Cafeteria Ban moved to Conditional Use Authorization

Supervisor Safai introduced amendments to his original proposed on-site ban for free corporate, large cafeterias at the Land Use and Transportation Committee Monday, December 10, Cafeteria Legislation Amendments as of 12/10/18.

In addition to a few minor edits, they have stricken language discussing an outright ban and changed it to a Conditional Use Authorization. This is would allow for a conditional use permit to be issued for on-site, employer-paid cafeterias where “foods are prepared and cooked on the site in a full-service kitchen with an exhaust ventilation system that requires a health permit from the Department of Public Health to operate.

The legislation now moves to the Planning Commission which had previously rejected an outright ban to these types of on-site food operations. We expect a few more, minor but important changes in the coming weeks after suggestions from the Land Use and Transportation Committee.

We supported amending the non-retail cafeteria ban legislation to a Conditional Use process, reiterating our support for this approach as stated in our October 24, letter to the Planning Commission. We believe that the lens of a Conditional Use process provides the best vehicle for determining the “necessity” or “desirability” of a private non-retail free cafeteria in the context of the City’s General Plan Priority Principles.

As highlighted in the letter to the Planning Commission we also support changes to the Health Code to differentiate between cafeterias that operate as a full-service daily non-retail free cafeteria (or perhaps better phrased food service operation) versus a kitchen that may be used for some cooking and preparation, or that provides complimentary snacks and beverages.  We also want to make it clear that this definition should not impact the catering in of food.

Below are some key considerations as to why a Conditional Use process makes sense.  

Loss of Sales and Use Taxes

Restaurants, referred to as Eating and Drinking Establishments, in the Planning Department’s Commerce and Industry Inventory, represent more than 65,000 jobs, with another more than 10,000 jobs being accounted for by Food Stores.  Eating and Drinking Establishments combined with Food Stores, represent over 60 percent of the jobs in the retail sector and more than 50 percent of retail establishments overall, generating more than $5.5 billion in retail sales and use taxes. 

When companies offer full-service free cafeterias, millions of dollars of local sales and use taxes are lost as sales tax is not being collected; restaurants and food stores contribute twice to sales and use taxes, first in the raw product purchase and then in the sale of the final product.  This secondary transaction lost can be significant to the local economy as these taxes support public transportation, local schools and the overall city budget.

And although not a local tax issue, many legal experts opine that companies offering free meals are actually skirting federal taxation on the employee benefit they are providing.

Ground Floor Economic Vitality

Office space constitutes the largest employment category by land use in San Francisco – 42 percent, representing the largest source of population to support the economic activity in our office districts. Most of our C-3 zoning in San Francisco requires mixed use ground floor retail, yet much of this space, particularly in new buildings, sits vacant.  

There’s been much research about how to create vibrant and safe streetscapes and active ground floors and storefronts are the key.  Active retail contributes to vitality and eyes on the street, helping to create safer street environments. The financial investment for creating a ground floor restaurant experience is extremely expensive — from the months of paying rent during renovations, the actual renovations, purchasing product, training staff, typical business start up costs, etc.; on the day a restaurant or retail business opens, it’s in debt.  Given the financial risk, a location’s demographics (size and scope) of the market is critical in the success or failure of the business. Traffic from neighboring residents and businesses is crucial — without which, businesses cannot survive. We saw a number of businesses in the Mid-Market and as far away as Folsom Street cite the move of companies to offices with full cafeterias for declining or disappearing traffic.  Conversely, restaurants have seen significant upticks in traffic on days when cafeterias have been closed or limited.

Planning Code Requirements & Fairness

The San Francisco Planning Code regulates restaurants with size and use limits, linear saturation thresholds, numeric caps in some neighborhoods, Conditional Use requirements, and not allowing activity above the first floor.  This is all done to the protect the balance of uses and vitality of a neighborhood in alignment of the Priority Principles of the General Plan. Given these realities, it’s absolutely reasonable to similarly look at the value of non-retail, free cafeterias and their impact on the same principles.  

The General Plan’s Commerce and Industry Element “sets forth objectives and policies that address the broad range of economic activities,” and serves as a comprehensive guide for both the public and private sectors when making decisions related to economic growth and change.  It is framed within three overriding goals which call for continued economic vitality, social equity and environmental quality. This Element challenges decision-makers to balance being responsive to near term needs, while also being consistent with long range goals and values.

In looking at this Element, highlighting the issue of social equity cannot be ignored; independent restaurants in particular are owned and operated by those without significant means — ranging from cooks who want to share their vision of a particular food or hospitality, to immigrants that are able to make a living and employ their family and others by sharing food from their country of origin.  Restaurants are one of the last bastions of urban manufacturing — where a product is taken from its raw form to completion onsite. And it’s an industry of opportunity where those without formal training can prosper, starting out as dishwashers and becoming restaurant owners and executive chefs. Independent restaurants also employ people without scrutinizing their immigration status, something that larger companies find imperative.  

Restaurants are community gathering places where people meet their neighbors, celebrate the high and lows of their lives, meet loved ones and feel nourished through food.  Every day their doors are open to those who want to eat or seek employment or ask for a donation — they are one of the last places that prioritizes human contact in an increasingly disconnected world.  Restaurants can transform communities and lives, and through hiring, community fundraisers, food donations, participation in charitable events and more play an important role of being publicly accessible space for all.

We believe that private enterprise should be able make the best decisions for their business, but we also believe that when choosing to locate in a city, there is a responsibility to that community, which only increases tenfold when tax breaks and incentives are provided.  A Conditional Use for a free cafeteria does not infringe on a business enterprise from doing their core business, and may even spur some creativity around it’s employee and community engagement. We hope that you will agree and support a Conditional Use process for new non-retail office cafeterias.

The legislation now moves to the Planning Commission which had previously rejected an outright ban to these types of on-site food operations. plus added five things we recommend the Planning Commission examine, however, this is a living document and we expect a few more, minor but important changes after today’s hearing.

Read GGRA Executive Director Gwyneth Borden’s previous think piece here.

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