven out already. Altogether i think it is important these services exist. I am not saying regulate them to death or anything. They should be on a level Playing Field with us. That is my time. I did not hear my name called. I am Terrance Allen from the castro. 47yearold cafe. I have had to recently close. After 47 years. The Financial Model no longer makes sense. We can go to details that is not why i am here. It is complicated. Three minutes would be an injustice. Two things. One is bullying. When saudi arabia gives 60 million to come in and take over the Restaurant Industry, grab the market share. Guess who sures . The existing Restaurant Industry. They have done the planning and they have millions and i have thousands to do the same thing. Is that a level Playing Field . I would proffer that it is not. It doesnt mean everybody is a bully and every action is a bully. We were on every single platform. The most difficult thing to do was when we decided and discovered how much money we lost on every item of food we delivered, we could not turn those damn things off. They sent orders for months. They were bullying to get us to stay because guess what . They dont exist without us until they replace us. If that is the direction that we are headed then we have to realize that we are investing through our process, through our social process, through government regulatory and bureaucracy, we are investing in the dye vice of Small Business in the device of the Small Business community. When i had to layoff a latino mother working there for 22 years, that hurt. That hurt. In a way i dont think the 60 million from saudi arabia money is going to improve the community. We have a social opportunity. Where does delivery fit . Do we have a role in regulating work environments to support the social outcomes such as cafeteria kitchen and tech designed specifically to keep employees from going out into the local community and shopping at stores and restaurants . Do we have that social responsibility in government. I have more to say at another time. Thank you very much. Next speaker, please. I am nate. I am a dual role in the community. Owner of the american Grilled Cheese kitchen. If you have been to the giants game you have been to the restaurant. My girlfriend and my wife built ourselves. We couldnt get through the construction permits in 2009 with our own money. That was difficult. I am speaking without regina in the office of Small Business i wouldnt be here. She coached us to get through the process. We opened two additional locations in San Francisco. After life changes the last couple years i decided to sell two locations. We are down to did original in soma. This is the mission beach, south Beach Mission bay. We are the last remaining restaurant on second street. Guess who signed a 10 year lease . This idiot. I said it on monday. They said they would never invest a dime in the city. The Small Business commission needs to dig deep. I agree with everything said. Beware of anecdotal stuff. Look at the hard data, wages. 62 higher than when i founded the business with my own money what i pay the employees today. I pay health care and i am not subject to hco. I downsized. I do it because i am a nice guy and my employees deserve it. Look at the rental cast, Small Business costs. The Health Department tells us one thing two years ago. This year they told me something that cost me 5,000 or they threatened to shut down. Other Health Inspectors approved it prior. I am here because i am the gm of Cloud Kitchens. I dont speak on behalf of that company. We let success of 23 Small Businesses. They are permanent and licensed they are loved brands you know. We let the success of the operators speak. We dont talk to the media. We are doing Something Interesting and creating a lot of opportunity for Small Business. That is all i will say about that. I am here with my american Grilled Cheese kitchen. I love the employees that are part of the community. I am the last business standing on second street. Whatever you think might be the right thing, whatever the bless press says, look at the numbers, what it costs to invest in the businesses. There is nothing you guys can do. It is the entrepreneurs that need to see a return for their risk because right now the risk. This is basic economics. Thank you. Next speaker. Do we have speakers . Okay. I will start the conversation here with a couple observations. It is probably not a surprise. I have been fired from every job i ever had. The only way to stay gainfully employed was starting a business. I think one of the big attractions in starting a business is having agency and some choice about what your business is like, who you do business with, and how you want to participate in the community. Personally, i think the services have heard from the restaurants. There are folks that converted from unlisted to listed. They found that experience attractive on some level. I can understand the dynamics that would lead a Delivery Service to want to List Services that had not opted in. It is a highly competitive environment. The stakes are very high. I respect that. That is a Small Business commission. We are here to protect Small Businesses. I think at a minimum a Small Business should have some agency over who they are and who they do business with. I know that i, as a Small Business operator, everybody here