What happened to happy hour in San Francisco

The window got shorter and the discount got smaller

Happy hour used to mean two or three hours of genuinely reduced prices on most of the menu. In San Francisco it now frequently means ninety minutes, bar seating only, on a short list of well drinks and one beer, often ending at six. A $2 or $3 discount off a $19 cocktail is still worth having, but it does not change what an evening costs. Three drinks inside the window plus one after it still lands near $60 with tax and tip.

The cause is not complicated. Rent per square foot in commercial corridors here is among the highest in the country, the city minimum wage runs well above $18 an hour, and the Health Care Security Ordinance obliges employers to spend on health coverage per employee hour. Those costs do not fall between four and six in the afternoon. A discounted drink has to be subsidised by a full-price one later in the night, so the window keeps narrowing toward the moment it stops losing money.

*Includes the $49 monthly membership. Menu prices only, before tax and tip in the San Francisco column, which is where the real gap gets wider. Annual difference: $6,375.

What a cheap drink in San Francisco actually means now

Adjust the definition to the market and the picture clarifies. A $7 beer counts as cheap here. A $12 cocktail counts as a find. Anything under $5 is either a can of domestic lager at a dive, a shot-and-beer special, or an error. The honest ceiling for a drink that most people would call inexpensive sits somewhere around $8 to $12, which is roughly what a full-price drink cost in 2015.

Tipping compounds it. The expected tip has drifted from fifteen percent to twenty, default options on card readers start at twenty-two, and a growing share of bills carry a four to five percent surcharge described as a health mandate or staff benefit line. Those are legitimate costs. They also mean the number on the chalkboard is roughly thirty percent below what leaves the bank account, which is why a $9 happy hour pint turns into $12.

Finding the good windows, by neighborhood

Geography still does most of the work. The Tenderloin and the blocks around Civic Center keep the lowest straight prices in the city, no discount required. SoMa runs the deepest early windows because the trade is office-driven and dies after seven, which makes Monday through Thursday before 6:30 the best value in that district. North Beach and Chinatown hold onto older pricing on beer and shots in rooms that have not been renovated recently.

The Outer Richmond and Outer Sunset are cheaper than the city average simply because the rent out there is lower and the customers are local. The Mission has volume and variety rather than low prices; Valencia Street is a $19-cocktail corridor with exceptions on the side streets. Downtown and the Embarcadero are the worst value, since those rooms price for expense accounts and conference traffic rather than for anyone walking home.

Why the discount model cannot get much better

A bar sells a $19 cocktail containing roughly $4 of liquor, ice, citrus and garnish. The other $15 pays rent, wages, benefits, card processing, insurance, licensing, breakage and the hours when nobody is in the room. Happy hour is an attempt to fill those empty hours by giving back part of the mark-up, which means the discount is capped by the overhead it still has to cover. No amount of shopping around changes the underlying structure.

That ceiling is worth understanding before spending another winter chasing windows. Five weekday coffees, two lunches out, four drinks and one dinner costs about $801 a month in San Francisco at market prices. Happy hour pricing trims the drinks portion by maybe fifteen percent on a good month. The rest of that total is untouched, which is the point of the full cost breakdown.

The structural alternative

The other approach is to stop discounting the mark-up and remove it. IRL charges $49 a month and sells everything at cost plus ten percent: $2 beer, $4 cocktails, $2 drip coffee, $3 lattes. The membership pays the rent and the staff, so the drink only has to cover the drink. There is no window, no bar-seating-only rule and no 6pm cut-off, because nothing on the menu is being sold at a loss to be recouped later.

At those prices the same basket runs about $221 a month, or $270 with membership, which is roughly $531 a month and $6,375 a year less than market. Every city is a waitlist for now, with the first San Francisco room planned for the Inner Sunset. The mechanics are on how it works, and food pricing sits on cheap eats.

Work out your own number

The San Francisco arithmetic is on the cost of going out page, with a calculator on the national version if your habits look nothing like the average.

Start with your neighborhood

A club opens in a neighborhood, not a city. These are the San Francisco neighborhoods we are tracking.