On the December day I stopped at Azalina Eusope’s 6-month-old restaurant in the Tenderloin, she’d just been granted Eater’s “Chef of the Year” award, which praised her eponymous business as “a bright ray of sunshine in the middle of the city.” The accolade was one of many the Malaysian immigrant earned for her restaurant, including being named one of the best restaurants in San Francisco by the New York Times and the Chronicle. By all rights, she had an incredible, enviable year.
But when I sat down with her in the restaurant’s dining room, filled with murals and draped with vines, the fifth-generation street food vendor held her head in her hands and told me she was at the end of her rope.
Her food, a modern take on Indian Muslim Mamak cuisine, is singular; the service, warm and on-point. Yet on many nights, the 34-seat restaurant seats only five diners, total.
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Chef Azalina Eusope is Eater’s “Chef of the Year” and her restaurant, Azalina’s, is on the best lists of the Chronicle and the New York Times. Yet on many nights, the 34-seat restaurant seats only five diners, total.
Neighbors are always popping in, thanking her for opening such a beautiful restaurant in an area that’s so often denigrated and dismissed as hopeless by the outside world. “Please don’t leave!” they beg her. Once a week, she hosts a meal for low-income families who pay $5 each, and it means a lot to her to provide a safe, sane space for neighborhood children. And, perhaps most of all, it’s been her longtime dream to establish a concrete foothold for her family’s cultural cuisine.
“Closing isn’t an option,” Eusope said.
But despite the fame and the community support, she cannot figure out how to make the numbers work. She’s tried selling pre-made meals to local grocery stores to diversify the business, and she uses a set menu to control costs, but it’s still not enough to turn a profit. At this point, Eusope, who is entirely self-funded, is too anxious to look at her bank statements to see how much of her savings have been depleted.
Here in San Francisco, we’re all about our great food scene. We pour so much sentimentality into restaurants, lauding them as essential third places, marks of sophistication and a rare avenue for social mobility. And we hold them to high standards. On top of impeccable food, they should provide good jobs, affordable price points, meaningful cultural experiences, good service, and sustainable ingredients and practices that make us feel good. Eusope provides all of that and more — but it’s a pursuit that she’s starting to consider “suicidal for business.”
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A scrappy, talented, self-made immigrant woman with a dream, Eusope is exactly the type of person the city says it cares about when it touts its reputation as a city of innovators. Her food helps make San Francisco such a special place to live.
Yet this city is among the toughest places to make restaurants work. And Azalina is a case study on the seemingly impossible math of keeping a business afloat here.
People dine during a private family and friends dinner at Azalina’s in June. On most nights, though, the restaurant has only a handful of customers.
The monthly rent on Eusope’s Tenderloin space is $11,000, an amount locked in when she signed the lease in 2018. Even as the pandemic forced her to close and subsequently gutted demand, she told me, that her Burlingame-based landlord, who owns several properties in San Francisco, has been unresponsive to her requests to adjust the rent to an amount that better reflects the current value of the space. Meanwhile, because the building is classified as historic and the Planning Commission has barred her from putting gates over the wide, street-level windows, insurance is high — about $3,500 per month. Because she cares about them, and because it’s incredibly difficult to find staff, she pays her employees well: the biweekly payroll for her six employees is $8,000 to $10,0000. The water bill is $2,000 a month. Credit card fees and tech, like Spotify and an online reservation system, add $600 or more per month. A state tax on “unsecured property” like tables and chairs (which she already paid sales tax on) cost her $3,000 a year. Compostable, environmentally friendly serviceware for grab-and-go meals amounts to $1,000 to $1,200 per month. Since it costs roughly $17,000 just to apply for a liquor license that you might not even get, her restaurant serves just beer and wine. Applying for this license costs $1,000 and renewal is $600 annually. On top of all that, the costs of raw ingredients, like cardamom and fresh ginger, has skyrocketed since the pandemic began.
“Nothing is cheap,” she told me. “I can’t breathe thinking about all this overhead.”
