9 ms·

The disruption of Silicon Valley’s restaurant scene

67 points by kanamekun 10y ago

temp20160423 10y ago
Are these restaurants just not that good to start with? If they were good, couldn't they increase prices and then increase wages they offer to staff? The article implies that the fast casual $10-15/person places are doing fine. My impression of PA is that the fancier $30+/pp places are also busy. It's possible there's simply less demand for the places at a price point in between (although there's not really evidence of this in the article).
- zaphar 10y ago
  The market sounds a little imbalanced. If they were competing with other restaurants then that would be an option. But they aren't competing with other restaurants. They are competing with companies that give the food away free to their employees. Those companies can afford to pay the chefs, and kitchen staff more because they don't make money selling the food. They make money on high margin digital goods. The market will only sustain so many $500 a meal restaurants. The casual dining restaurants, which sound like the hardest hit, can only increase their prices so much before they price themselves out of the market.
  - marmot777 10y ago
    This seems way more extreme than the general problem. I live in a city that does not have any problem supporting a variety of great restaurants from low to high end. It sounds to me like possibly the people who are being hired away from the tech companies are benefiting. I think it's still an ethical issue as this situation is obviously hurting restaurant owners and people who don't have the money for the super high end. That's a shame.
- asah 10y ago
  Zibibbo was excellent - bite your tongue!
  - karma_vaccum123 10y ago
    meh forgettable white table cloth bistro...there have to be fifty such places in the Bay Area okay they get props for being early in recognizing Palo Alto as a night out ...but little else
deleted 10y ago
[deleted]
eruditely 10y ago
This is because our impotent tech elite have failed to even solve the first issue they've organized to solve, housing! We should ask for new elites, it's always been ok to ask for new elites when they've failed. They literally installed a foreign elite everywhere they went who did not know the local population and always brought negative externalities with them. The tech elite managed a feat that not even the financial elite have, they managed to get the locals to hate them everywhere they've moved in!
DrScump 10y ago
The article is oddly silent on food truck competition. Food trucks avoid real estate costs, most employees, and are given free rein to compete with brick-and-mortar restaurants, even to the point of being allocated parking right on the same block in some cases. The result was easily predictable.
- reustle 10y ago
  I would never want to open a brick and mortar shop of any type, but I have this weird desire to build an automated food truck. A tablet on the side with big plexiglass windows so you can see the simple process internally building your food (sandwiches or burgers). Maybe I've been spending too much time here in Japan :-)
  - jayjay71 10y ago
    Automating food is harder than you think. I agree though - that would be amazing.
  - marmot777 10y ago
    Open a food truck! It's a relatively low risk thing compared to opening a restaurant. Still a lot of work though your idea reduces that quite a bit. :-)
- marmot777 10y ago
  Food trucks would be the lower end though. The article focused on the medium end that the average person might go to for a good dinner with a decent ambience without breaking the bank. That's a reasonable thing that most people do to relax at least occasionally. Sure, OK, it's a first world problem but that's not sufficient reason to dismiss a problem as trivial. It's not the biggest problem that needs to be solved, either. :-)
cyberferret 10y ago
Article is behind a paywall. Anyone got a precis? EDIT: Not sure why this was downvoted? I thought it was reasonable to ask for a short summary of the article seeing as I don't have a paid subscription to the NY Times? Or are people who don't want to spend the cash simply excluded from the conversation with no recourse?
- CN7R 10y ago
  How Tech Companies Disrupted Silicon Valley’s Restaurant Scene PALO ALTO, Calif. — It wasn’t so long ago that the aroma of Moroccan spiced prawns and wood-oven pizzas wafted out to a downtown street here from the open-air patio of a once popular eatery called Zibibbo. Today that patio is behind locked doors, obscured by frosted glass. The pizza oven is gone. The formerly crowded bar has been converted into a sparsely populated start-up space of a dozen engineers, their bikes and whiteboards. After 17 years in operation, the restaurant closed in 2014. The space is now an American Express venture capital office and a start-up incubator. All told, more than 70,000 square feet of Palo Alto retail and restaurant space were lost to office space from 2008 to 2015, as the tech bubble drove demand for commercial space downtown. It is a story playing out across Silicon Valley, where restaurateurs say that staying afloat is a daily battle with rising rents, high local fees and acute labor shortages. And tech behemoths like Apple, Facebook and Google are hiring away their best line cooks, dishwashers and servers with wages, benefits and perks that restaurant owners simply cannot match. Silicon Valley technologists love to explain how they have disrupted the minutiae of daily life, from our commutes to the ways we share family photos. But along the way, they have also managed to disrupt their local restaurant industry. That may not be an issue for tech workers with access to free, farm-fresh cuisine in corporate cafeterias, but for everyone else here it is leaving a void between the takeout cuisine popping up around Palo Alto — picture bento boxes ordered on iPads at a counter — and $500 meals at high-end restaurants. “Restaurants as we know them will no longer exist here in the near future,” said Howard Bulka, a chef and owner of Howie’s Artisan Pizza in Palo Alto and another restaurant in nearby Redwood City. “Palo Alto is just too tough a row to hoe. A lot of people are looking into getting out in one piece or are thinking of leaving the business entirely.” With razor-thin profit margins, restaurateurs find they can increase wages only so much. Paying a livable wage is a struggle in Palo Alto, where the average one-bedroom apartment rents for $2,800, the same as in New York City, according to Rent Jungle. Workers have also been driven out of surrounding towns that were previously