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San Francisco

How these three new Castro businesses made it through their first year, and how the city can help

Running a business in San Francisco is no easy task. Multiple hurdles are involved with opening a new business, including creating a concept, finding the right location, navigating the permitting process and hiring staff.

Just in the last week two Castro businesses, Dapper Dog and Slurp, closed along the prominent 400 block of Castro Street, and multiple long-time businesses have closed in the past year.

Hoodline checked in with three businesses, Gai Chicken Rice, MX3 Fitness and Stag & Manor, who've successfully navigated their first year in business.

We found out how they're doing, heard about their successes and challenges, and asked what the city can do to help businesses thrive.

Gai Chicken Rice (3463 16th St.)

"It's been quite a fun and exciting first year for Gai here in the Castro," said Gai owner Kevin Lieu. The fast-casual chicken-and-rice restaurant opened in December 2018 in the former Sofia Cafe space.

"Although it was challenging starting a restaurant from the ground up we really enjoyed diving in, connecting with our customers, and just getting to know the Castro community," Lieu said. "It's important to us to connect with other local businesses, getting to know our local church groups, reaching out to our neighbors and give back to our community."

One of Lieu's biggest challenges came as a surprise. "One of our greatest challenges this year is having to deal with break ins, broken windows and robberies," said Lieu. "In no way did we think one of our greatest headaches would be crime and time spent assessing physical security and repairing broken glass windows."

Other challenges Lieu cited were increasing city regulations, wages and fees. "It is quite tough being a small business trying to help fix big city issues," Lieu said.

Lieu would like to see city officials review how the city is growing and take another look at the root causes impacting small business. "We helped provide incentives for big corporate companies to start up in SF, thus raising the cost of living," said Lieu. "What may help is better policies/incentives to help small business."

Lieu says he thinks it's costs, by far, that are driving away businesses from the Castro. "Just look at the growing empty storefronts in SF," said Lieu.

"As the city continues to grow, we need to provide better encouragement towards restaurant innovation," said Lieu. "As a community we need to help support small business."

MX3 Fitness (2336 Market St.)

"Our first year in the Castro has been quite an adventure," said co-owner Glenn Shope. Shope and husband Dave Karraker opened their second location in the former Shift and Copy Central space in Fall 2018.

"Our sales increased by about 69% from the previous year," Shope said.

While initially experiencing a slight dip when Barry's Bootcamp opened, Shope says inquiries have rebounded. Added to that, they were able to tout their LGBTQ ownership when SoulCycle received backlash for hosting a President Trump fundraiser.

"We are so proud to be the local, LGBTQ-owned personal training and yoga alternative in the Castro," said Shope. "In spite of the challenges the neighborhood has faced recently, the encouragement we have seen from residents and other retailers has been inspiring."

Since opening in the Castro, Shope says MX3 Fitness has seen increased visibility in their services. "One of the big surprises has been the increase in attendance of our weekday morning bootcamps in Duboce Park," Shope said.

Shope said the addition of small-format yoga classes has been a great decision and helped them differentiate themselves from other yoga studios in the neighborhood.

"We found a fantastic Yoga Director, Marc Morozumi, and he has helped us transform the space and hone our offering into a successful yoga business," Shope said.

MX3 Fitness' biggest challenge has been finding trainers and instructors that are the right fit. "We have been able to rely on word of mouth from our existing clients and trainers to assemble what is turning out to be a really amazing team," Shope said.

Currently offering a donation-based community yoga class on Wednesdays benefitting LGBTQ charities, in the coming year they'll be adding a yoga class specifically designed for the transgender community. "We really want to be the Castro's community fitness business," Shope said.

When it comes to helping new businesses open, "we could be a lot more proactive about welcoming and helping sustain locally owned business," Shope said.

He suggested the creation of a welcoming committee that could help new store owners get their business off the ground and navigate the cumbersome permitting process: "Helping them get their utilities set up, helping them ensure they have the correct permits, helping them find local contractors for any work they need done," Shope said.

Shope also thinks there's a lot more the city could do to help businesses. "We spend a lot of money on tax cuts and other incentives for large corporations, but very little by comparison on small, locally owned businesses that make our communities livable and vibrant," he said.

Shope suggested grants for ground floor storefronts, tax incentives for hiring locally and subsidies for ADA improvements.

"We very clearly need to simplify our permitting process for food and beverage retailers," said Shope. "I don’t think any small business entrepreneur sets up shop expecting a free ride, but we do expect a fair playing field."

While the Castro has many challenges, Shope doesn't want to just give up. "We can’t just throw up our hands and say things aren’t fixable, because they absolutely are," he said. "We need people willing to roll up their sleeves and get involved because we all benefit from a healthy community."

