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Solimar Research

A Key Ingredient In Placemaking Faces Peril

Josh Stephens on
Jan 30, 2017

I had two distressing conversations on the same topic with two different people last week. The first worked at the headquarters of a medium-sized California-based chain of fast-casual restaurants that specializes in salads and other plant-based meals. The second used to run her own casual lunch restaurant in downtown Culver City. 

I say that the second person “used to work” at her own place, because she doesn’t anymore. After many years in business, she closed up shop a few months ago. The salad chain, meanwhile, is going gangbusters. They’ve slowly raised their prices, with no drop in sales. They are swimming in investor money and have bullish plans for expansion. 

Despite their disparate experiences, they both agreed that these two examples represent the foreseeable future of the restaurant industry: chains will prevail while mom-and-pops and other one-off, idiosyncratic places face increasing peril. Indeed, many independent restaurants are already running deficits. Their failure will be a lagging indicator of a trend that is already well underway. Chains and high-end “groups” with multiple outlets (often under different names) will fill the void. 

Case in point: that Culver City restaurant was one of eight that closed in the city’s tiny downtown last year. Los Angeles Magazine referred to it, mixed metaphor and all, as the “epicenter of the restaurant apocalypse.” 

This means that something else is in peril: the vibrancy of American cities, and, especially, of coastal California cities. 

The economic pressures facing independent restaurants aren’t hard to imagine. Labor costs and some wholesale costs are rising. Competition is fierce, and not just from other restaurants. The food truck revolution (which I think has been, on balance, a good thing for cities) competes with lunch-oriented places. Interestingly, the cost of groceries has remained relatively low, so eating in is a better option than ever. Add services like Blue Apron, and every one of those blue-and-white boxes equals up to six seats that will go empty in restaurants. 

But let’s get to the meat of the matter. Restaurants are getting clobbered by the same thing that is clobbering everyone else in coastal California: real estate prices. In many cases, landlords are raising rents by amounts that are simply untenable for small businesses. When they move out, many of landlords prefer to let storefronts lie vacant, waiting for a deep-pocketed tenant. 

There’s only so much restaurants can do. They can’t start mail-order businesses. They can’t take on roommates or rent sofas on Airbnb. They can’t give up square footage and let some workers telecommute. They’re not allowed to sell their parking lots. They can’t move to the suburbs. 

Of course, cities have weathered the loss of book stores, video stores, stationary stores, and the rest. But, as much as I mourn those loses, there’s a difference between a restaurant and, say, a typewriter repair business. For one thing, restaurants are exactly what have filled the the places of many of those forlorn businesses. 

More importantly, restaurants are deeply, uniquely intertwined with the fabrics of their respective communities. Urban planners may not always refer directly to restaurants, but I’ve rarely heard a discussion of “place-making” that didn’t implicitly refer to some purveyance of food and drink. Mixed-use buildings need businesses for those ground-floor units. Walkable neighborhoods need places worth walking to. 

I suppose Starbucks and Chipotle are places. But you’d have to be a pretty narrow-minded capitalist to argue that they are richer and more interesting than their equivalent mom-and-pop places. Moreover, independent businesses are at the heart of urban economies. They embody all the benefits of entrepreneurship, from abstract virtues like creativity and initiative to the very real economic benefits of keeping profits at arm’s length rather than sending them to Wall Street. 

And yet, Blue Apron notwithstanding, everyone still has to eat. That means that someone will fill those spaces. This means that the chains are only going to get bigger and, collectively, stronger. They can afford the rents and onerous startup costs (often made more onerous by municipal regulations). They have backing of investors and can maintain their profit margins through economies of scale and tightly run back offices. 

Short of holding bake sales to support their local watering holes, what can planners do? 

In cities that that don’t treat new development like E. Coli, an increase in supply will, hopefully, lead to a flattening out of rental rates. But that’s a long game that goes far beyond the shelf life of many restaurants. 

San Francisco has recently experimented with protections and aid for “legacy businesses.” Their effectiveness is as yet uncertain, and the city’s definition of “legacy” protects only the most longstanding businesses. Though residential rent control is surging in California, I see no appetite for a retail equivalent. I’d love to see disincentives for empty storefronts, since many landlords currently would prefer to let them lie fallow while they wait for for big-money tenants than let an incumbent stay on at a manageable rate. My personal favorite anti-chain ordinances that pretend not to be anti-chain ordinances are those that restrict the large, garish signs that many fast food places rely on. 

Of course, even tepid versions of these options would cause landlords to go apoplectic. In the political battle between aspiring restaurateurs and grizzled property owners, that’s like bringing a whisk to a gunfight. 

Ironically, the resurgence of urban life over the past decade or so has corresponded almost perfectly with the artisanal, locavore, organic, small-batch, multiethnic, hipster-led resurgence in the culinary industry. There’s probably never been a better time to be a chef, mixologist, restauranteur, or “foodie.” That goes double for California — a hotbed of culinary diversity and probably the farmer’s market capital of the world. 

But planners need not enjoy bone marrow or roasted dandelion greens to care about this trend. They need only care about the places they are trying to create — and bring as much imagination to their jobs as todays’ chefs do to theirs. 

2 Comments Posted Leave a comment

Howard Ahmanson (Irvine)
Howard Ahmanson (Irvine)
 

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