Neighborhood Pride Prompts Effort to Limit Chain Stores

For years, Starbucks, Rite Aid, Walgreens and other corporate chains have felt the wrath of residents determined to freeze them out and protect the home-grown charm of this city’s diverse neighborhoods.

Now San Franciscans have translated that passion into policy. Late last month, the Board of Supervisors passed an ordinance restricting so-called formula retail stores from opening their doors here.

The measure, which has not yet been signed by the mayor but has enough support to override his potential veto, bans chains with more than 11 outlets and a standardized look from opening in the trendy-chic enclave of Hayes Valley.

It places tight restrictions on any chain store hoping to move into Cole Valley -- where residents and merchants recently fought a losing battle to keep out Walgreens after learning of its lease too late. And it requires all chain stores to notify neighbors of plans to open in any of the city’s designated Neighborhood Commercial Districts.

The ordinance leaves untouched plenty of areas that are purely commercial -- including the Financial District, upscale Union Square and the tourist haven of Fisherman’s Wharf. Proponents call it a necessary step to prevent the bejeweled city from turning into a replica of such cities as Phoenix, where identical chain stores are scattered across town.

“People come to San Francisco [because] it’s a city of neighborhoods,” said Paul Lord, a senior planner with the city who helped draft the legislation. “Chinatown doesn’t look like the Mission, which doesn’t look like North Beach.”

Corporate chains often pay higher rents and undercut the local independent store owner on pricing, eventually driving out smaller businesses along with their vendors and suppliers, supporters of the ordinance add. Once a neighborhood turns, they say, there’s no going back.

But critics say the ordinance sends a dangerous message -- at a time of record budget deficits and stinging unemployment -- that liberal San Francisco is not business friendly. It comes on the heels of a citywide minimum wage hike approved by voters last fall.

“It’s ideology over practicality,” said San Francisco Chamber of Commerce President Lee Blitch. “The answer to our budget crisis is to create more jobs.... Not only is it hurting on tax revenues, it’s also hurting on the cost side because the Planning Department is going to have to add people to process all these things.”

Besides, Blitch adds, “if a neighborhood doesn’t want a certain type of store, they won’t shop there. So why are we legislating that? Competition brings lower prices for the consumer and more jobs.”

As chain stores spread across cities small and large, however, they are meeting increasing resistance.

From Coronado, Calif., to Bristol, R.I., more and more towns have passed or are considering similar restrictions, said Stacy Finch, senior researcher with the Minneapolis-based Institute for Local Self-Reliance and author of “The Hometown Advantage: How to Defend Your Main Street Against Chain Stores and Why It Matters.”

The ordinances -- San Francisco’s included -- don’t ban the stores outright, but saddle them with restrictions. For example, the San Francisco ordinance defines formula retail stores as having more than 11 outlets and meeting two of any of the following criteria: standardized merchandise, a standardized facade or decor and color scheme, uniforms, standardized signage or a trademark or service mark.

Because the chains could arguably ditch their defining look and offerings and open a distinct store, legal challenges to the measures have been unsuccessful, Finch said. Coronado’s ordinance, for example, was upheld by a state appellate court last year.

“It’s an interesting way of -- as a community -- saying, ‘If you really want to be here, then these are the standards you have to meet. If you don’t meet them, then fine, we didn’t want you anyway,’ ” Finch said.

The fight is not new for San Francisco, where lawmakers have been trying to control the influx of chain stores since the 1970s, albeit less directly, said Lord, the city planner. An ordinance that took effect in 2001 requires businesses that are expanding in size or planning a change of use for a targeted location to notify neighbors and give them a chance to speak out.

But if a store changes hands within a broad retail category, no notification is required. That has helped Starbucks and others enter some neighborhoods without opponents’ knowledge. Last year, Board of Supervisors President Matt Gonzalez pushed another ordinance specifically requiring coffee shops and pharmacies to give neighborhoods notice.

But Hayes Valley residents wanted more. Nestled west of San Francisco’s civic center and opera house, the neighborhood has been transformed over the past decade from a blighted hollow to a strip of one-of-a-kind boutiques with a bohemian flair (for example, an organic nail salon and designer clothing boutique rolled into one). Here, shopkeepers and restaurateurs say they have invested sweat equity when chain stores wouldn’t have looked twice.

Leigh Stackpole moved her Gimme Shoes into the neighborhood 12 years ago. Sporting two-toned hair and a T-Shirt that reads “Touch Me, I’m Sick,” she recently rattled off the benefits of her business while lunching in a community garden behind a locally owned cafe.

Stackpole employs a neighborhood graphic designer, as well as an accountant and lawyer up the block -- all longtime shoe customers. Merchants throughout the neighborhood know her 12-year-old son and keep a protective eye on him when he plays outside. She has three San Francisco locations, each a little different to match neighborhood needs. (Proponents of the ordinance note that fewer than 1% of businesses in San Francisco have more than five locations.)

Last year, Stackpole and others accidentally learned from a local real estate agent that Starbucks had its eye on an empty storefront. The Hayes Valley Neighborhood Assn. kicked into action. At community meetings, sentiment ran solidly in favor of a ban, said Vice President Ed Bedard.

“When you bring in a chain store and break the interconnectedness of the local economy, it really harms the area,” Bedard said. “It’s not worth the Frappuccino to put the local accountant out of business.”

A loud and long campaign dissuaded Starbucks. But residents and merchants were exhausted.

“We spent hundreds of hours mobilizing,” said Stackpole, who along with her business partner selects the store’s designer shoes in Italy, Paris and New York. “This ordinance protects us.”

The neighborhood turned to Gonzalez -- who represents both Hayes and Cole valleys -- to sponsor the new restrictions.

Since sentiment ran so strong in Hayes Valley, its four-block commercial district received a chain-store ban. A few miles away, in Cole Valley, feelings were somewhat shy of unanimous, so two commercial strips there got a lesser restriction: The stores must obtain conditional use permits, a lengthy and often costly process that places the onus on them to prove they belong.

Starbucks officials have said they were willing to work around any new restrictions and would not be deterred. They note that smaller chains might fare worse. Some critics of the policy point out that the Gap began as one storefront in the city and would have been hampered by this ordinance, but proponents argue that there still is plenty of room for expansion for a store like the Gap, just not in every neighborhood.

The ordinance leaves open the possibility that other neighborhoods could seek similar restrictions in the future. To some, the notion is appalling.

“The legislation before us is not fair,” Supervisor Fiona Ma told her colleagues last Tuesday, before the board voted, 8 to 3, to support it on a second and final reading. “It creates advantages for some businesses in some neighborhoods and penalizes others.”

Steve Sarver agrees. He and his wife opened the San Francisco Soup Co. five years ago and now have six outlets with, yes, standardized decor and uniforms. Three more are set to open -- at San Francisco International Airport and in Palo Alto.

With plans to open three new outlets annually, Sarver said, he may soon hit the magic dozen that would label him formula retail.

“It seems un-American,” said Sarver, who has not considered either Hayes Valley or Cole Valley but is concerned that the restrictions will spread throughout the city and possibly to Berkeley and Palo Alto. “It’s anti-competitive. It should be unconstitutional.”

But Stackpole suggests that Sarver is thinking too narrowly. If he proposed an outlet with a special look, feel and menu to fit the neighborhood, he could fly right under the radar of the new rules.

“He could come to us and say, ‘I’d like to fit in,’ she said. “Maybe he could open a Hayes Valley Soup Co.”