affordable, like Cupertino and San Jose, where demand from a new influx of tech workers has driven up the average cost of a one-bedroom apartment to more than $2,500. The cost to lease space in downtown Palo Alto, according to the city’s planning department, is now $7.33 a square foot, up more than 60 percent from four years ago. Landlords have also put the onus of building improvements on the tenants. Palo Alto requires restaurants to pay fees for things like sidewalk improvements, tree maintenance and parking. Restaurants that lease 1,000 square feet or more must provide four private parking spaces or pay an in-lieu parking fee of $63,848 per space, for a total of $255,392 — the highest such fee in the country. Successful restaurants often pay 4 to 6 percent of gross sales in occupancy costs, which include rent and other fees like insurance and property taxes. But in Palo Alto, restaurateurs say the combination of high rents and staffing challenges has pushed their occupancy costs to 12 percent of gross sales. “From an operating standpoint, it’s crushing,” Mr. Bulka said. “There’s just not enough profitability in this. Period.” “Help wanted” signs are now ubiquitous, and not only among restaurants. On a recent Wednesday, a sign outside a florist read: “Call our associate. We don’t have enough people to run the shop here right now.” Understaffed “fast casual” restaurants — frozen yogurt, cupcake and tea shops; poké bars; and salad stations where customers order from the counter — have replaced older mom-and-pop restaurants. Other newcomers are well-heeled chains like Nobu, the global sushi empire that announced plans to open a restaurant in Palo Alto, and Sweetgreen, the salad chain start-up that has raised $95 million in venture capital funding and can offset the costs of doing business in Palo Alto with sales from its more than 50 other locations. Not everyone is so fortunate. “We’re competing more for staff than we are for guests at this point,” said Craig Stoll, a James Beard Award-winning chef and co-owner with his wife, Annie Stoll, of Delfina. The Stolls own four restaurants in San Francisco and two in Silicon Valley — one in Burlingame and the other in Palo Alto. They have not been able to fully staff their Silicon Valley locations since they opened about two years ago. They used to require their line cooks to have particular experience. “Now we’re just selling ourselves on Craigslist, posting pictures of cooks butchering pigs, sautéing, and good-looking waitresses to recruit staff,” Mr. Stoll said. In the last year, the Stolls have lost several of their best servers and their director of operations to Twitter and Airbnb in San Francisco. To compete, the couple have been increasing pay and perks as much as possible, but they say they still often have to close off entire sections of their Silicon Valley restaurants simply because there is not enough staff to service them. Recently, they have resorted to hiring their 14-year-old daughter and her friends to step in. “We’re breeding our own work force at this point,” Mr. Stoll joked. Just a few blocks from Pizzeria Delfina in Palo Alto, JC Andrade, an owner of Vino Locale, a family-run wine bar, said his bar lost its previous chef to Facebook. His family increased workers’ pay and now offers a 401(k) program, but Facebook and Google continue to offer his staff higher wages than Mr. Andrade said he makes as owner. Increasingly, he said, he has to beg his 15-year-old brother to pick up shifts. Last year, Brigette Lau and Chamath Palihapitiya, founders of the venture fund Social Capital, opened Bird Dog, a stylish restaurant downtown. They had backing from other Silicon Valley investors eager to bring a slice of younger, innovative and relatively affordable San Francisco-style cuisine to downtown Palo Alto. But even with Silicon Valley’s backing and their own substantial means — Mr. Palihapitiya is part owner of the Golden State Warriors basketball team — Ms. Lau said operating a restaurant in Palo Alto was not for the faint of heart. “I’m supportive of the start-up community, but not at the expense of the community,” she said. Walk around downtown Palo Alto and you will probably stumble on an enticing dining space where seasonal menus with dishes like Cuban braised pork tease passers-by. But do not try to enter without a badge. The space is Palantir Technologies’ private, fully staffed, employee-only cafeteria. The privately held software company now occupies over 12 percent of the rentable commercial office space downtown, according to the research firm PrivCo. The newest options for locals include Zume Pizza in nearby Mountain View, where robots cook the pizza. Zume delivers to Palo Alto — perhaps in driverless cars in a few years. On Palo Alto’s main street, adult-size robots, with screens featuring real people speaking from their homes in Bermuda or Kansas City, greet pedestrians and escort them into a Beam robot shop, which is unstaffed and empty save for the other robots selling themselves. “We joke that we’re all going to end up like Beam robots,” said Mr. Andrade, of Vino Locale. “It’s only a matter of time before someone hands them a tray.”
KKKKkkkk1 10y ago
"It is a story playing out across Silicon Valley, where restaurateurs say that staying afloat is a daily battle with rising rents, high local fees and acute labor shortages. And tech behemoths like Apple, Facebook and Google are hiring away their best line cooks, dishwashers and servers with wages, benefits and perks that restaurant owners simply cannot match. ... That may not be an issue for tech workers with access to free, farm-fresh cuisine in corporate cafeterias, but for everyone else here it is leaving a void between the takeout cuisine popping up around Palo Alto — picture bento boxes ordered on iPads at a counter — and $500 meals at high-end restaurants." I consider the Bay Area as being affected by a Dutch disease phenomenon, meaning that all industries are crowded out by the one that has a comparative advantage, and that products and services that are not easily transportable undergo significant price and wage inflation.
- deleted 10y ago
  [deleted]
twblalock 10y ago
There's nothing specific to tech about this. In any place where rents increase more than 60% in a few years, whether that increase is caused by tech or anything else, lots of restaurants aren't going to make it. The same is true for many other small businesses with small profit margins, such as indie bookstores, for example. On the other hand, I pass through downtown Palo Alto every weekday, and I see plenty of open restaurants. Many are able to succeed. It's not like the area is a wasteland of tech offices with private cafeterias. There are more people in downtown Palo Alto eating and drinking now than at any time in the past.
