After reflecting on these past two years, this is what I’ve observed about why restaurants in SF are suffocating.

Astronomical turnover pushes labor costs even higher.

The situation in this industry has created a mercenary frenzy whereby everyone is running around trying to maximize what they’re able to make per hour. According to culinary hiring service Instawork, annual turnover in the restaurant business in San Francisco has reached as high as 90 percent, and operators pay about $3,000 to rehire and train a new hourly employee. For context, the national restaurant industry turnover was a little over 70 percent during the last two years.

When restaurants are desperate for anyone to fill a role and are constantly concerned about losing people, the staff has little incentive to do good work.

From our experience, the associated cost of turnover for an employee who left came in at about $2,600–$3,200. This cost included sourcing a new employee, training them until they were able to be independent contributors and paying any overtime associated with another staff member covering the labor shortage. In total, our business saw a 10 percent increase in labor costs due to turnover alone.

The quality of the labor pool has quickly dwindled.

The mass exodus of individuals from the industry has left fewer people to choose from and fewer reasons for the people remaining to excel. Financial woes make it even harder to focus on one’s job and do good work. Plus, when restaurants are desperate for anyone to fill a role and are constantly concerned about losing people, the staff has little incentive to do good work. This, of course, has a big impact on the quality of service and customers’ experiences. It also means needing more managers to ensure training and quality, and to pick up the pieces.

What was once a celebrated culinary city boasting creativity and innovation is no longer so creative or innovative.

Not surprisingly, the most celebrated new restaurants right now are yet another ramen, pizza or pasta shop. This state of the industry has arguably resulted in the unoriginal “beet and goat-cheese salad” showing up on 5,000+ restaurant menus in the city, a phenomenon brought to light by the San Francisco Business Times. Restaurants are creating simpler and less-inspired food items that don’t require highly trained or talented kitchen cooks to execute.

We, like many others, have suffered from employees with substance-abuse problems, employee theft, and the frequent “no call, no show” occurrences. We had an employee who was terminated for embezzling thousands of dollars to pay for his cocaine debt, only to go on and be rehired into important roles at four other prominent restaurants that each, in turn, fired him for similar offenses. Restaurants are so desperate for talent that no one is going through the proper channels to reference-check or validate a new hire’s performance history.

There’s no organizational headspace in which to think about growth or innovation.

In a people business, your team is the oxygen that allows your business to function and grow. That’s the case for any business in any industry. In tech, where I started and built my career, we understood that well — it’s about not only getting the daily operational work done but also giving enough room to innovate. In the industry’s current state, that isn’t possible.

If the economics are such that you’re trying to keep a small team so that you can do better by them, then you never have any slack to grow beyond the “survival” stage. And the city doesn’t help. Small businesses are highly taxed, with little value offered. When you take note of the extensive tax breaks given to large companies in this city, it gives you pause. The tax code is also incredibly complex and allows the state to disregard certain federal tax benefits available to small businesses. Lastly, the minimum-wage hikes, though necessary to allow people to earn a livable wage, end up being ineffective without holistic programs to address housing and health care.

The service-charge model will work only if all restaurants take part, but everybody is scared of the diners’ wrath.

When it comes down to it, diners today don’t care. Really.

Today’s SF is in love with the idea of “local,” “small business” and “economic diversity.” But few are doing the work to support those ideas. To be fair, the average San Francisco resident has changed. Natives have moved away in droves, and they are the ones who grew up learning to appreciate the role small businesses play in defining SF. These folks have been largely replaced by younger, wide-eyed, high-earning transplants, many of whom don’t understand the history of small businesses in San Francisco and why they’re so integral to the makeup of this special city.

Today’s San Francisco pretends to be a liberal city, but when it comes to having a real impact on people who work in small businesses, the majority are not willing to put their money where their mouth is.

We saw this firsthand impact when we tried the “service charge inclusive” model. Diners were so dismayed by it. We often heard, “Why should I be putting money toward your employees’ health care?” or “How come I no longer have a choice in deciding how I pay tips?” It was always the more affluent who complained, the ones who bought that $200 bottle of wine. This disconnect pained us. The service-charge model will work only if all restaurants take part, but everybody is scared of the diners’ wrath. We know it works because that’s how it works in the rest of the world, but it works only if the whole industry runs that way.