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Where every cent of $1 goes at one L.A. restaurant, explained

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Where every cent of $1 goes at one L.A. restaurant, explained

My industry has always been as difficult as it is magical. In the post-pandemic era, challenges are categorically higher.

The threat to restaurants during the pandemic was obvious; it was a given that many wouldn’t come out the other side. In 2024, restaurants are back! No, restaurants are dying! No, restaurants are (sometimes) busy! It is whiplash, day to day.

For many, including my restaurant, Botanica, solvency is more elusive than ever due to the elevated cost of doing business. Since opening Botanica nearly seven years ago, our labor costs have risen 40% for hourly workers and 25% for salaried management, the result of minimum-wage increases and market-rate pay increases. Our rent has risen 17%. Our sales, on the other hand, have grown only 2.3%.

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Obviously, this creates a near-impossible status quo. In our industry, there are no mechanisms for alleviating costs other than trimming spending on goods and labor.

In other words: There is no way to balance the books without compromising the quality, vision and values that define a business like ours. There are no tax breaks on costly insurance policies or credit card processing fees. And if we were to pass the costs on to our customers, we’d be compromising the vision and values that make us what we are. It’s an absolute conundrum.

Our way of doing business is under threat. From frequent conversations with restaurateur friends (including my co-founders of Regarding Her, a nonprofit focused on female food-industry leaders), I know that what Botanica is navigating at the moment is far from unique.

Botanica co-owner Heather Sperling lean against a wall, holding a glass of wine, at her restaurant

Botanica co-owner Heather Sperling at her restaurant in Silver Lake. For many restaurants, “Solvency is more elusive than ever due to the elevated cost of doing business.”

(Michael Blackshire / Los Angeles Times)

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Why does this matter? Neighborhood-oriented restaurants are vital to communities and economies. They are meaningful gathering spots and dependable local employers. They support numerous other businesses: cleaners, farmers, coffee roasters, winemakers, equipment technicians, etc. They’re small and personal, and thus are approachable and accountable in ways that larger businesses aren’t. They’re often run by owners and managers who care deeply about their people, their neighborhood and their impact — even more than they care about their bottom line.

I know this because Emily Fiffer (Botanica’s co-owner) and I are among these people. And, moreover, we’re friends with dozens of like-minded owners across L.A. and beyond.

Eating at a place like Botanica might feel indulgent. Dishes on the spring menu range in price from $14 for marinated bean toast $36 for Baja striped bass. But from our perspective, the purpose of our business is not just to provide a nice evening of beautifully prepared, local, sustainable produce and natural wine. Our goal is to run a business with the most positive possible impact on our community, economy and environment — a business that embodies what we call “nourishing hospitality.”

There’s an economic concept called “the multiplier effect,” which describes how the effect of spending is greater than the original money spent. While every dollar you spend ripples through the economy in some way, restaurants surely must provide among the best bang for your buck, so to speak.

So one day I sat down to try to calculate exactly how this works with our model, and I landed on a startling figure.

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Of every $1 spent by a customer at Botanica in 2023, $1.005 went back out the door.

Of that, 86.7 cents went toward “the good stuff” — meaning people, businesses and causes that it feels good to be supporting; 53.2 cents pays for the livelihoods of 50 staff members (including insurance, benefits and hefty payroll taxes); 26.2 cents buys products from a sensational web of farmers, purveyors and makers doing ethical, sustainability-focused work, who themselves employ countless passionate individuals; and 7.3 cents pays for a cadre of small businesses in supporting roles: our cleaning crew, florist, laundry services, a cavalcade of local equipment repair people, the family-run supplier of our recyclable and compostable to-go and market packaging, and so on.

A spread of food on a wooden table.

Two diners share a spread during tinned-fish happy hour at Botanica restaurant in Silver Lake.

(Michael Blackshire / Los Angeles Times)

The colorful tinned fish boxes at Botanica restaurant's marketplace.

The tinned fish display at Botanica. The restaurant also has a market stocked with house-made goods and products from local, largely women-owned businesses.

(Michael Blackshire / Los Angeles Times)

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And then 13.8 cents goes to occupancy costs (rent, utilities and trash/recycling/compost pickup); administrative costs (office supplies, our accountant, various apps and tools essential to operations, phone and internet, etc.); and the cost of credit card processing — 3.1 cents I really wish we could spend elsewhere!