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All told, Eusope needs $70,000 a month in sales just to cover her expenses and break-even — a Sisyphean task that is only growing more difficult.
When we spoke, she kept asking me for advice. How could she shift her model to bring more people in? What adjustments should she make? At this point, she’s willing to do anything. But she also worries about scaring off the few customers who do show up.
She currently charges a mere $100 each for an ample four-course meal plus two beverages. This allows her to put her family’s food on a pedestal, her whole reason for opening the restaurant and one that has earned her accolades. But now she’s considering shifting to something casual in the hope of bringing more business in.
It might be easy to brush off Eusope’s story as a byproduct of doing business in the struggling Tenderloin, but things are just as bad for restaurateurs everywhere in the city.
Chef Tracy Goh’s highly anticipated Damansara restaurant in San Francisco isn’t turning a profit even with grants and waived fees from the city.
After a decade of success running central Malaysian food pop-ups, Tracey Goh opened the hotly anticipated Damansara, named for her hometown, in Noe Valley in 2022. She had $47,000 in opening cash from a Kickstarter campaign and was able to benefit from San Francisco’s new First Year Free program, which waives the cost of initial registration fees, initial license fees, first-year permit and other applicable fees for certain new businesses. To date, more than half of the 3,639 beneficiaries of the program have been food businesses like hers, totaling $823,723 in waived fees.
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Despite this break, the numbers still don’t pencil out.
Her rent is $6,000 a month; utilities are about $1,900. Wages range from $5,000 to 8,000 per week. Ingredients can be $1,000 a week, and stocking the bar with beer, wine and sake costs $1,600 a month. She estimates taxes will be in the high thousands. Then there are so many little things: disposables like toilet paper and gloves are $200 a month; clean linens, leased equipment and a license for the digital point-of-sale system are $1,200 a month; and general maintenance and various types of insurance add up to $18,800 a year.
Goh’s food is the real deal. Her gorgeously rippled curry puffs are a labor of love, using hand-laminated dough, house-made pickles and an aromatic blend of spices. Her rich and spicy laksa, a noodle soup often heralded as an icon of Malaysian cuisine, takes two days to make from scratch.
Yet few people, it seems, are willing to pay premium prices for Asian food, she said. It’s a phenomenon that’s been heavily documented by researchers like Krishnendu Ray, author of “The Ethnic Restaurateur.” In that book, Ray uses menu prices and 150 years of restaurant reviews and awards to articulate a “global hierarchy of taste” that links the perceived value of a cuisine to the perceived value of the culture that produces that cuisine. Immigrant and African American cuisines consistently suffer from what he describes as “the contamination effect of low-class association” — corresponding restaurants are trapped into never striving above their station, lest the public rebel at the price tag.
Goh says the average table pays $40 a head. Raising prices has proven to be a non-starter. It’s hard to imagine how a person can make this work.
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The spiral curry puffs at Damansara are part of the focus on shareable small plates and laksa, Malaysia’s famous noodle soup.
Many of the regulars who supported her in her pop-up and catering days have left the city. Catering was more stable, allowing Goh to easily estimate what she needed to feed a set amount of people, but those jobs have largely withered away with mass tech layoffs and the advent of work-from-home policies.
Goh wrestles with the reality of offering delivery services like DoorDash and Grubhub, which disrupt service for in-person diners and bite off 30% of sales. While San Francisco capped delivery fees to a more humane 15% in 2020, lawsuits by those companies prompted those regulations to relax at the beginning of 2023.
“We all know who’s really making money,” she said. “It does make the kitchen busy but, after all the deductions, we’re not really making anything.”
A brunch experiment was short-lived; Goh has seriously contemplated throwing in the towel on the Malaysian food and serving pancakes instead.
Some city grants are available to help small businesses such as Goh’s stay afloat. A $10,000 grant for business expenses is offered via the Office of Economic Workforce and Development. But securing these funds requires rigorous preparation — mandatory trainings, paperwork and business projections — that can total 72 hours of labor. (When Eusope went through the process, slowly putting together her application in the spaces between her 16-hour workday, she was rejected.)
