Limits on chain stores much more broadly popular than a decade ago 

click to enlarge Proposals to curtail chain stores in The City are becoming increasingly popular. Hayes Valley shops are primarily small businesses, and some would like that to become more widespread. - MIKE KOOZMIN/THE S.F. EXAMINER
  • Mike Koozmin/The S.F. Examiner
  • Proposals to curtail chain stores in The City are becoming increasingly popular. Hayes Valley shops are primarily small businesses, and some would like that to become more widespread.

Shoppers walking along the pleasant streets of Hayes Valley can enter a wide range of boutiques and trendy restaurants and bars. But there's one thing they generally can't find there: chain stores and restaurants.

Since 2004, San Francisco has banned such so-called "formula retail" stores in that neighborhood. But now, months after a European-based chain managed to move into Hayes Valley without scrutiny, a fight over this issue is coming to a head.

Several existing or proposed new chain outlets are prompting renewed questions about where such stores should be regulated and how to give city residents a say in what stores open in their neighborhoods. The bitterest of battles, though, revolves around how City Hall will define a business as being formula retail.

Among large cities, San Francisco has been at the forefront of such controls for many years. But today their expansion appears to be much more broadly popular among members of the Board of Supervisors than was once the case.

Instituting Controls

In 2004, the Board of Supervisors passed legislation banning such businesses in the Hayes-Gough commercial district while imposing limits elsewhere. The legislation defined formula retail as chain businesses with 11 or more U.S. locations.

In 2006, the ban was expanded to North Beach, and supervisors had by then designated several neighborhoods in which chain businesses could not be approved without obtaining a conditional-use permit. That process requires approval at a hearing before The City's Planning Commission. Later that year, the voter-approved Proposition G mandated conditional-use permits for chain retailers in any of The City's neighborhood commercial districts — primarily areas containing retail zones within prominently residential areas. No one prominent in San Francisco has yet advocated for the expansion of such controls to commercial districts such as Union Square or the Financial District.

Throughout this period, support for this movement came from political progressives. Supervisors Matt Gonzalez, Chris Daly and Tom Ammiano sponsored the 2004 legislation, and they and their progressive allies Aaron Peskin, Gerardo Sandoval and Ross Mirkarimi voted to put Prop. G on the ballot.

Moderate supervisors Sean Elsbernd and Michela Alioto-Pier opposed the initiative. In a written ballot argument, they described the measure as "a wolf in a sheep's disguise" that "stifles small business development and further burdens the desires of neighborhoods demanding economic growth." Business interests such as the San Francisco Association of Realtors and the San Francisco Chamber of Commerce funded ballot arguments against the measure, with the former arguing that "Proposition G will make it impossible for popular neighborhood-serving businesses to locate in any of San Francisco's neighborhood commercial districts."

A Push For More

But nine years after these controls were first put into place, a broad range of observers agree that they have worked in striking a balance. In fact, 70 of the 93 chain businesses proposed since 2004 have been approved, according to Planning Department statistics. The commission rejected 11 and the final 12 applications were withdrawn.

More to the point, six of San Francisco's 11 supervisors — including moderates London Breed, Mark Farrell and Scott Wiener — have either introduced successful legislation or proposed ordinances that would bring the controls to new neighborhoods or define more businesses as chain stores. Some of these proposals are noncontroversial, such as moderate Supervisor Malia Cohen's push to include stretches of Third Street in the Bayview.

"This legislation fills in gaps in zoning along our commercial corridor to ensure that residents and merchants have a say in any proposed formula retail development for their neighborhood," Cohen said of her proposal.

Slightly more controversial is expansion to the mid-Market Street area. Supervisor Jane Kim's legislation, which was tentatively approved by the Board of Supervisors in late July, would require conditional-use permits for chain stores on Market Street between Sixth Street and Van Ness Avenue. Critics say this stretch is already too commercial for such controls, but Kim says the burgeoning neighborhood should have a say regarding its future.

The Coming Battle

The most controversial upcoming fight involves whether to ensnare more businesses in the formula retail net. Supervisors Breed, Farrell and Eric Mar have proposed ways to redefine the term. Farrell introduced neighborhood-specific legislation for Upper Fillmore Street that would expand the definition to stores that are 50 percent or more owned by a chain retailer. Breed incorporated that proposal into broader Hayes Valley legislation that also would expand the definition to stores with 11 or more stores worldwide. Mar's legislation expands upon Breed's proposal by instituting such controls citywide. And his proposal, which is still being refined, also would include businesses like gyms and gas stations that currently are exempt from the stricter oversight.

The proposal to count global locations when determining whether a business is a chain store seems to have garnered near-universal support in City Hall. The suggestion to include businesses that are only partially chain-owned has not.

Proponents of this expansion note that major chains doing business under new names — such as clothing powerhouse Gap Inc. and its catalog retail brand Athleta — have used other names and opened stores, bypassing the conditional-use process. They complain that because these stores have the backing of large companies, they are more able to afford higher rents than small, locally owned stores.

But San Francisco Chamber of Commerce President Bob Linscheid counters that such stores often offer wares that smaller retailers do not. He believes The City should welcome larger companies seeking to create innovative new pilot stores.

Meanwhile, Planning Department Director John Rahaim has expressed concerns about basing land-use decisions on factors unrelated to the relationship between a property and the business proposed for it.

"I think it is a very dangerous precedent to set to start basing land-use decisions on ownership," Rahaim said.

Despite a plea from Rahaim's department for the supporters of these proposals to pause while his agency completes a study on the benefits or pitfalls of formula retail controls, supervisors seem to be pressing ahead. Many cited pending proposed businesses that residents of their supervisorial districts want to be able to influence.

The battle will resume after the supervisors return from their summer break.

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Tuesday, Dec 6, 2016

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