The national average profit margin for independent restaurants is regularly cited to be in the zone of 3% to 5% (sometimes higher, often lower). This profit is necessary for retaining staff (raises), reinvesting in infrastructure (endless property and equipment repairs), navigating snafus (a power outage can result in thousands of dollars in losses), and repaying the investors, often friends and family, who funded the venture in the first place.

Botanica closed out 2023 with a 1.19% profit — but not from restaurant operations; those were just slightly less than break-even. Our revenue was boosted by a handful of commercial photo shoots held at the restaurant on days when we were closed.

Granted, Botanica is a more labor-heavy model than many in our cohort. We are open for breakfast, lunch and dinner; we have a robust coffee/tea/bakery program, and the front of our space is a market stocked with natural wine, house-made goods and products from local, largely women-owned businesses. These are laborious undertakings that require substantially more staff (with specialized training, no less) than a dinner-only joint. But these elements of our business, costly as they may be, are the ones that make us an especially useful, multifaceted neighborhood spot.

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Co-owner Heather Sperling chats with two diners at Botanica in Los Angeles.

Botanica is open for breakfast, lunch and dinner. Sperling drops by a table to chat with customers Zal Batmanglij, center, and Blake Holland, right.

(Michael Blackshire / Los Angeles Times)

All this is to say that a restaurant like Botanica — like so many other independent, owner-operated neighborhood restaurants across the country — exists, first and foremost, to nourish its people. Hospitality is innately altruistic, and the neighborhood restaurant is especially, preciously, precariously so.

I don’t have any grand solutions to propose, though I do believe that low-margin, financially uncertain businesses like ours will need structural support to continue to exist. That 3.11% of revenue that goes to credit card processing fees ($98,725 last year, paid to our point-of-sale system, Toast) would be a transformational addition to our bottom line. And I’d vastly prefer to reinvest some of the 4.89% that went to payroll taxes ($155,000 in 2023) into our team.

In the absence of legislated solutions, it comes down to the diners. Nearly 20 years ago, right as I was starting out in the food world, Michael Pollan introduced the concept of “voting with your fork” via his seminal book “The Omnivore’s Dilemma”; it’s his way of succinctly expressing the importance and power that your daily food choices can have.

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A selection of wines on display at Botanica in Silver Lake.

Botanica’s marketplace also sells natural wines, along with its selection of house-made goods and local products.

(Michael Blackshire / Los Angeles Times)

A waiter behind a counter, reaching for a straw to put in a drink he is holding.

A server prepares a drink at Botanica. Co-owner Sperling says that since opening the restaurant almost seven years ago, labor costs have risen 40% for hourly workers and 25% for salaried management.

(Michael Blackshire / Los Angeles Times)

I’ve been trying to come up with a corollary that relates to the restaurant world — “dining with your values” doesn’t have the same ring to it; my suggestion box is wide open! — as a way to convey what it means to support restaurants not just for the creative/buzzy/exciting food they serve but for the broader philosophy that informs their work and exponentially impacts their small corners of the world.

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Because for us to keep doing what we do, we need your support — and your understanding of the positive ripple effect that your support has. I hope this encourages you to feel good about your next brunch/dinner/coffee/cocktail outing at a thoughtful, community-minded restaurant near you.

It means more than you may know.

Heather Sperling is the co-founder and co-owner of Botanica, a restaurant and market in Silver Lake, Los Angeles.

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After a pandemic strike, nurses union must pay Riverside hospital millions in damages

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After a pandemic strike, nurses union must pay Riverside hospital millions in damages

The union representing nurses at Riverside Community Hospital has been ordered to pay more than $6 million to the hospital for the fallout from a 2020 strike.

The unusual financial penalty was imposed by an arbitrator who found the 10-day work stoppage during the pandemic violated the terms of the labor agreement signed by HCA Healthcare, which operates the hospital, and Service Employees International Union Local 121RN. The $6.26-million fine, the arbitrator determined, was necessary to compensate the hospital for the cost of replacing workers who walked off the job during the strike, according to a statement released Wednesday.