- dang 10y ago
  > There's nothing specific to tech about this Other users pointed this out as well, so we took the explicit reference to tech companies out of the title above.
- adrianN 10y ago
  I wonder how the zillion Ramen shops in central Tokyo stay alive. The rents there are horrendous, and the noodles are fairly cheap.
  - mercer 10y ago
    I've wondered the same thing about some of the tiny shops in the center of town here. They sell cheap phone covers and whatnots that I can't imagine bring much profit. Could it be that these places have existed for a long time and rent protection keeps the rent down? The only other explanation I can think of when it comes to some of these shops/food joints is that they're used for money laundering or something like that.
    - crdoconnor 10y ago
      >They sell cheap phone covers and whatnots that I can't imagine bring much profit. Those things actually have really high margins.
      - 10y ago
DannyBee 10y ago
This is basically what should happen. I'm also unsure what relation tech has to it. Either restaraunts/etc pay enough to make it possible for people to live there (and in turn, people living there pay for those things), or they close, eventually causing people to stop deciding to live in those parts (eventually helping to bring prices back down) It happens right now that tech is a major industry in the area can afford to pay those people enough to live there. But it's also probably true that people would not like PA as much if every restaurant closes. So, ..... This is the same as the cities having trouble attracting police/firemen/etc because they can't pay enough. Either the people living there will pay more, or they'll be okay with no police/firemen, or they'll decide they don't want to live in a place with no police/firemen, which will help bring prices back down.
- twblalock 10y ago
  That's not what happens. What happens is that the policemen, firemen, and restaurant workers commute from areas where it is cheaper to live. It's been that way in Palo Alto for a while, and it certainly has not caused any downward pressure on prices.
  - deleted 10y ago
    [deleted]
  - DannyBee 10y ago
    Sure it is. "But in recent years, many police agencies across the Bay Area have seen a decrease in applicants. Some say the area's high cost of living is partly to blame as job seekers move to other parts of the state to start their careers." They only commute if the cost of doing so is worth it. When they can find reasonable jobs that provide the life they want elsewhere, they stop :) The expensive area police hiring has dropped dramatically (SF, etc) when the less expensive areas have seen increases in ability to recruit (San Mateo, etc). It's only when the less expensive areas don't need police that you see increases in hiring elsewhere. Even then, they are still having more and more trouble hiring over time.
    - 10y ago
lukeschlather 10y ago
Like a lot of Silicon Valley's problems, this really comes down to unreasonable height restrictions. When you have to choose between a 3000 sq.ft. restaurant and 3000 sq.ft. office space, the offices can pay better. If the city would let people build large office towers they could put restaurants on the ground floor and this choice wouldn't have to happen.
- crdoconnor 10y ago
  The city's usually just responding to property owners lobbying to restrict the supply of their scarce asset in order to maintain/drive up its value. This is what's going on in London (note that the list of supporters including property-owning associations, property developers and hedge funders): http://www.skylinecampaign.org/ http://www.skylinecampaign.org/ Politically it's easier to throw sand in the wheels of new projects than it is to propose new projects, which is why this remains an effective way of lobbying.
  - Aethelwulf 10y ago
    I don't think that's an accurate description of the situation in London. There is almost unbridled development at the moment. It's going to markedly change how the city looks and feels. That's what people are reacting against.
    - crdoconnor 10y ago
      Give London residents a choice between 400 pounds a month off their rent+reducing shop/restaurant prices and avoiding high rises changing the "aesthetic" and I'll guarantee the outcome of that poll. This is not driven in any sense by democracy. Quite the opposite.
      - michaelt 10y ago
        Are there any credible development projects I can support that will reduce my rent by £400/month?
Animats 10y ago
First world problem. Palo Alto's University Avenue has enough good restaurants. Some are not obvious. Gyros Gyros has excellent fish platters and kabobs. There are several decent Chinese restaurants. Paris Baguette is OK. It's interesting that Palantir is leasing all the available office space. That's unusual, but not unheard of. In the early days of Autodesk, they at one point had leased most of the office space in Sausalito. The city council was unhappy about this, so Autodesk moved to San Raphael where they could lease large office buildings. I noticed yet another rug store opening on University Avenue recently. Someone must need an investor visa. The guy who owns most of the rug stores used to lease the upstairs to startups in exchange for equity. Now he's a venture capitalist.
- throwaway_exer 10y ago
  Palo Alto City Council is also unhappy about the tech companies leasing downtown. Their contention is that the existing office space zoning is for accounting and legal, not software.
danso 10y ago
Some context: http://sf.curbed.com/2016/8/23/12603188/palo-alto-mayor-housing-interview http://sf.curbed.com/2016/8/23/12603188/palo-alto-mayor-hous... The mayor recently made news about wanting to stifle job growth, as it far outpaces what he believes is acceptable housing availability: > Burt: Palo Alto’s greatest problem right now is the Bay Area’s massive job growth. Cities are still embracing huge commercial development with millions of square feet of office space they can’t support. They’re chasing their tails. We started reining in office growth and put a cap on it. And then we began expanding housing in our downtown areas, which we’re in the process of. What's funny is that the mayor himself is a CEO of a tech company headquartered in Palo Alto downtown. Some of the things he says are infuriating ("We don’t want to turn into Manhattan"...as if PA were anything close to Manhattan) but as I understand it, he was the more pro-housing/growth candidate in the mayor race: http://www.paloaltoonline.com/news/2016/01/04/burt-returns-to-the-mayors-chair-in-palo-alto http://www.paloaltoonline.com/news/2016/01/04/burt-returns-t... > The two votes mean that the council's top two leadership positions will now shift from members with the heaviest slow-growth residentialist leanings to ones with less predictable voting records. While Burt has played a leading role in the council's recent adoption of an office cap, its efforts to preserve retail and its reform to the "planned-community" zoning, he had also split from the residentialists in supporting several recent developments, including mixed-use projects at 101 Lytton and 441 Page Mill Road (Holman and Schmid had opposed both).
