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  • San Francisco Takes One More Step Toward An Almost Complete Ban of New Chain Stores (Formula Retail Stores)

San Francisco Takes One More Step Toward An Almost Complete Ban of New Chain Stores (Formula Retail Stores)

December 04, 2013

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Several pending proposals would further limit the addition of new formula retail (chain store) businesses in San Francisco. Current law considers a retailer to be “formula retail” if it has 11 or more stores in the United States and has consistency in products and merchandising among its stores. To illustrate the political nature of this issue, six members of the Board of Supervisors have each introduced competing versions of a new law that would create further restrictions. One proposal calls for taking into account whether the retailer has 11 or more stores anywhere in the world. Some proposals would treat certain zoning districts different from others. The San Francisco Planning Department will continue to study all these competing proposals until the end of 2013, and as a result has asked the Board of Supervisors to put on hold for now any competing proposals that create disparities among districts. The Planning Department will make a recommendation on the proposals to the Planning Commission most likely in February or March of 2014. So far, the only new adopted controls are formula retail controls affecting properties along Market Street from 6th to Van Ness. This was intended to allow the rapidly improving Mid Market area to be free of new formula retail during its current boom.  At this time, the Department is not considering expanding the formula retail restrictions to downtown C-3 districts, an area which has the greatest density of retail stores, and this is unlikely to change.

The current approach to formula retail is a patchwork quilt of rules prohibiting such stores in certain districts, and requiring conditional use approval through the Planning Commission in others. Some proposals do not ban the use, but create limited use sizes; other proposals regulate formula retail only when it involves certain uses, such as restaurants and pet shops. One very unfortunate result of existing legislation is that businesses founded in the City which are successful enough to open 11 or more stores, even if all are in the City or in the Bay Area, suddenly find themselves unable to grow in their own backyard. Recently, a local pet store whose success led to expansion to more than 11 stores was turned down from opening a new store in the City. Today’s definition of formula retail excludes international stores with less than 11 stores in the U.S., clothiers which have a presence in many department stores but without 11 independent shops, and certain businesses such as gas stations (which are harder and harder to find in San Francisco since they often exist on street corners that are ideal for new housing). Some of these exclusions could be eliminated.

Although San Francisco has approved 75% of formula retail conditional use applications over the last nine years, it is an expensive and lengthy process that discourages many retailers from pursuing a location in these areas. Many believe that the restrictions mean that local non-chain retailers end up being able to charge higher prices than they would if they had more competition. Nonetheless, with a successful local economy for now, that concern does not seem to be on the mind of most San Franciscans. If it is, it may be less important than people’s fondness for our many home grown and eccentric retail stores.

The Planning Department noted that the City has been struggling to define, manage and evaluate formula retail during all of the thirty years since neighborhood commercial districts were created. The City has stated that its goal with these restrictions is to protect the visual character of the City, to prevent larger stores from inhibiting the success of medium and small businesses, and to keep the mix of local to national retailers balanced. However, studies have shown that formula retail businesses provide a broader selection at more affordable prices and also serve as retail anchors in developing areas and thus promote the creation of new stores in such developing areas. Sacramento’s City Council recently eased restrictions on “big box” chain retailers after finding that such restrictions simply meant that these stores were locating outside the city limits, depriving the city of tax revenue and jobs.

For more information, please contact:

M. Brett Gladstone

415-995-5065 Direct Phone
415-995-3517 Fax

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