Entrepreneurs in San Francisco face notoriously high regulatory hurdles to get their businesses off the ground. It is the most complex city we studied: Layers of onerous zoning review and permitting requirements present serious challenges. On top of this, California Environmental Quality Act (CEQA) regulations require many projects to undergo environmental review. While the model businesses in this study would be exempt from CEQA, other ventures that require, for example, the construction of new buildings would likely not be exempt. It is also difficult and time-intensive to properly determine if a business would be subject to environmental review. On the other hand, San Francisco has useful agency websites with comprehensive starter kits for common business types such as restaurants and food trucks.
In San Francisco, the cost, delays, and complexity imposed by the regulatory process for small businesses make it difficult—or even impossible—for entrepreneurs to start the ventures of their dreams and pursue their passions.
It is more expensive to start a business in San Francisco than in any of the other cities we studied. Environmental reviews and exemptions are the single most expensive part of starting a business, but they are not the only hurdle facing entrepreneurs, as the city piles on additional regulatory burdens. For example, building permits required to open a restaurant cost $7,600 in review fees and $2,423 in issuance fees, contributing to the total price tag of $22,648 facing would-be restaurateurs.
The environmental review process can take a very long time and delay the start-up process, due to its numerous veto points and opportunities for public input. Restaurants must also go through 61 steps to get started in San Francisco, further delaying entrepreneurs from opening their doors.
Useful city agency websites have comprehensive starter kits for common business types, earning the city a four out of five on the one-stop shop analysis. These are comprehensive and generally include all applicable requirements, but some city agencies such as the Department of Building Inspection still operate on older, difficult to use sites, creating more layers of complexity when parsing out requirements.
Starting a Business in San Francisco: By the Numbers
We calculated this metric by totaling the fees for all the licenses, permits, and registrations each business needs to get started.
Number of Fees
We calculated this metric by counting how many fees governments impose on each business for completing registrations and paperwork.
We calculated this metric by totaling the number of agencies entrepreneurs must work with in order to get up and running—whether in the form of submitting paperwork to an agency’s staff, or in terms of abiding by regulations that an agency has promulgated.
We calculated this metric by counting the number of compliance activities each entrepreneur needs to complete in person, rather than online or by mail.
Number of Forms
We calculated this metric by counting the various forms and applications each business needs to submit
Number of Steps
We calculated this metric by totaling the discrete tasks an entrepreneur must complete to start each of the business types.
Late payments for business licenses incur a fee that increases every 30 days. The amount increases by 10% of the license fee after 30 days, 15% after 60 days, and 25% after 90 days.
Occupations that lend themselves to entry-level work face additional restrictions. Home-based businesses cannot see clients at home, making whole categories of home-based businesses—including our model home tutoring business—impossible to run. With food trucks, any member of the public can object to the issuance of a food truck license during a 30-day public comment period, triggering a public hearing that can significantly delay food truck owners from getting down to business.
Accommodations for New or Small Businesses
Fees for registering a business are prorated so that applicants don’t have to pay for a full year if they get licensed later in the year.
The business registration fee is based on a business’ gross receipts, accommodating new and small businesses with a lower fee compared to more established businesses with higher revenues.
Officials and policymakers have the opportunity to make it cheaper, faster, and simpler to start a business in San Francisco. City officials should:
Lower fees for permits and licenses.
Continue to strengthen the SF Business Portal and further its mission of being a true one-stop shop for all business needs. This means consolidating much of the requirements from other agencies, such as the buildings department, into the portal. Entrepreneurs should be able to calculate all their building permit needs and costs through the business portal.
Simplify the business licensing process by reducing the number of business license categories.
Publish clear guidelines that can tell an aspiring business owner if they are exempted from environmental review, while continuing to work with state lawmakers to exempt more projects from CEQA review altogether.
Remove barriers to occupations that lend themselves to starting small. Remove the objection power of the public over food trucks. No other city we studied offers the public veto power over a business in such a direct manner. The public hearing process creates unnecessary delays for entrepreneurs. Also, allow customer visits for home-based businesses.
Sign up to receive IJ's biweekly digital magazine, Liberty & Law, along with breaking updates about our fight to protect the rights of all Americans.