operating Small Businesses. We have all been there. Not restaurants, not all of us, some of us. I recent when Tech Companies conscript me into becomes content generation, unpaid content generators for their businesses. I recent having to take moments of time when i have so very few to help them in their businesses succeed. I am, frankly, quite agreeable with the argument that these services i understand why they want it to be opt out. I dont actually have a chip on my shoulder about it. As i mentioned it is very competitive, but i think the right moment for government to step in with regulation is when an industry is unable to regulate itself because of competitive pressures, and it is creating more harm than good. I have yet to hear an argument the harm of bringing businesses in that didnt want any part of this is somehow less than the benefit of including businesses that arent listed. That is how i personally feel about that issue. I am interested in hearing from fellow commissioners as well. With respect to the ghost kitchens, i still have a lot to learn. About what the dynamic is for the Restaurant Industry. I am interested in hearing what you guys think about it. It is certainly complex. They have facilitated Small Businesses and been away for like one of the Public Commenters been the way to step up to brick and mortar. I think perhaps there is something we need to look at around, you know, what are the dimenammics with dynamics within the commercial corridors what is the balancing line between too many Catering Companies and not enough . I come down on the side of we should be able to just compete, and it should just be fair, but, as i mentioned at the beginning. There are externalities to restaurants, particularly like yours that create community and deliver benefits that arent necessarily measured in the p l statement or Balance Sheet statement or dont lend to scaling from a vp perspective but they scale our hearts and minds. That is a big part of what makes San Francisco what it is. That is why i moved here in 1991 and slept under park benches for a better part of two months. I want to make sure we protect that element, too. Commissioner ortiz. I. I want to thank everybody that came out. We know how hard it is to get out. I appreciate your time. I hate to say it. Everybody here. We told you and this is to legislators, for the last 10 years the legislation in San Francisco has killed retail and restaurants. Now we have ghosts in San Francisco. You are turning my be loved San Francisco into a ghost town. These thirdparty delivery, they were born out of necessity created by legislation that we created in San Francisco. These ghost kitchens as city departments have stated. They clearly right now they have a competitive advantage. Catering use is so much easier than opening a brick and mortar restaurant. Yes, i understand the component of commissary. I am a champion. From an equity lens i havent seen any talk about Services Online catering to certain Socio Economic geographics. I want the Small Business owners to know we are here, we believe in free market. We do not want to over legislate to create something that blocks you guys from making more money. We are Small Business. We make payroll. I have not paid my mortgage to make payroll. I am with you. I have skin in the game, but we have created so much legislation. It is like when i grew up there was a protection like you pay somebody not to break your windows. This is a racket and we should look at it like that. Thank you. Any other commissioner comments . I want to thank the Small Business owners who come here. I was at my Small Business before here. I know it is busy. There is a lot going on. I appreciate laurie because i know you wear a lot of hats and on a volunteer basis running this organization. Thank you for doing that. Dominica and director for spending a lot of time, many, many hours bringing this hearing together to hear from the community, the seven of us together represent all Small Businesses in San Francisco, hundreds of thousands of people and the board of supervisors is going to be having a similar conversation on this very question. The gathering was to determine the perspective grott brought b. I make payroll every two weeks. There are lives at stake. I understand the difficulty of doing that. I also moved to San Francisco seven years ago because of the magic on the streets and the things that can happen. Ththe glances you can exchange t the right coffee shop or what it is like to meet someone walking down castro street and give them the eye. That is just me being vulnerable. That is magic in the city. We have a good problem. Too many people want to live here with no space. It is because of not just good jobs it is what happens in the streets and cities. To be honest after listening to everyone, the tension between the imperative of the Small Business owners to do what they need to do to make payroll, to pay the bills. You cannot receive a grant to pay your bills if you are a restaurant. You need to make it happen. There is tension between doing what you can and must to do that and what has been a long standing tradition in our city of figuring out the right chemistry to keep the city magical. I was so disappointed when pasta gina closed. It was an establishment i as a Community Member could not enter. It was maybe not the best Business