Goh said she’s now staring down the prospect of debt on top of debt in order to keep up with regular expenses.
What’s happening to restaurants is a mirror of what’s happening to the public at large. Finance expert Sam Dogen estimates that, due to the area’s high cost of living, a family of four San Franciscans would need to bring in $300,000 per year to live an average, middle-class lifestyle. And according to the U.S. Census Bureau, the San Francisco metro area’s median household income fell by 4.6%, to $116,005, from 2019 to 2021.
In these conditions, even just cracking into the business requires an incredible amount of capital. And the city doesn’t make it easier. While building out her soon-to-open restaurant in the Fillmore District, chef Fernay McPherson was told by the city to make several costly adjustments, despite taking over a space that had been a permitted restaurant for years.
“Nothing gets grandfathered in anymore,” she said.
A new grease trap was $5,000; a bigger water heater, $6,000; and another HVAC system, $40,000. To simply change four light fixtures inside of the restaurant required a $400 permit.
“Those things add up.”
But the most glaring problem is that commercial real estate is largely out-of-step with reality. Though the housing crisis is the most salient concern for most people in the Bay Area, commercial real estate is also rife with the kind of costs that can be crushing for normal folks who aren’t sitting on a foundation of investment money. That’s startlingly clear with the $11,000 price point for Eusope’s Tenderloin restaurant. And she’s not alone.
In November, Julie’s Kitchen, one of three remaining tenants inside a Financial District mall, received an eviction notice because its annual sales weren’t up to a $500,000 par set in 2014. The landlords chose not to factor in the restaurant’s city-mandated closure during pandemic lockdowns.
Blake Kutner, business development director at culinary incubator La Cocina, told me that many commercial landlords are still setting prices for an imaginary future San Francisco with a vibrant middle class, thriving tech industry and, subsequently, full dining rooms.
“People are still basing prices on peak times, on what they think might be possible,” he said. “For many places, rent is close to what it was pre-pandemic even though sales might be half. Landlords are thinking, ‘If I underprice it now, it’ll feel like a mistake three years from now.’ ”
But is it really a mistake to bring in a novel, interesting restaurant at a reasonable price instead of having a vacant space that’s going to sit there for years, like we’re seeing now?
Everything Eusope does is configured around making that rent payment.
“We have become slaves of capitalism,” she wrote me in a text message.
The impossible realities of trying to navigate this city’s economic and bureaucratic challenges have downstream effects. In the name of survival, restaurant owners have been some of the most visible advocates against policies that others would find progressive: minimum wage increases, health care mandates and more inclusive street food and food truck regulations. I think of this whenever I dine out at bigger restaurants and see the “SF Health Mandate” tacked onto a bill as a separate charge in relation to the price of food: Owners don’t fold it into the menu because, similar to Goh and Eusope, they’re afraid customers will criticize them for raising the prices.
The popular, romantic notion of restaurants, reinforced by shows like “The Bear” is that they are one of the last remaining institutions that meaningfully reward hard work. But in San Francisco, where the line between stability and destitution is dramatically razor-thin, that’s largely a fairy tale.
And yet, despite how “suicidal” it all seems, there are still people like McFerson trying to open restaurants — to share their stories, culture and points of view with strangers.
I recently asked Gayle Pirie, longtime co-owner of Mission District restaurant Foreign Cinema, what keeps her and others like her in the game.
“It can be irrational, can be nearly unhinged, but there is a population of humans who need to feed people,” she wrote in a text message. “It is their sense of absolute purpose in the world.”
We pour so much sentimentality into restaurants — as we should. But what if we as a society honored that human urge to nourish? What if diners, governments and financial institutions put more value on these places’ cultural contributions to society and didn’t nickel and dime every single thing about them? Maybe then, restaurants could be everything we ask them to be.
Reach Soleil Ho (they/them): soleil@sfchronicle.com; Twitter: @hooleil
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