Nurses walked off the job in June 2020 in an effort to force the hospital to increase staffing and improve safety as COVID-19 infections surged, the union said at the time. But hospital officials argued that because nurses also voiced complaints about shortages of personal protective equipment, the reasons for the strike were too expansive to be allowed under the collective bargaining agreement the two sides had signed.

“Our contract was clear, and the union showed reckless disregard for its members and the Riverside community by calling the strike,” said Jackie Van Blaricum, president of HCA Healthcare’s Far West Division, who was the hospital’s chief executive during the strike. “We applaud the arbitrator’s decision.”

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SEIU 121RN Executive Director Rosanna Mendez objected to the arbitrator’s findings, saying nurses were permitted under their contract to go on strike. She called the arbitrator’s decision “absurd and outrageous.”

“It is absolutely shocking that an arbitrator would expect nurses to not talk about safety issues,” Mendez said, adding that the union was exploring its options to contest the arbitrator’s decision.

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Supreme Court rejects California man's attempt to trademark Trump T-shirts

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Supreme Court rejects California man's attempt to trademark Trump T-shirts

The Supreme Court on Thursday turned down a California attorney’s bid to trademark the phrase “Trump Too Small” for his exclusive use on T-shirts.

The justices said trademark law forbids the use of a living person’s name, including former President Trump.

The vote was 9-0.

Trump was not a party to the case of Vidal vs. Elster, but in the past he objected when businesses and others tried to make use of his name.

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Concord, Calif., attorney Steve Elster said he was amused in 2016 when Republican presidential candidates exchanged comments about the size of Trump’s hands during a debate. Florida Sen. Marco Rubio, whom Trump had mocked as “Little Marco,” asked Trump to hold up his hands, which he did. “You know what they say about guys with small hands,” Rubio said.

After Trump won the election, Elster decided to sell T-shirts with the phrase “Trump Too Small,” which he said was meant to criticize Trump’s lack of accomplishments on civil rights, the environment and other issues.

Legally he was free to do so, but the U.S. Patent and Copyright Office denied his request to trademark the phrase for his exclusive use.

When he appealed the denial, he won a ruling from a federal appeals court which said his “Trump Too Small” slogan was political commentary protected by the 1st Amendment.

The Biden administration’s Solicitor Gen. Elizabeth Prelogar appealed and urged the Supreme Court to reject the trademark request.

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She acknowledged that Elster had a free-speech right to mock the former president, but argued he did not have the right to “assert property rights in another person’s name.”

“For more than 75 years, Congress has directed the U.S. Patent and Trademark Office to refuse the registration of trademarks that use the name of a particular living individual without his written consent,” she said.

Writing for the court, Justice Clarence Thomas said Thursday: “Elster contends that this prohibition violates his 1st Amendment right to free speech. We hold that it does not,”

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Elon Musk blasts Apple's OpenAI deal over alleged privacy issues. Does he have a point?

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Elon Musk blasts Apple's OpenAI deal over alleged privacy issues. Does he have a point?

When Apple holds its annual Worldwide Developers Conference, its software announcements typically elicit cheers and excitement from tech enthusiasts.

But there was one notable exception this year — Elon Musk.

The Tesla and SpaceX chief executive threatened to ban all Apple devices from his companies, alleging a new partnership between Apple and Microsoft-backed startup OpenAI could pose security risks. As part of its new operating system update, Apple said users who ask Siri a question could opt in for Siri to pull additional information from ChatGPT.

“Apple has no clue what’s actually going on once they hand your data over to OpenAI,” Musk wrote on X. “They’re selling you down the river.”

The partnership allows Siri to ask iPhone, Mac and iPad users if the digital assistant can surface answers from OpenAI’s ChatGPT to help address a question. The new feature, which will be available on certain Apple devices, is part of the company’s operating system update due later this year.

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“If Apple integrates OpenAI at the OS level, then Apple devices will be banned at my companies,” Musk wrote on X. “That is an unacceptable security violation.”

Representatives for Musk and Apple did not respond to a request for comment.

In a keynote presentation at its developers conference on Monday, Apple said ChatGPT would be free for iPhone, Mac and iPad users. Under the partnership, Apple device users would not need to set up a ChatGPT account to use it with Siri.