Model, but it was vacant and replaced by something that does not enrich the streets in any way. That concerned me. I am nervous about the level Playing Field here. What i am nervous about it is less expensive to operate one of these ghost kitchens than a typical brick and mortar, no house staff, no waiter experience you have, you dont have a cleaning crew. That is good from a business perspective. I am worried this playing out over the decades. In addition to what the city does to make it hard for the restaurants to stay open, this competition like lie uber and lt are providing jobs. I think it is the rome of the role of the city to look at where these establishments should be. How many are allowed to operate in the neighborhoods . What businesses they are allowed to serve . I see that as the way to ensure longterm success of the Business Model increasingly harder and harder to maintain. That is how i see it. I look forward to discuss with the commissioners and department. Thank you to the office of Small Business for putting in the hard work to make this happen today. I have a lot of oneonone conversations with my family and friends and community about this. This is a new forum to speak like this publicly. My main concern is really the vitality of our neighborhoods. I have had a Small Business in the richmond for a long time, a couple of Small Businesses. I have seen the Community Grow around spaces and around just making a physical space for people to gather. I feel like that is something we just need more of. As i watch restaurants struggle and places of business where people can physically come together and struggle, it is making me very concerned about our city. I understand that we are working really hard and sometimes at the end of the day we just want food in our own home and that is totally fair as well. I have been giving this whole thing so much thought, but i want to thank everybody for coming today and bringing up so many like concrete points that the commission can really take back and put together real recommendations around, and i also think you brought up so many things that were so good. Like really meat i didnt thinks to talk about. I just want to encourage that hopefully i see that after owning a business for so many years that we are kind of in a really good spot with good conversations and nice collaborative work as merchants and Business Owners. This gives me a lot of hope that everybody here came so prepared, and so passionate about what you do and so willing to share. That wasnt necessarily the case before. I think people were much more protective of their data, of their experience. We all wanted to smile and go business is great. Even when times were tough we were unwilling to share vulnerabilities. Right now we have an opportunity to collaborate as Business Owners and Community Members to say this is enough of this. We need more of these things. I really appreciate everybody shared so openly with us and everybody else all of your experiences. Thank you. You know, one thing many of you this might be your first Small Business commission hearing. One thing that is important to understand. Our role is primarily advisory. We cannot write legislation, we cannot pass legislation. In fact, this hearing itself is reactive. A supervisor is considering introducing legislation. If we wait for the legislation to be introduced, we are behind the 8 ball and we are now trying to unwinds unwise policy and advocate good policy. We learned if there is legislation pending. It is wise to get in front of it and have a hearing and educate us. As a commission we cant know everything there is to know about the Restaurant Industry. These hearings are critically important in raising our awareness of the issues. I probably learned 100 Different Things from the testimony today. There is an old saw about government. We are talking about the Restaurant Industry. If you are not at the table you are probably on the menu. Just by being here, you have allowed yourself to participate in the process, and that is being ingested into us, and we will provide the best guidance that we possibly can to the supervisors and mayor so the policy that eventually results is thoughtful, considered, and you know like the physician first do no harm. I think from our perspective as commission we will tread cautiously into this area and try to have a minimal hand. I did want to call out commissioner ortiz for bringing up equity issues. I think that gets lost a lot in these conversations. I think that is something that the Tech Community has struggled to keep up with, which is how do we make opportunities for folks of all races and all socioeconomic backgrounds. Speaking of somebody that was on step zero for many, many years. Getting from step zero to step one is the hardest step. Most small you know, as we heard from laurie, 52 of our Retail Sector is restaurants. That means 52 of the folks getting the first start in business, learning the first thing about business is happening at the restaurant. That is their First Experience with customer service. You know, i think we need to pay very careful attention to that equity lens and make sure we hold ourselves accountable with whatever guidance we give at the end. In hearings we come up with resolutions to introduce. In this case we have very senior and experienced commissioners that i would want