DNA Lounge: Wherein Codeword will will be closing at the end of July.

I'm sorry to report that, three years after the beginning of this project, and after nearly two years of operation, we are shutting Codeword down. Stick a fork in it, it's done.

To be clear, Codeword is closing, DNA Lounge is not.

So please watch it with those misleading headlines, ok?

Codeword's attached restaurant, the Fifth and Folsom location of DNA Pizza, will also be closing. However, both DNA Lounge and the Eleventh Street location of DNA Pizza remain open.

We have had some really fun events at Codeword, and worked with some great artists and promoters. But even though many of the parties were fun, very few of them made enough money to cover our rent, and those that did were few and far between.

So to all of the artists and promoters who made a go of it there, thank you for all your hard work, and I'm sorry we couldn't figure out how to make the venue succeed.

And to our staff, I'm sorry to have put you all through this. Especially to the restaurant staff, who spent less of their time serving food than they did fighting with angry schizophrenics, trying to keep heroin addicts from using our restrooms as their shooting gallery, mopping the lake of trash and human shit off of the sidewalk, and arguing with whichever meth dealer du jour had decided to do business out of the hotel upstairs. We literally do not pay them enough to put up with the kind of nonsense that came their way every night.

Our landlord has been remarkably understanding and generous during this process. He recently gave us a substantial rent reduction, but even that wasn't enough. We spent more than eight months trying to find someone willing to buy the business and take over our lease, but nobody would take the bait. Our landlord would be totally within his rights to demand our monthly rent until the end of our lease, quite a few years in the future, but we've negotiated an exit: he's letting us out of the lease. That leaves him with an empty building, awaiting the next person to come along, so letting us walk away is pretty huge.

The Fallacy of Sunk Cost is a monster. It's very difficult not to view situations like this with the framing of: "We have invested so much, and if we stop now, we are wasting that money". But the reality is, that money has been spent. It is already gone. The remaining decision is only whether continuing down this path, or down another, has better future potential.

Does the facility we have on hand have a strong enough economic potential that it is better to devote even more resources to it? Or would those same resources be better spent at DNA Lounge?

And those resources are not exclusively financial. It's hard to quantify the brain drain in financial terms. Every hour that I and my managers spend trying to figure out how to improve Codeword is an hour that is not being spent thinking about how to improve DNA, where the potential benefits could be much larger.

There are many theories about what went wrong. I have a few, maybe you have some of your own. One perennial favorite is that the interminable construction project next door made our side of the street invisible, unwalkable and filthy.

There are some arguments for being optimistic about the location, so here are some of the difficult debates we've had with ourselves about why not to close:

The sidewalk is open again, and that has made a great visual improvement. The construction is almost finished, and the condo building next door will soon be full of hundreds of new potential pizza customers. The construction on Moscone will be finished in a year or two, bringing more conference tourism to the neighborhood. So, maybe in a couple of years, this will be a great spot for a restaurant and bar.

But that's a lot of rent to pay in the mean time, waiting for a potential coming Golden Age of Fifth and Folsom.

In the shorter term, with the sidewalk being open, maybe now is the right time to try again to be open for lunch. To do that right, it would be sensible to improve our signage and do a big advertising push, and give it at least a couple of months before deciding whether it's working. Not the cheapest experiment. And far from a sure thing.

We actually just booked a couple of recurring parties that have been doing pretty well. If those parties continue to do as well as they have, and continue to do that well even during the coming slow winter months, then we might be jussssst breaking even.

That is a lot of "ifs", though; and a lot of effort just to claw back up to zero.

So it's my judgment that we are better off cutting our losses and retreating back to the Eleventh Street compound.

As I explained in December, things were looking up at DNA Lounge back in 2014. We were turning business away: we had more people wanting to throw parties than we had nights available, and we were having trouble keeping up with our pizza orders on weekend nights. Opening Codeword to expand our business seemed like a sensible, profitable idea at the time. And it might have turned out to be, had the demand for events stayed that high, or if that corner of the neighborhood wasn't a nightmare. And even with that, it might not have been a fatal disaster if, over those intervening years, Bootie's attendance numbers hadn't gone into free-fall. But it didn't, it was, and they did.

So, while extricating ourselves from the Codeword albatross will certainly help, please don't labor under the illusion that this fixes all of DNA Lounge's problems. It helps, absolutely. But overall, we're still pretty fucked. Getting rid of Codeword staunches the flow, but we're still bleeding out, every damned day.

So, RIP Codeword, but if you want DNA Lounge to continue to exist, please keep contributing to our Patreon, and keep showing up to our events!

In summary: I think we built a pretty nice little club at Codeword. It's too bad that not enough other people agreed.

Thank you all for your support, and I'm sorry.