“Privacy protections are built in for users who access ChatGPT — their IP addresses are obscured, and OpenAI won’t store requests,” Apple said on its website. “ChatGPT’s data-use policies apply for users who choose to connect their account.”

Many of Apple’s AI models and features, which the company collectively calls “Apple Intelligence,” run on the device itself, but some inquiries will require information to be sent through the cloud. Apple said that data is not stored or made accessible to Apple and that independent experts can inspect the code that runs on the servers to verify this.

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Apple Intelligence will be available for certain models of Apple devices, such as the iPhone 15 Pro and iPhone 15 Pro Max and iPad and Mac with M1 and later.

So does Musk have a point? Technology and security experts who spoke to The Times offered mixed opinions.

Some pushed back on Musk’s assertion that Apple’s OpenAI deal poses security risks, citing a lack of evidence.

“Like a lot of things that Elon Musk says, it’s not based upon any kind of technical reality now, it’s really just based upon his political beliefs,” said Alex Stamos, chief trust officer at Mountain View, Calif.-based cybersecurity company SentinelOne. “There’s no real factual basis for what he said.”

Stamos, who is also a computer science lecturer at Stanford University and a former chief security officer at Facebook, said he was impressed with Apple’s data protection efforts, adding, “They’re promising a level of transparency that nobody’s really ever provided.

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“It’s hard to totally prove at this point, but what they’ve laid out is about the best you could do to provide this level of AI services running on people’s private data while protecting their privacy,” Stamos said.

“To do the things that people have become accustomed to from ChatGPT, you just can’t do that on phones yet,” Stamos added. “We’re years away from being able to run those kinds of models on something that fits in your pocket and doesn’t burn a hole in your jeans from the amount of power it burns.”

Musk has been critical of OpenAI. He sued the company in February for breach of contract and fiduciary duty, alleging it had shifted its focus from an agreement to develop artificial general intelligence “for the benefit of humanity, not for a for-profit company seeking to maximize shareholder profits.” On Tuesday, Musk, who was a co-founder of and investor in OpenAI, withdrew his lawsuit. Musk’s San Francisco company, xAI, is a competitor to OpenAI in the fast-growing field of artificial intelligence.

Musk has taken aim at Apple in the past, calling it a “Tesla graveyard,” because, according to him, Apple had hired people that Tesla had fired. “If you don’t make it at Tesla, you go work at Apple,” Musk said in an interview with German newspaper Handelsblatt in 2015. “I’m not kidding.”

Still, Rayid Ghani, a machine learning and public policy professor at Carnegie Mellon University, said that, at a high level, he thinks the concerns Musk raised about the OpenAI-Apple partnership should be raised.

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While Apple said that OpenAI is not storing Siri requests, “I don’t think we should just take that at face value,” Ghani said. “I think we need to ask for evidence of that. How does Apple ensure that processes are there in place? What is the recourse if it doesn’t happen? Who’s liable, Apple or OpenAI, and how do we deal with issues?”

Some industry observers also have raised questions about the option for Apple users who have a ChatGPT account to link it with their iPhone, and what information is collected by OpenAI in that case.

“We have to be careful with that one — linking your account on your mobile phone is a big deal,” said Pam Dixon, executive director of the World Privacy Forum. “I personally would not link until there is a lot more clarity about what happens to the data.”

OpenAI pointed to a statement on its website that says, “Users can also choose to connect their ChatGPT account, which means their data preferences will apply under ChatGPT’s policies.” The company declined further comment.

Under OpenAI’s privacy policy, the company says it collects personal information that is included in the input, file uploads or feedback when account holders use its service. ChatGPT has a way for users to opt out of having their inquiries used to train AI models.

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As the use of AI becomes more entwined with people’s lives, industry observers say that it will be crucial to provide transparency for customers and test the trustworthiness of the AI tools.

“We’re going to have to understand something about AI. It’s going to be a lot like plumbing. It’s going to be built into our devices and our lives everywhere,” Dixon said. “The AI is going to have to be trustworthy and we’re going to need to be able to test that trustworthiness.”

Night Archiving Supervisor Valerie Hood contributed to this report.

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