to get their input before moving forward with any formal recommendation. I am not going to recommend, of course, any commissioner can introduce a motion if they feel differently. I am not going to recommend we introduce any formal recommendations at this time and reserve that. I believe we have time, correct . Yes. I think what will be hel helpfur staff. From the conversations i heard issues. I will list those. I think what we need for charity for timing is the next Commission Meeting is march 9th. There is that ability for the commission to take action on a specific set of recommendations. If you want to be able to have a very specific set of recommendations even if they are still at 1,000foot level for us to communicate at supervisor safais hearing on monday and that hearing is march 12th. It would be helpful to give some direction of which then dominica and i can work. We can start to do that now. The first thing i will say at the top level what i think we heard over and over again is that the top line issue here wasnt necessarily Delivery Services or ghost kitchens per se but this whole environment that has settled in to make it extremely difficult to operate as a restaurant. It is driving businesses towards operating ghost kitchens and what have you. I am a little worried about the prescription not actually being the cure for the disease. I think we can walk and chew gum. We make sure this is not a Silver Bullet and never get the eye off the eight ball. There are a lot of issues. We are providing specific recommendations to this one. I don dont want to lose sitesf that. Again, legislators, you caused this. Your legislation, you dont run businesses, you dont make payroll. This is what happens, 10 years, this is the result. The virtual ghost kitchens. They need to post scorecards online on the site, not up to the consumer to go and investigate the department of Public Health. They have to post like a brick and mortar. We should also have a special use for this type of use now. They are getting byeby getting. Local guys that they trigger if they are successful. I think when we talk about level Playing Field, if you love chipotle and there are a set of things that prevent it from coming to the valley. If it is in this format that is something that could longterm hurt. We need to support the local restaurants is one thing to not do that formula retail is skirting by the rule. One thinone thing to considee evidence happening . The Planning Department said it can happen in the public hearing. There are people in companies watching or here present. My point is from my perspective when you craft legislation to address issues that havent actually happened or become a problem you sometimes wind up creating problems where there was no problem. I am encouraging a certain degree. We should be responding to. I want to be proactive. I want it before it happens. Sorry, we let chipotle. We see it coming. You know that is what they are going to do. There is a loophole. Where i am with you and this gets addressed is in the tension between catering versus retail, right . You heard me say. It seems like we should have a new category, right . To my perspective what is the material difference between a takeout delivery place to walk up and order food and go away versus you know i can order something on the app . Isnt that retail . I am still buying from the kitchen . For me the catering definition didnt bother me as much. There are a lot of strict guide lines about the catering kitchens. The ones that have got in they have used limited restaurant. I actually as someone who went through the planning process, i am hesitant to create whole new definitions. Having these i do not see the evidence why that is mess since they are del that is necessary necessary. It is important for whatever definition is needed. It is different from formula retail. It is two Different Things. I dont think formula retail should operate out of ghost kitchens. It creates long fair advantages to mom and pop kitchens. There is a formula retail happening right now. It hasnt exploded but it is happening. That is not fair. I guess formula retail, just gaming this out, right . That is a land use provision, right . 11 retail units or more. You know, there is a conditional use aspect to it. You have to get a c. U. If you are formula retail to open up a business. As planning testified, caters is permitted. He said it depends where you are. In certain districts like per and i forget the other one. It is permitted. You know, to shoe horn, i am far from the expert on this, right . To shoe horn formula retail into something that is principally permitted, caters is principally permitted, formula retail is conditional use. Formula retail is not permitted in a lot of neighborhood commercial districts. Some allow it conditionally which is a killer because no one is going to approve it. It always triggers conditional use, formula retail. We know that. If we dont agree. I have my own thoughts on that separate. Whatever is the legislation today should apply to everybody else. Play even Playing Field. That is all. I dont be know where i fall on this. I am still sort of assessing it out. With respect to formula retail we can all agree that if a chipotle or burger king started operating a Delivery Service, you know, that would probably be materially bad for local business, right . How