"I think the city’s proposed vacancy tax is an important measure for voters to consider," said Shope, referring to Supervisor Aaron Peskin's Proposition D which would add a tax on vacant commercial properties.

Pointing towards filling the long-vacant former Pottery Barn space, "just that alone could serve as the catalyst to drive a wave of rejuvenation in the Castro," he said.

Stag & Manor (2327 Market St.)

"It’s been an amazing first year thanks to all the incredible people who have come through the shop and made it such a fun place to be," said owner Seth Morrison. The home decor store opened in 2018 in the former Johnston Tax Group office.

"It’s a common trope that the first year in business is the toughest — it certainly was tougher than I ever expected," Morrison said.

"The compliments have bolstered my belief that folks want shops to have experiences, even in our digital age," added Morrison.

"Every little bit of recognition, from being recommended by Lonely Planet and Traveler Magazine, to being asked to host the Mayor’s press event for the Shop & Dine in the 49 Shop Small campaign has been a real source of pride," he said.

Over the past year Morrison said they've nearly tripled their product selection of furniture, rugs and lighting. "One of the challenges is to keep reminding folks that we have more than just what’s on our small sales floor to offer," he said

"Another source of pride is continuing our commitment to donating a portion of our sales to local and global non-profits," Morrison said. In 2019 they donated more than $6,500 to non-profits including Grameen Foundation, World Food Programme, Meals on Wheels, SF SPCA, Lava Mae, David Sheldrick Wildlife Trust, and Black Jaguar/White Tiger.

After his first year in business, Morrison tells Hoodline making the financials work was a bigger challenge than he imagined. "I went into opening with a plan A, B, and C, and I think I’m on E now," said Morrison.

Higher expenses like utilities, services, and supplies, plus missing sales targets, leads to cuts in marketing, which takes a bite out of online sales," said Morrison. "It’s a delicate game of Jenga."

"Modern Market Street rent is no joke, and I have more understanding now about why more businesses don’t take it on," Morrison said.

Morrison says he opened in the Castro because it's his home and community. "I want to be part of keeping the Castro alive and vibrant, but every day I have wondered about the sustainability," he said.

"It’s hard to stay optimistic as we continue to see businesses close and the homeless community grow," Morrison said.

Pointing towards next door neighbor, the former Ixia, Morrison said it was difficult to see it close because it had been such a mainstay and retail partner.

However in December, with the support of the landlord and neighbors, Stag & Manor began merchandising the empty storefront's window and offering the space as a gallery for local artwork.

"While it’s an opportunity to increase our visibility on the block, more importantly, the effort fights the feeling of looming blight that I think has us all concerned," Morrison said.

He also partnered with neighboring businesses D & H jewelers, Crystal Way and Kenneth Wingard to put on a Holiday Block promotion, where they hosted Rocket Dog Rescue in the former Ixia space.

In 2020 Morrison hopes to work with other businesses to develop new shopping experiences.

"I truthfully worry what year two feels like, but hopefully, our continued engagement in the community and city as a whole reaps some sustainability there," Morrison said.

Looking at larger neighborhood issues, Morrison said he's hopeful the city will see a significant improvement in services and shelter options for the homeless.

"We’re up to 6 navigation centers now, but more and more tents throughout the Castro," Morrison said.

"There’s something both frightening and seemingly disingenuous that one of the smartest, richest, most compassionate cities in the richest country of the world has so much of its population living on the streets," he added.

Another major concern many business owners share is the difficulty of the permitting process. "Everyone knows the planning department is a huge hurdle to businesses getting off the ground in San Francisco," Morrison said. He suggested some sort of 'shepherd' or 'sherpa' to guide small business owners over the mountain.

"There’s clearly either a resourcing or an efficiency deficit there that needs to be addressed if we want to keep the city alive," he said. "I’ve heard people recently say how crazy an idea it is that San Francisco could die, and okay, maybe it could never die, but be left battered and penniless, left adrift."

Morrison also pointed towards Peskin's Prop. D on the March ballot as a potentially big boost. "The efforts to disincentivize for landlords the holding of empty commercial spaces is also huge," he said. "I’m sure there’ll be bumps in the road if passed, but I think it’s one of the best shots to start to turn the tide back toward economic health."

Morrison would like to see customers continue to comparison shop, but also be smart and compassionate about it. "As a city community, we all need to give each of San Francisco’s small businesses the chance to compete with big businesses that might seem easier," he said.

"If price comparisons still push you away, give your local shop the chance to match the price if they can," Morrison said.

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