- spiffage 10y ago
  Mayor Burt's not pro-housing. He's just the least anti-housing of the anti-housing majority on the city council.
jdale27 10y ago
It's hard to imagine why anyone outside Palo Alto would care about the food scene in Palo Alto. As far as food goes, Palo Alto is a provincial backwater that just happens to have a few decent restaurants due to the unlikely concentration of rich people in the area. The continued cultural desertification of the peninsula and the south bay (there wasn't really ever much culture there to begin with) is yet another effect of the tech monoculture dominating the socioeconomic ecosystem.
- karma_vaccum123 10y ago
  Jing Jings is a nice Hunan place that has been there forever and will be there forever (I assume they own their building)... everything else is meh and transient. I miss Sushiya and Zao. Nothing really noteworthy on a regional scale. Closest "big deal" restaurant is Manresa in Los Gatos. Not sure why the article seems nostalgic about Zibiboo...it was just another meh bistro I think people are just fascinated by PA...it is our Hunger Games ' District 1
marmot777 10y ago
Are the staff that are hired away from the restaurants better off in a substantial way to off set the damage done to the restaurant owners and non-tech industry people. Yes, I do think it is an ethnical issue even though the market's involved. :-)
- PhasmaFelis 10y ago
  I'm not sure what you're asking. The staff that are hired away are presumably better off in the matter of ready cash, which is perfectly reasonable. Ethics in job choice are important--you probably shouldn't take a job supporting a CIA hit squad even if the pay is great--but poor restaurant choice, while unpleasant is hardly a human-rights issue.
  - marmot777 10y ago
    What I mean is are the costs of the tech industry disrupting the restaurant scene worth benefits. I get that it isn't a problem specific to tech. My city, with a vibrant tech scene, also has a vibrant restaurant scene but the situation described in the article is extreme. It's the sort of thing that could strain a city in a few ways from hurting the middle class to boarded up shops and decaying neighborhoods. So is it reasonable to ask is worth the damage? It's a reasonable question to ask.
  - marmot777 10y ago
    I guess what I'm trying to get at is that choices the "market" made are viewed almost with a sacred reverence by a lot of people. They'll even call you a socialist if you question anything about it. I'm no ethics expert either by studying or being ultra ethical in practice, but I think it's worth it to at least discuss the implications when the market makes a decision that hurts people. It doesn't follow that I'm a socialist. Reading between the lines and categorizing things is useful but it requires a bit more sophistication to be able to adjust those filters and focus on what they're saying not what you perceive as the sub-text. (Note, by you and I don't mean you as in the person I'm responding to I mean a more general "you" as in all of us as I'd like to be more skilled at resisting the default as well)
ignasl 10y ago
Rules and regulations create market imbalances and no change later is possible because of special interests lobbying. Population is later brainwashed into blaming free market and "evil" corporations. Such a life in socialist dystopia. At least SV is not Venezuela and they really have first world problems. Just remove all the permits to build housing and the problem will go away in a few years. Of course special interests who already extracting very nice rents of their properties wouldn't like that.
RangerScience 10y ago
I really like the formula! (Performance = Potential - Interference) This reminds me of two recent things, and one older thing. A) http://killsixbilliondemons.wikia.com/wiki/Meti's_Sword_Manual http://killsixbilliondemons.wikia.com/wiki/Meti's_Sword_Manu... "You must strive for attachment-non-attachment when cutting. Your cut must be sticky and resolute. A weak, listless cut is a despicable thing. But you must also not cling to your action, or its result. Clinging is the great error of men. A man who strikes without thought of his action can cut God." B) I've been playing a lot of Holopoint, a VR archery game that keeps you in constant motion. I notice I do much better when I loose arrows without paying that much attention to the result of the shot... if I've started slow enough to get into the proper rhythm. C) I've heard about a study on pottery student. One group was told they would only be judged on the best pot they produced; the other was told they would only be judged on the quantity of pots produced. In the end, the quantity group also produced the best pots.
Steeeve 10y ago
The result of this is extraordinarily poor service at some restaurants. And some restaurants are downright scary. Business is brisk at most places that I've been to - quality of food and service seems to have little to do with how much business they do. Some places have fantastic service and great food. For the most part, I think it really is a matter of competing for the right employees. Chains don't do well in the area outside of the Stanford Shopping Center. (For instance, I stay away from Cheesecake Factory even though I really like them outside the area). I find it strange that the New York Times would print something about Palo Alto restaurants. I'm sure the same scenario exists in several areas of NYC. High rents make it tough to bring in good employees for service jobs. At least PA has a student body to work with.
- ZanyProgrammer 10y ago
  Do Stanford students really work part time jobs? I'd always imagined even the poorest of them to be scholarship and student loaned up enough to be able to not too.
  - Steeeve 10y ago
    I don't think such a utopia exists. There are plenty of working students.