do we feel . Just to finish my thought. How about somebody like ikes or a local business that is triggered under these rules. They might have only one location in the city because there are 10 elsewhere in the world. I called the City Attorney to ask about this under the Commerce Clause of the constitution you want say only local businesses are excepted from the rule. We have to be careful. My accident with 15 my business with 15 locations. I dont want to open another one in San Francisco, if i did i could not without going through the c. U. Process. I think, you know, we have ben from oewd who has done a lot of work and was very instrumental in the mayor and former supervisor vallie brown streamlining legislation, i dont know if the commission is able to get to the very specific nuancing of formula retail, but to say this is one area to look at and to take the general principals of what the current formula retail policy is and look how it overlays because if there is an application to it, even as the formula retail exists, it still may narrow the window if it gets applied to these catering facilities. If it is applied it can narrow the window of the land use of them being able to be. I think it is important for us to hear the direction of you that this is one area that needs to be looked at and brought together with oewd and the Planning Department to look at this and sort of look at all of the zoning codes and locations and where things can and cant be, and then, you know, if it develops into legislation or develops into the Planning Department needs to be more rigorous in the questions when applications come through, we can come back. That is the direction you can make to the city agencies and for us to then report to the supervisors that this is an area that the commission thinks needs to be looked at and addressed . We can take your direction where to look and come back before you later on when we spent, you know, weeks looking at this and refining it. Commissioner huie. I want to say the big take away was and then my mother specific recommendation more specific recommendations. I totally agree we need to solve all problems in the neighborhoods and look at why we are struggling so hard to like just maintain a business. Just to open a store, restaurant. Why is it so difficult in San Francisco . That is like my number one thing. I think that is going to be for me, at least, that is why i am here. That is why i am on the commission. My mother specific things my more specific things are optin and out. Possible predatory repractices. Literally as a Business Owner you do everything. You are doing every little tiny thing. I dont have time to police whether there is a new delivery app with my name on it. That shouldnt happen. I cant police the internet wherever my name shows up. I mean these arent the only Companies Going to be in business like two or three years from now. I think the ability to opt into a program is giving the business much more, i guess, agency over their own futures. I agree, by the way. There is a lot of consensus. There is one thing we didnt talk about very much during this hearing. It has been brought up by a couple different restaurants, which is the element of end customer data. When a tell Delivery Service for instance the scorecard. I think that is a really solid Consumer Information point. I think that there is another solid point we should know the true distance of the food preparation from your location. That is like from an environmental perspective some sound Public Policy behind that. What we didnt talk about was the right to customer data. I think, you know, if you have customers who are eating your food but you dont have any ability to know who those customers are, you dont have ability other than dashboard metrics, is there a Public Policy component there . Is that something to look at. I think right now we are compiling our list. That is definitely fair for us to discuss. The other thing i was going to say was i totally agree with having the food Rating System somewhere servicesible. If i am ordering food or choosing between restaurants. I shouldnt go offer customer reviews or star rating. I should have a Health Rating code to apply to all types of food sources. Whatever that may be, i feel like that should be much more transparent and easy to get to. It sounds like there are commissaries that are selfregulating. 23 plus kitchens. That type of data should be easy for a consumer to achieve. The other piece that i think is also the delivery apps. To me the most concerning part is the delivery apps in terms of having no real oversight with like they dont really fall under planning. They dont fall under anything. They arent falling under the department of Public Health. If this is such a large component how we get food today, i think i should know like how my food is getting to me. I feel like that is going to become a larger and larger piece of Public Health picture. I would like to know, you know, how it is getting to me. I feel that should be part of their responsibility. There is so little responsibility on their shoulders besides creating technology and software. They need some real world accountability. I think that is part of our commissions goal is how to create account ability with this Virtual World that we are living in because at this point there is none. Let me see if i