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Opening a small business in San Francisco is still a nightmare. Ask me how I know

A wine glass with red liquid amidst an urban scene with "STOP" signs and barrier tape.
Source: AI illustration by Jesse Rogala/The Standard

By Naz Khorram

Five years ago, I decided to pursue my dream and launch Arcana, a wine bar, restaurant and entertainment venue on the Mission Street corridor. Little did I know what it would take to open those doors: years of hard work, heartache, blind alleys and bad-faith conversations. It almost led me to give up hope.

Most notably, reforms to the city’s planning code intended to streamline the process, such as the Community Business Priority Processing Program, turned out to be nothing but a mirage.

As I started my application process with the city, I was told that I should engage with neighborhood “stakeholders” for their approval. Since this did not sound like following the formal process for starting a business, I reached out to the Mayor’s Office of Economic and Workforce Development and the office of the current District 9 supervisor, Hillary Ronen, for clarification. 

They sent me on a year-long journey talking to pressure groups abusing the conditional use authorization process. Contrary to official rules, these groups demanded that Arcana close at 10 p.m., imposing guidelines on the venue’s design, the artists we could hire and even the food we could serve, telling us we were not allowed to be a vegan restaurant.

Many other businesses have been through this, where local groups claiming to protect the character of a neighborhood impose a list of demands, trying to force a private memorandum of understanding under threat of delays and boycotts.

Keeping City Hall in the loop did not bring me any support. One person in the Mayor’s Office actually told me that “sometimes you just need to kiss the ring.”

Despite the pressure, I resisted; I had to protect my business from this interference. As an Iranian asylum seeker and political activist, I was beyond intimidation. I sent a detailed explanation of the events to the planning commission and faced the public hearing with heart-aching uncertainty. Somehow, I prevailed and was able to open Arcana’s doors mid-pandemic.

Today, Arcana employs 15 staff members, contracts with a dozen local service providers, supports over 30 winemakers, vendors, and farmers and hosts over 100 musicians and performers annually.

Dead ends and sapped spirits

The 2020 “Save Our Small Businesses Initiative” (Prop H) and other recent legislative reforms were drafted with the intent of improving the small business permitting process. The reality differs. While opening a restaurant, bar or entertainment venue no longer requires special approval on some commercially zoned transit streets in San Francisco, special approval is still required on 24th Street in the Mission, along Mission Street and in most of South of Market.

In other words: The neighborhoods that need investments and resources the most are still tied up in red tape.

In corridors where Prop. H did take effect, converting an office space to an entertainment venue still takes months. That is when the use is already allowed by zoning: Over 30 days where Prop. H applies and six to nine months where it does not.

Imagine trying to open a music venue, which requires an entertainment permit that takes another two to four months, plus a 30-day public notice for people to comment, plus mandatory neighborhood outreach and a hearing before the Entertainment Commission. Any opposition from a neighbor, neighborhood group, or competitor can further stall the process.

Business operators must also pass inspections by the San Francisco Fire Department, Department of Public Health and Department of Building Inspection for plumbing, electrical and building compliance. Waiting for a license from the Department of Alcoholic Beverage Control, which includes an FBI background check, adds two to six months. This administrative and financial burden can quickly turn into a dead end and sap even determined entrepreneurs’ energy, determination and bank accounts.

As I consider opening a second art and entertainment venue, I am frustrated by the extensive paperwork and community outreach still required, despite the latest legislation intended to aid small businesses. Streamlining exemptions forced me to reject some locations due to the excessive administrative and financial burden.

Additionally, concerns about public safety and street conditions in certain areas could deter customers, making those options unviable. Business operators have been seeking rent-free leases until they are up and running, but landlords are hesitant to agree due to fear of conflicts with the planning department that could delay openings.

Although the city has improved its permitting support, my experience with Arcana taught me that the many different city agencies do not coordinate well. Despite my efforts since June 2023, I have yet to find a suitable location with the right conditions.

San Francisco faces a critical moment with a 31.6% vacancy rate in commercial real estate, affecting major retailers, restaurants, bars, entertainment spaces, music venues, and theaters. It signals the need for imaginative urban planning, moving beyond bureaucratic constraints and political games. We need a shift toward data-driven and economically sound strategies, focusing on commercial corridors.

Envision our high streets bustling with life, where vibrant commercial corridors feature public art, community gardens, museums, theaters, arcades, and thriving bars and restaurants. Thousands of small businesses, artists, and innovators could create jobs and draw tourists and locals alike. 

Other cities have faced similar challenges and succeeded.  San Bruno reinvented Tanforan Mall following its closure and San Antonio, Texas, transformed Pearl Brewery. Why does San Francisco's vivid vision remain unrealized?

To radically transform downtown and our other commercial corridors, we must reform our planning code for businesses. It is essential to fast-track all art, entertainment, restaurant, and bar applications by removing red tape and public hearings citywide. Eliminate the 30-day neighborhood notification and outreach requirements, change of use processes, discretionary reviews, and caps on eating and drinking places. Businesses would still be required to follow all building, plumbing, electrical, fire, health, and police codes.

We can revolutionize the city's urban fabric, converting underutilized office spaces and large commercial vacant properties into dynamic centers of creativity and leisure. This would re-establish San Francisco as a landmark for arts and entertainment and a hub for the hospitality industry.

If San Francisco listens to small business owners and empowers us to reinvent the city from the bottom up, we can achieve this transformation together.

Naz Khorram is a small business advocate and co-founder of Mission Vibrant, an initiative bringing art, entertainment and investment to the Mission Street corridor. In 2021, they founded Arcana, a natural wine bar, restaurant, and entertainment hub in the Mission.

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