67 points by kanamekun 10y ago

temp20160423 10y ago

Are these restaurants just not that good to start with? If they were good, couldn't they increase prices and then increase wages they offer to staff? The article implies that the fast casual $10-15/person places are doing fine. My impression of PA is that the fancier $30+/pp places are also busy. It's possible there's simply less demand for the places at a price point in between (although there's not really evidence of this in the article).

zaphar 10y ago
The market sounds a little imbalanced. If they were competing with other restaurants then that would be an option. But they aren't competing with other restaurants. They are competing with companies that give the food away free to their employees. Those companies can afford to pay the chefs, and kitchen staff more because they don't make money selling the food. They make money on high margin digital goods. The market will only sustain so many $500 a meal restaurants. The casual dining restaurants, which sound like the hardest hit, can only increase their prices so much before they price themselves out of the market.
- marmot777 10y ago
  This seems way more extreme than the general problem. I live in a city that does not have any problem supporting a variety of great restaurants from low to high end. It sounds to me like possibly the people who are being hired away from the tech companies are benefiting. I think it's still an ethical issue as this situation is obviously hurting restaurant owners and people who don't have the money for the super high end. That's a shame.
asah 10y ago
Zibibbo was excellent - bite your tongue!
- karma_vaccum123 10y ago
  meh forgettable white table cloth bistro...there have to be fifty such places in the Bay Area okay they get props for being early in recognizing Palo Alto as a night out ...but little else

deleted 10y ago

[deleted]

eruditely 10y ago

This is because our impotent tech elite have failed to even solve the first issue they've organized to solve, housing! We should ask for new elites, it's always been ok to ask for new elites when they've failed. They literally installed a foreign elite everywhere they went who did not know the local population and always brought negative externalities with them. The tech elite managed a feat that not even the financial elite have, they managed to get the locals to hate them everywhere they've moved in!

DrScump 10y ago

The article is oddly silent on food truck competition. Food trucks avoid real estate costs, most employees, and are given free rein to compete with brick-and-mortar restaurants, even to the point of being allocated parking right on the same block in some cases. The result was easily predictable.

reustle 10y ago
I would never want to open a brick and mortar shop of any type, but I have this weird desire to build an automated food truck. A tablet on the side with big plexiglass windows so you can see the simple process internally building your food (sandwiches or burgers). Maybe I've been spending too much time here in Japan :-)
- jayjay71 10y ago
  Automating food is harder than you think. I agree though - that would be amazing.
- marmot777 10y ago
  Open a food truck! It's a relatively low risk thing compared to opening a restaurant. Still a lot of work though your idea reduces that quite a bit. :-)
marmot777 10y ago
Food trucks would be the lower end though. The article focused on the medium end that the average person might go to for a good dinner with a decent ambience without breaking the bank. That's a reasonable thing that most people do to relax at least occasionally. Sure, OK, it's a first world problem but that's not sufficient reason to dismiss a problem as trivial. It's not the biggest problem that needs to be solved, either. :-)

cyberferret 10y ago

Article is behind a paywall. Anyone got a precis? EDIT: Not sure why this was downvoted? I thought it was reasonable to ask for a short summary of the article seeing as I don't have a paid subscription to the NY Times? Or are people who don't want to spend the cash simply excluded from the conversation with no recourse?