can summarize. I have to go soon as well. We are going to summarize and close. Director, i think the issues to explore at the next meeting the scorecard, whether or not these services should be required to have health scorecards, whether that unfairly advantages virtual kitchens over brick and mortar, optin and opt out on the Delivery Service, whether ghost kitchens should be included in formula retail provisions, which obviously brick and mortar are. That is another area where ghost kitchens perhaps have an unfair advantage. From the delivery perspective, whether brick and mortar restaurants should have access to data about customers, if so, how much. We want to very carefully look through the equity lens. Are we considering what this looks like from different socioeconomic levels from somebody starting a brandnew business for somebody who maybe doesnt speak english as first language, how does this landscape look to them . Is there anyone i forgot . I feel like i forgot one. My only one was creating a planning code such that it would be to make sure that if it is true we do not want these kinds of businesses in the neighborhood commercial district there is a code framework to make sure that doesnt happen. Right. Does planning have a role to play in the proliferation of ghost kitchens versus brick and mortar. Is that what you are driving at. It seems like they do. It is whether or not there are hoop holes. There is a secondary question is how. What is the determination . What is the basis for the determinations. Then i do want to ask you do you also because much was just brought up in Public Comment is the citys current Regulatory Environment. Do you want to be able to do you want to make a note about how that intersects with the new industry models because i think, you know, we have heard the Economic Impact from our brick and mortars in relationship to existing regulation. I felt like from some of you there are strong statements in relationship to that. At the very least maybe not direction but just a document that prior legislation is what is bred these Business Models, and to coast constantly in our mind we do not want to legislate unintends consequences for Small Businesses. If this is the way to compete because of past legislation. We want a fair chance. We dont want them to be in the ring with mike tyson with two hands behind their back. That spirit should be constantly mentioned at all levels. We should make special note when we formulate our resolution or guidance that we make it explicitly clear it is the Regulatory Environment that made it possible for this current situation. And happy to do that. I do have a concern that if we keep it that broad level it doesnt give specific direction in terms of what the legislature can do or identify. It is a preamble to more detailed recommendations. If i may, i think we did hear a short list, litany of specific things, increases of payroll which the city is involved in, increased cost of doing business which is city is involved in terms of healthcare and housing. We should preface any recommendations with the short list of things that have fallen on the shoulders of Small Business owners. It was well said and we should definitely note that and not keep it too broad. Also include the expense of opening. The cost of permits and fees to open. It is like it should be boilerplate language at the beginning of every document. It was obvious that it should be mentioned specifically. That is part of it. It is so obvious to us and seeing the forest through the trees at the policymaker level. Okay. Anything else . Are we done . Anything special i have to do . I just have one other question in relationship to this. Not fully sort of indirectly brought up but i know that commissioner ortiz mentioned this numerous times. A recommendation or the question was what mechanisms the city has set up to track and evaluate the economic implications both ways and so a question to the commission is that a recommendation you would like to see on the list that the city needs to track. That didnt happen like with the burgeoning of uber or air b and b. We have the ability to put those metrics in place now. Is that something . This is new, we have some kind of framework to evaluate it, but it is not really my departments fulltime responsibility to figure this out. That is the controller and city chief economist. Maybe we should put in there. Hold on. I think that we should discuss it at the next hearing. My caveat here is, for example, to take uber. If we had done an analysis in 2003 when uber came out. It would have been wrong. My concern here is that we take up city staff hours and you know we are spending budget on items that we dont have enough data to begin to analyze the implications unless you disagree and think the data is there. I would recommend not trying to foresee the future in terms of the data. I would like to see milestones that we would like to see data so we can evaluate and figure out what those data points would be to examine the success or, you know, nonsuccess of something. I mean i am disagreeing. A lot of information is anecdotal. Bad actors, Restaurant Owners talking about people showing up saying where is the delivery . That is good information but a lot of it we heard today is triggering what could be an issue. It doesnt seem s. F. M. T. A. s answers indicated there is