He tried, and he failed. But the worst part is he never got a chance to even start. And now he’s got a $200,000 debt to pay off.
That’s the story of Jason Yu, a 30-year-old father of two who had the audacity to attempt to open up an ice cream shop in San Francisco’s Mission District. Unfortunately, the city got in his way.
As reported by San Francisco Chronicle, Yu started his project – a shop that sold green-tea-flavored ice cream – in late 2018, and ultimately found a location in mid-2019 where he got to work. After committing to a lease ($7,300 a month – this is San Francisco, remember?) he hired an architect to draw up plans for the space, which proposed no structural changes or modifications.
Then the city stepped in.
After submitting plans to the department of building and inspection in November 2019, which required him to notify his neighbors, one of said neighbors – a competing ice cream shop no less – contested the idea and Yu was forced to wait until the following June before he could plead his case in front the city’s planning commission (more legal fees), who ultimately gave him the go-ahead.
So we’re ready to open, right? Wrong.
As the Chronicle explains: “Yu won approval, but then got stuck in the city’s never-ending web of securing permits. The Department of Building Inspection’s online permit tracker shows Yu faced 15 hurdles to secure his permits including getting the sign-off from a host of departments. The last to weigh in was the Department of Public Health, which said in December its review was complete, but that Yu owed more money in permit fees before the department could give the OK.”
Yu had spent a boatload – about $200,000 – by this point and still had nothing to show for it. It was then that he decided to cut his losses and abandon the idea. “This [the ice cream shop] became a nightmare project,” Yu said.
The problem facing small business owners like Yu is that, in San Francisco, existing businesses and residents are allowed to contest the establishment of new businesses or construction projects in their neighborhoods. Many – not surprisingly – have pushed these rights to their extreme because there’s little downside to filing even frivolous claims. So, as Mike Chen reports in The Frisc, an existing falafel shop can tie up a would-be competitor for months or neighbors can reject each other’s remodeling plans for the smallest of reasons.
“While community and neighborhood input is often positive, what we have here is overkill,” Chen writes. “The labyrinthine permitting and ‘Discretionary Review’ process (where appeals courts can decide what cases to hear) contribute to commercial storefront vacancies and to our housing crisis.” Chen says he had observed regulatory processes like discretionary reviews and environmental appeals “for years”.
The good news is that San Francisco’s political leaders seem to be waking up to the fact that over-regulation is killing commerce.
Yu’s story, which went viral last month (and spurred an online campaign against the competing ice cream shop owner) has drawn national attention to San Francisco’s burdensome process for starting up a small business. In late 2020, the city passed legislation – called Prop H – to help streamline the process for starting a new business but there have been few takers so far. According to Knight, as of the end of last month only 50 people have expressed interest and only two new businesses have been approved.
Thanks to Covid – and a good broadband connection – many workers and entrepreneurs are already moving out of big towns and enjoying the quality of life found in more peaceful surroundings where costs are lower and safe streets are a given. For cities like San Francisco to counter this growing trend, rules have to be relaxed and more businesses should be allowed to move quickly and easily open. Forcing a would-be owner of an ice cream shop of all things to spend $200,000 and then abandon the venture because of red tape is not a recipe for future economic growth.