CN7R 10y ago
How Tech Companies Disrupted Silicon Valley’s Restaurant Scene PALO ALTO, Calif. — It wasn’t so long ago that the aroma of Moroccan spiced prawns and wood-oven pizzas wafted out to a downtown street here from the open-air patio of a once popular eatery called Zibibbo. Today that patio is behind locked doors, obscured by frosted glass. The pizza oven is gone. The formerly crowded bar has been converted into a sparsely populated start-up space of a dozen engineers, their bikes and whiteboards. After 17 years in operation, the restaurant closed in 2014. The space is now an American Express venture capital office and a start-up incubator. All told, more than 70,000 square feet of Palo Alto retail and restaurant space were lost to office space from 2008 to 2015, as the tech bubble drove demand for commercial space downtown. It is a story playing out across Silicon Valley, where restaurateurs say that staying afloat is a daily battle with rising rents, high local fees and acute labor shortages. And tech behemoths like Apple, Facebook and Google are hiring away their best line cooks, dishwashers and servers with wages, benefits and perks that restaurant owners simply cannot match. Silicon Valley technologists love to explain how they have disrupted the minutiae of daily life, from our commutes to the ways we share family photos. But along the way, they have also managed to disrupt their local restaurant industry. That may not be an issue for tech workers with access to free, farm-fresh cuisine in corporate cafeterias, but for everyone else here it is leaving a void between the takeout cuisine popping up around Palo Alto — picture bento boxes ordered on iPads at a counter — and $500 meals at high-end restaurants. “Restaurants as we know them will no longer exist here in the near future,” said Howard Bulka, a chef and owner of Howie’s Artisan Pizza in Palo Alto and another restaurant in nearby Redwood City. “Palo Alto is just too tough a row to hoe. A lot of people are looking into getting out in one piece or are thinking of leaving the business entirely.” With razor-thin profit margins, restaurateurs find they can increase wages only so much. Paying a livable wage is a struggle in Palo Alto, where the average one-bedroom apartment rents for $2,800, the same as in New York City, according to Rent Jungle. Workers have also been driven out of surrounding towns that were previously affordable, like Cupertino and San Jose, where demand from a new influx of tech workers has driven up the average cost of a one-bedroom apartment to more than $2,500. The cost to lease space in downtown Palo Alto, according to the city’s planning department, is now $7.33 a square foot, up more than 60 percent from four years ago. Landlords have also put the onus of building improvements on the tenants. Palo Alto requires restaurants to pay fees for things like sidewalk improvements, tree maintenance and parking. Restaurants that lease 1,000 square feet or more must provide four private parking spaces or pay an in-lieu parking fee of $63,848 per space, for a total of $255,392 — the highest such fee in the country. Successful restaurants often pay 4 to 6 percent of gross sales in occupancy costs, which include rent and other fees like insurance and property taxes. But in Palo Alto, restaurateurs say the combination of high rents and staffing challenges has pushed their occupancy costs to 12 percent of gross sales. “From an operating standpoint, it’s crushing,” Mr. Bulka said. “There’s just not enough profitability in this. Period.” “Help wanted” signs are now ubiquitous, and not only among restaurants. On a recent Wednesday, a sign outside a florist read: “Call our associate. We don’t have enough people to run the shop here right now.” Understaffed “fast casual” restaurants — frozen yogurt, cupcake and tea shops; poké bars; and salad stations where customers order from the counter — have replaced older mom-and-pop restaurants. Other newcomers are well-heeled chains like Nobu, the global sushi empire that announced plans to open a restaurant in Palo Alto, and Sweetgreen, the salad chain start-up that has raised $95 million in venture capital funding and can offset the costs of doing business in Palo Alto with sales from its more than 50 other locations. Not everyone is so fortunate. “We’re competing more for staff than we are for guests at this point,” said Craig Stoll, a James Beard Award-winning chef and co-owner with his wife, Annie Stoll, of Delfina. The Stolls own four restaurants in San Francisco and two in Silicon Valley — one in Burlingame and the other in Palo Alto. They have not been able to fully staff their Silicon Valley locations since they opened about two years ago. They used to require their line cooks to have particular experience. “Now we’re just selling ourselves on Craigslist, posting pictures of cooks butchering pigs, sautéing, and good-looking waitresses to recruit staff,” Mr. Stoll said. In the last year, the Stolls have lost several of their best servers and their director of operations to Twitter and Airbnb in San Francisco. To compete, the couple have been increasing pay and perks as much as possible, but they say they still often have to close off entire sections of their Silicon Valley restaurants simply because there is not enough staff to service them. Recently, they have resorted to hiring their 14-year-old daughter and her friends to step in. “We’re breeding our own work force at this point,” Mr. Stoll joked. Just a few blocks from Pizzeria Delfina in Palo Alto, JC Andrade, an owner of Vino Locale, a family-run wine bar, said his bar lost its previous chef to Facebook. His family increased workers’ pay and now offers a 401(k) program, but Facebook and Google continue to offer his staff higher wages than Mr. Andrade said he makes as owner. Increasingly, he said, he has to beg his 15-year-old brother to pick up shifts. Last year, Brigette Lau and Chamath Palihapitiya, founders of the venture fund Social Capital, opened Bird Dog, a stylish restaurant downtown. They had backing from other Silicon Valley investors eager to bring a slice of younger, innovative and relatively affordable San Francisco-style cuisine to downtown Palo Alto. But even with Silicon Valley’s backing and their own substantial means — Mr. Palihapitiya is part owner of the Golden State Warriors basketball team — Ms. Lau said operating a restaurant in Palo Alto was not for the faint of heart. “I’m supportive of the start-up community, but not at the expense of the community,” she said. Walk around downtown Palo Alto and you will probably stumble on an enticing dining space where seasonal menus with dishes like Cuban braised pork tease passers-by. But do not try to enter without a badge. The space is Palantir Technologies’ private, fully staffed, employee-only cafeteria. The privately held software company now occupies over 12 percent of the rentable commercial office space downtown, according to the research firm PrivCo. The newest options for locals include Zume Pizza in nearby Mountain View, where robots cook the pizza. Zume delivers to Palo Alto — perhaps in driverless cars in a few years. On Palo Alto’s main street, adult-size robots, with screens featuring real people speaking from their homes in Bermuda or Kansas City, greet pedestrians and escort them into a Beam robot shop, which is unstaffed and empty save for the other robots selling themselves. “We joke that we’re all going to end up like Beam robots,” said Mr. Andrade, of Vino Locale. “It’s only a matter of time before someone hands them a tray.”

KKKKkkkk1 10y ago

"It is a story playing out across Silicon Valley, where restaurateurs say that staying afloat is a daily battle with rising rents, high local fees and acute labor shortages. And tech behemoths like Apple, Facebook and Google are hiring away their best line cooks, dishwashers and servers with wages, benefits and perks that restaurant owners simply cannot match. ... That may not be an issue for tech workers with access to free, farm-fresh cuisine in corporate cafeterias, but for everyone else here it is leaving a void between the takeout cuisine popping up around Palo Alto — picture bento boxes ordered on iPads at a counter — and $500 meals at high-end restaurants." I consider the Bay Area as being affected by a Dutch disease phenomenon, meaning that all industries are crowded out by the one that has a comparative advantage, and that products and services that are not easily transportable undergo significant price and wage inflation.

