What does it take to open a business in San Francisco?

Jan 30, 2013

The nation may have been on shaky economic ground as it kicked off 2013, but there was little sign of that here in San Francisco. The city is still in the midst of a tech boom, which has fueled construction and retail investment.

If you want to see it first hand, just take a look at skyscraper being built at Market and 10th Street – or head down to Valencia Street in the Mission District around dinnertime.

The San Francisco Chronicle reported last October that at least 16 new eateries opened on Valencia in the span of one and a half years. With so much competition – and skyrocketing rents – this is a sink-or-swim atmosphere for business owners.

Craftsman and Wolves is one of the places that recently opened up on Valencia Street. As I walk in, a young employee offers me muffins, gougers, hazelnut financiers, and other tasty pastries that are carefully lined up on gray counter. Craftsman and Wolves is a patisserie for San Francisco where lots of traditions are based in French pastries.

“But there is also definitely an American part of it as well,” says general manager Kate Meadow Killoran. She and chef William Werner are two of the five founders of this business, which opened in June 2012.

Killoran spent most of her career in the restaurants of the Ritz-Carlton Hotel chain, where she also met Werner.

“We have known each other and we always kind of traveled around each other,” says Killoran. Later, she moved back to San Francisco to manage a bakery called Tell Tale along with Werner. But due to disagreements with the owners and investors, that business closed down.

“This was really the first time we had to work together and it just worked well. So we have decided: let's continue. Let's stay together!” exclaims Killoran.

The name of the patisserie came out of a struggle they experienced with the previous business.

“Werner just had this moment of frustration of being the craftsman,” Killoran recalls. “You create these things and you really just working with your hands trying to make something perfect.” But there are “wolves who come in and are trying to take it away from you,” Killoran continues. “Then also you needed wolves because if there is no demand then why are you doing all this for anyway.”

The patisserie’s location on Valencia, between 18th and 19th Streets, is among the best in the city. The high restaurant density and vibrant atmosphere make it one of the most competitive parts of the Mission District. Some, like the Valencia Corridor Merchants Association, believe that there are already too many restaurants on Valencia and is pushing to impose a one year moratorium on new establishments. For instance, Craftsman and Wolves is just two blocks away from another French bakery named Tartine. Killoran disagrees.

“I know, people talk about competition. I don't see this competition. I think it creates a beautiful destination,” says Killoran.

Killoran also doesn't see Tartine as competitor. “I think we benefit them, they benefit us. I think that's really beautiful,” she says.

Still, Killoran admits that it's not easy to make it work, especially in the beginning. She recommends everyone who wants to start such a business to raise $1 million, but try to make a budget only for $650,000. It's also important to have cash resources for at least the first three months “because people don't know who you are.”

Killoran and her partners put a lot of thought into the redesign of this space, which used to be a car garage for Jaguar.

“So it was fancy before we got here!” she says with laughter.

Yes, fancy. The word many long-time Mission residents seem to dislike, as it translates into higher prices and higher rent. According to a recent interview in the San Francisco Chronicle with local business owners, the average commercial rent is now comparable to those in Marina and Cow Hollow neighborhoods.

“The rent is expensive and that's one of the reason why we chose a smaller footprint on Valencia,” says Killoran. “We have commissary kitchen over in Bayview because we knew that we wouldn't be able to afford all the space that we needed in this corridor. But we knew, for the survival of our business and the foot traffic that's available in this neighborhood, that we should be here.”

When I ask her about how she may be contributing to gentrification of the neighborhood, Killoran says businesses like hers shouldn't get the blame. “I am a small business, so I don't think that I'm doing anything wrong. I hire very diverse crew, they are very young. I'm giving job opportunities for young people who are just coming out of college, trying to figure out what they are doing. I'm creating a safe environment for them to work in.”

Her business partner, Werner, actually lives in the Mission, which was another reason to open up on Valencia.

“I wanted to be able to call people by name, for them to know who I am, really have a sense of community,” says Killoran. “And that's how we want to establish. We didn't really want to come in and take over. We really wanted to be part of community. I think we've done that.”

But still, not everyone can afford to have a slice of cake for $7.

“Some of our things are pricey and some of our things are not – and it’s our commitment is to have things of high quality it means that we are going to buy things of high quality,” Killoran explains. “And in San Francisco things are pricey! So, I'm right along with you.”

Who are the target customers for places like Craftsman & Wolves? Perhaps, some of them are the people who are moving into the new apartment buildings on the same block.

“A lot of bartenders from around the neighborhood are coming in and grabbing a coffee and a cookie before they go to work,” says Killoran. Another group of customers are mothers with their small babies who usually come in the afternoon or the late morning.

“And what we've noticed is that it's the businesses around us that come and support us on a daily basis – and we really get to see all the neighbors and the families in the weekends,” Killoran adds.

At the end of our conversation, Killoran says that despite the long working hours and other pressures that come along with owning a business, the struggle is worth it.

“I used to wear suits, three-inch heels, and stockings every day. And now I get to wear jeans and t-shirts every day and clogs. My back doesn't hurt anymore, so that's fantastic,“ says Killoran.

Craftsman & Wolves has gotten high praise from critics in local food magazines and blogs, but it’s yet to be proven whether it will attract stable customers in the long term. In the meantime, it doesn’t hurt for Killoran to keep up her good attitude.