Posted by Nasser Coutinho.
The closure of the McDonalds on Front Street in downtown San Francisco signifies more than just the shutdown of a fast food outlet. It serves as a testament to the transformations occurring in urban areas following the COVID-19 pandemic. Having been in operation for thirty years, this establishment ultimately fell victim to the shifts within its surroundings. According to Scott Rodrick, from Rodrick Management Group “The economics of running a franchised restaurant in San Francisco continue to be a challenge” due to the high vacancy rates of downtown office buildings and the slow resurgence of tourism (Aitken, 2023). It’s clear from the article that the closure was not a matter of if, but when, as the “level of vibrancy” necessary to sustain such businesses has diminished since the pandemic (Aitken, 2023).
In a city once teeming with office workers and tourists, the quieted streets and empty offices have created an unsustainable situation for businesses that thrived on foot traffic. The decision to close was likened to a “gut punch” by Rodrick, a sentiment that underscores the distress many business owners feel as they navigate the post-pandemic economy (Aitken, 2023). The shift in the commercial real estate market is palpable, with properties changing hands at “steep discount” and a “full-on buyer’s market” emerging, revealing the extent of the economic downturn in these urban areas (Aitken, 2023).
The new wage law in California, which aims to increase the minimum wage for fast food workers to $20 by April 2024, is posing challenges for businesses like McDonalds. Chris Kempczinski, the CEO of McDonalds has voiced his concerns about the impact this will have on franchisee operations. “there will certainly be a hit in the short term to franchisee cash flow in California” (Aitken, 2023). These ongoing difficulties demonstrate the equilibrium between guaranteeing wages for employees and upholding a thriving business atmosphere in cities such as San Francisco, where the past vitality of the economy appears to be fading further away.
Nasser is a business student at the Stillman School of Business, Seton Hall University, Class of 2025.