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twblalock 10y ago

There's nothing specific to tech about this. In any place where rents increase more than 60% in a few years, whether that increase is caused by tech or anything else, lots of restaurants aren't going to make it. The same is true for many other small businesses with small profit margins, such as indie bookstores, for example. On the other hand, I pass through downtown Palo Alto every weekday, and I see plenty of open restaurants. Many are able to succeed. It's not like the area is a wasteland of tech offices with private cafeterias. There are more people in downtown Palo Alto eating and drinking now than at any time in the past.

dang 10y ago
> There's nothing specific to tech about this Other users pointed this out as well, so we took the explicit reference to tech companies out of the title above.
adrianN 10y ago
I wonder how the zillion Ramen shops in central Tokyo stay alive. The rents there are horrendous, and the noodles are fairly cheap.
- mercer 10y ago
  I've wondered the same thing about some of the tiny shops in the center of town here. They sell cheap phone covers and whatnots that I can't imagine bring much profit. Could it be that these places have existed for a long time and rent protection keeps the rent down? The only other explanation I can think of when it comes to some of these shops/food joints is that they're used for money laundering or something like that.
  - crdoconnor 10y ago
    >They sell cheap phone covers and whatnots that I can't imagine bring much profit. Those things actually have really high margins.
    - 10y ago

DannyBee 10y ago

This is basically what should happen. I'm also unsure what relation tech has to it. Either restaraunts/etc pay enough to make it possible for people to live there (and in turn, people living there pay for those things), or they close, eventually causing people to stop deciding to live in those parts (eventually helping to bring prices back down) It happens right now that tech is a major industry in the area can afford to pay those people enough to live there. But it's also probably true that people would not like PA as much if every restaurant closes. So, ..... This is the same as the cities having trouble attracting police/firemen/etc because they can't pay enough. Either the people living there will pay more, or they'll be okay with no police/firemen, or they'll decide they don't want to live in a place with no police/firemen, which will help bring prices back down.

twblalock 10y ago
That's not what happens. What happens is that the policemen, firemen, and restaurant workers commute from areas where it is cheaper to live. It's been that way in Palo Alto for a while, and it certainly has not caused any downward pressure on prices.
- deleted 10y ago
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- DannyBee 10y ago
  Sure it is. "But in recent years, many police agencies across the Bay Area have seen a decrease in applicants. Some say the area's high cost of living is partly to blame as job seekers move to other parts of the state to start their careers." They only commute if the cost of doing so is worth it. When they can find reasonable jobs that provide the life they want elsewhere, they stop :) The expensive area police hiring has dropped dramatically (SF, etc) when the less expensive areas have seen increases in ability to recruit (San Mateo, etc). It's only when the less expensive areas don't need police that you see increases in hiring elsewhere. Even then, they are still having more and more trouble hiring over time.
  - 10y ago

lukeschlather 10y ago

Like a lot of Silicon Valley's problems, this really comes down to unreasonable height restrictions. When you have to choose between a 3000 sq.ft. restaurant and 3000 sq.ft. office space, the offices can pay better. If the city would let people build large office towers they could put restaurants on the ground floor and this choice wouldn't have to happen.

crdoconnor 10y ago
The city's usually just responding to property owners lobbying to restrict the supply of their scarce asset in order to maintain/drive up its value. This is what's going on in London (note that the list of supporters including property-owning associations, property developers and hedge funders): http://www.skylinecampaign.org/ http://www.skylinecampaign.org/ Politically it's easier to throw sand in the wheels of new projects than it is to propose new projects, which is why this remains an effective way of lobbying.
- Aethelwulf 10y ago
  I don't think that's an accurate description of the situation in London. There is almost unbridled development at the moment. It's going to markedly change how the city looks and feels. That's what people are reacting against.
  - crdoconnor 10y ago
    Give London residents a choice between 400 pounds a month off their rent+reducing shop/restaurant prices and avoiding high rises changing the "aesthetic" and I'll guarantee the outcome of that poll. This is not driven in any sense by democracy. Quite the opposite.
    - michaelt 10y ago
      Are there any credible development projects I can support that will reduce my rent by £400/month?

Animats 10y ago

First world problem. Palo Alto's University Avenue has enough good restaurants. Some are not obvious. Gyros Gyros has excellent fish platters and kabobs. There are several decent Chinese restaurants. Paris Baguette is OK. It's interesting that Palantir is leasing all the available office space. That's unusual, but not unheard of. In the early days of Autodesk, they at one point had leased most of the office space in Sausalito. The city council was unhappy about this, so Autodesk moved to San Raphael where they could lease large office buildings. I noticed yet another rug store opening on University Avenue recently. Someone must need an investor visa. The guy who owns most of the rug stores used to lease the upstairs to startups in exchange for equity. Now he's a venture capitalist.

throwaway_exer 10y ago
Palo Alto City Council is also unhappy about the tech companies leasing downtown. Their contention is that the existing office space zoning is for accounting and legal, not software.

danso 10y ago

Some context: http://sf.curbed.com/2016/8/23/12603188/palo-alto-mayor-housing-interview http://sf.curbed.com/2016/8/23/12603188/palo-alto-mayor-hous... The mayor recently made news about wanting to stifle job growth, as it far outpaces what he believes is acceptable housing availability: > Burt: Palo Alto’s greatest problem right now is the Bay Area’s massive job growth. Cities are still embracing huge commercial development with millions of square feet of office space they can’t support. They’re chasing their tails. We started reining in office growth and put a cap on it. And then we began expanding housing in our downtown areas, which we’re in the process of. What's funny is that the mayor himself is a CEO of a tech company headquartered in Palo Alto downtown. Some of the things he says are infuriating ("We don’t want to turn into Manhattan"...as if PA were anything close to Manhattan) but as I understand it, he was the more pro-housing/growth candidate in the mayor race: http://www.paloaltoonline.com/news/2016/01/04/burt-returns-to-the-mayors-chair-in-palo-alto http://www.paloaltoonline.com/news/2016/01/04/burt-returns-t... > The two votes mean that the council's top two leadership positions will now shift from members with the heaviest slow-growth residentialist leanings to ones with less predictable voting records. While Burt has played a leading role in the council's recent adoption of an office cap, its efforts to preserve retail and its reform to the "planned-community" zoning, he had also split from the residentialists in supporting several recent developments, including mixed-use projects at 101 Lytton and 441 Page Mill Road (Holman and Schmid had opposed both).

