City seeks operators for two cafes in center of Union Square in San Francisco

San Francisco officials have invited proposals for the lease of two cafes in Union Square, which had a monthly gross revenue of more than $250,000.

The Parks and Recreations Department of the city is seeking bids for either one or both concession and storage areas, which are approximately 2,000 square foot, to be operated for a period of three to fifteen years. The city will accept proposals until 9 June at 3 pm (more information is available on the department website).

The city will choose the highest option. This could be a monthly minimum guarantee or a percentage of the rent.

On April 25, starting at 10 am (meeting will be held at the Westin St. Francis Hotel located at 335 Powell St.), and May 8, at 2 pm, two pre-submission meetings and site tours will take place. Questions about the leasing opportunity must be submitted by May 24.

The city requires that applicants have "sufficient financial capability to execute the proposed proposal" and at least three-years of experience in management for their concession. In its description of the opportunity, the city makes it clear that it prefers a single lease with one "master" tenant for both spaces -- referred to as the East and West Complexes -- although it is open for proposals to subdivide the space or to give it to other lessees.

The Recreation and Parks Department also mentions that any lease proposal of over five years should "preferably include significant capital investments to the property."

East Cafe and Store Complex (currently closed) is located adjacent to Stockton Street, near the intersection of Post Street. The East Cafe and Store Complex is not a kitchen but it has a license to sell alcohol.

Two outdoor seating areas, directly in front and next to the cafe, can accommodate 70 people.

The West Complex store and cafe is located near Powell Street, and it is licensed separately to sell alcohol. The building, which has approximately 930 square foot of space indoors, could be reconfigured so that it provides indoor seating. The veranda outside, which is 600 square feet in size, can seat about 34 people.

Emporio Rulli's occupied the spaces from 2014 to 2019. They paid rent at a rate of 8% of gross sales, or just under $23,000 a month.

McCalls Catering & Events was the latest tenant. They had a month to month lease. The rent was 6% of gross sales (up to $250,000.) After that, it increased to 8%. The RFP did not specify a base rent figure.

The city provided historical revenue figures for the combined café spaces between 2014-2019 (operating hours are inconsistent during the pandemic beginning in 2020). In 2014, the combined spaces had gross receipts exceeding $2.9 million. In the years following, receipts ranged between $2.4 and $2 million. The cafes reported just under $2.3 million in revenue in 2019.

The final lessee of the cafe space would be responsible to repair and tenant improvements. These must be approved and completed in 180 days from the date of lease signing. They are also required to maintain minimum insurance coverage. At lease signing, a $50,000 security deposit will also be required.

With the assistance of the city, the liquor licenses for the two complexes could be obtained at a discounted rate (they can cost a lot depending on the market). The transfer of these licenses would be purchased by the new operator from McCall's, their current owner.

The Board of Supervisors will need to approve a new lease if it exceeds ten years or the total rent is more than $1 million.