a little bit of data. It is important to understand where we are right now. My argument wasnt against data. I love data. I think maybe how i said it got misinterpreted is to encourage the city to start establishing not projecting what the economics is but start setting update take metrics so that two years from now we can say how did these policy choices affect . Did we swing too far . I think about, you know, the fact that when i thin think aboe mobile ghost kitchen coming in. They have done Economic Analysis about the Customer Base and the money to be made here. We are not tracking that as a city to understand our policy implications. They directly relate to our policy implications. I just feel like i guess not what i feel like. You are right. I misunderstood. I thought you were suggesting the generation of report. It sounds like you are saying setting up tracking data points or mechanisms. Am i characterizing that correctly . To evaluate the growth, impacts, if we are making policy decisions, are those policy decisions being, are they meeting our economic, you know, health and wellbeing that we want to balance as best we can. I think like critical to that question is so often the case what are we measuring . What are the data points . I cant say that i can have a whole lot of confidence that i know precisely the data points that we should be measuring. I agree there are likely data points and we all would collectively benefit from measuring them. I want to know how cloud kitchen, virtual kitchen was, whatever you call them in coordination with the delivery apps are affecting Small Businesses. I want the answer to that question. We are advocating for them. Maybe i misunderstand. It seems that is a question the city has tools to answer. It behooves us to get that answer. Lets explore that. Number of employees, what meals are served, and then we also have to sort of consider to what point are they not replacing restaurants and just replacing cooked at home . What is helpful was sf m. T. A. Did a baby survey of 32 merchants, what networks, when do the cure yours pick up, deliveries, that kind of thing. I got a quick aside. To that list s. F. M. T. A. Was not here so we didnt have a chance to ask about double parking and the traffic. Can you add that to the list to consider . I think this would be a nice thing to take on march 9th as we continue this. Bring us home, cynthia. The general direction the city needs to measure the economics would be fine for us to take to the board of supervisors, getting into the detail could be an ongoing conversation. A good conversation to have with oewd. Can we end it now . It is on your shoulders. It was up to me the whole time. Next item please. Sfgovtv please show the office of Small Business slide. It is our custom to begin and end each meeting with the reminder the office of Small Business is the only place to start your new business in San Francisco and best place to get answers to questions about doing business in San Francisco. It should be your first stop. Find us online or in person at city hall. Best of all, all services are free of charge. Small Business Commission is official public forum to voice opinions and concerns about policies for the Economic Vitality of Small Businesses in San Francisco. If you need assistance start here at the office of Small Business. Thank you. Item three adjournment. Action item. I move. Second. In favor. The meeting is adjourned at 4 18 p. M. Shop and dine the 49 promotes loophole businesses and changes residents to do thirds shopping and diane within the 49 square miles of San Francisco by supporting local services we help San Francisco remain unique and successful where will you shop and dine shop and dine the 49. My name is neil the general manager for the book shop here on west portal avenue if San Francisco this is a neighborhood bookstore and it is a wonderful neighborhood but it is an interesting community because the residents the neighborhood muni loves the neighborhood it is community and we as a book sincerely we see the same people here the shop all the time and you know to a certain degree this is part of their this is created the neighborhood a place where people come and subcontract it is in recent years we see a drop off of a lot of bookstores both National Chains and neighborhoods by the Neighborhood Stores where coming you dont want to one of the great things of San Francisco it is neighborhood neighborhood have dentist corrosive are coffeehouses but 2, 3, 4 coffeehouses in month neighborhoods that are on their good afternoon. I am the director of the San Francisco department of homelessness and supportive housing. I am excited to welcome you to the long anticipated opening of the Important Program to sheriff people who are homeless, pregnant or with young children. Iit is incredibly important that we serve people who have new life either about to be born or already born to make sure they are well cared for as they come into this world so they dont become people who are homeless 15 or 20 years from now. If we get a handle on the problem we have to work with the people pregnant and youth and families. This is one of many initiatives mayor breed initiated or led to address this issue. I am honored and excited to address our mayor london breed. Thank you. First of all, let me say i am so excited to be here because this project