spiffage 10y ago
Mayor Burt's not pro-housing. He's just the least anti-housing of the anti-housing majority on the city council.

jdale27 10y ago

It's hard to imagine why anyone outside Palo Alto would care about the food scene in Palo Alto. As far as food goes, Palo Alto is a provincial backwater that just happens to have a few decent restaurants due to the unlikely concentration of rich people in the area. The continued cultural desertification of the peninsula and the south bay (there wasn't really ever much culture there to begin with) is yet another effect of the tech monoculture dominating the socioeconomic ecosystem.

karma_vaccum123 10y ago
Jing Jings is a nice Hunan place that has been there forever and will be there forever (I assume they own their building)... everything else is meh and transient. I miss Sushiya and Zao. Nothing really noteworthy on a regional scale. Closest "big deal" restaurant is Manresa in Los Gatos. Not sure why the article seems nostalgic about Zibiboo...it was just another meh bistro I think people are just fascinated by PA...it is our Hunger Games ' District 1

marmot777 10y ago

Are the staff that are hired away from the restaurants better off in a substantial way to off set the damage done to the restaurant owners and non-tech industry people. Yes, I do think it is an ethnical issue even though the market's involved. :-)

PhasmaFelis 10y ago
I'm not sure what you're asking. The staff that are hired away are presumably better off in the matter of ready cash, which is perfectly reasonable. Ethics in job choice are important--you probably shouldn't take a job supporting a CIA hit squad even if the pay is great--but poor restaurant choice, while unpleasant is hardly a human-rights issue.
- marmot777 10y ago
  What I mean is are the costs of the tech industry disrupting the restaurant scene worth benefits. I get that it isn't a problem specific to tech. My city, with a vibrant tech scene, also has a vibrant restaurant scene but the situation described in the article is extreme. It's the sort of thing that could strain a city in a few ways from hurting the middle class to boarded up shops and decaying neighborhoods. So is it reasonable to ask is worth the damage? It's a reasonable question to ask.
- marmot777 10y ago
  I guess what I'm trying to get at is that choices the "market" made are viewed almost with a sacred reverence by a lot of people. They'll even call you a socialist if you question anything about it. I'm no ethics expert either by studying or being ultra ethical in practice, but I think it's worth it to at least discuss the implications when the market makes a decision that hurts people. It doesn't follow that I'm a socialist. Reading between the lines and categorizing things is useful but it requires a bit more sophistication to be able to adjust those filters and focus on what they're saying not what you perceive as the sub-text. (Note, by you and I don't mean you as in the person I'm responding to I mean a more general "you" as in all of us as I'd like to be more skilled at resisting the default as well)

ignasl 10y ago

Rules and regulations create market imbalances and no change later is possible because of special interests lobbying. Population is later brainwashed into blaming free market and "evil" corporations. Such a life in socialist dystopia. At least SV is not Venezuela and they really have first world problems. Just remove all the permits to build housing and the problem will go away in a few years. Of course special interests who already extracting very nice rents of their properties wouldn't like that.

RangerScience 10y ago

I really like the formula! (Performance = Potential - Interference) This reminds me of two recent things, and one older thing. A) http://killsixbilliondemons.wikia.com/wiki/Meti's_Sword_Manual http://killsixbilliondemons.wikia.com/wiki/Meti's_Sword_Manu... "You must strive for attachment-non-attachment when cutting. Your cut must be sticky and resolute. A weak, listless cut is a despicable thing. But you must also not cling to your action, or its result. Clinging is the great error of men. A man who strikes without thought of his action can cut God." B) I've been playing a lot of Holopoint, a VR archery game that keeps you in constant motion. I notice I do much better when I loose arrows without paying that much attention to the result of the shot... if I've started slow enough to get into the proper rhythm. C) I've heard about a study on pottery student. One group was told they would only be judged on the best pot they produced; the other was told they would only be judged on the quantity of pots produced. In the end, the quantity group also produced the best pots.

Steeeve 10y ago

The result of this is extraordinarily poor service at some restaurants. And some restaurants are downright scary. Business is brisk at most places that I've been to - quality of food and service seems to have little to do with how much business they do. Some places have fantastic service and great food. For the most part, I think it really is a matter of competing for the right employees. Chains don't do well in the area outside of the Stanford Shopping Center. (For instance, I stay away from Cheesecake Factory even though I really like them outside the area). I find it strange that the New York Times would print something about Palo Alto restaurants. I'm sure the same scenario exists in several areas of NYC. High rents make it tough to bring in good employees for service jobs. At least PA has a student body to work with.

ZanyProgrammer 10y ago
Do Stanford students really work part time jobs? I'd always imagined even the poorest of them to be scholarship and student loaned up enough to be able to not too.
- Steeeve 10y ago
  I don't think such a utopia exists. There are plenty of working students.