When Berkeley-based purveyor of iced treats CREAM opened shop on 16th Street this past August, we witnessed the usual comments about people waiting in lines along with the requisite politician photo-oping a ribbon cutting in support of a “great Bay Area business.” What we didn’t see was any discussion of the latest trend hitting San Francisco: chain stores finding yet another way around the city’s formula retail laws.
CREAM, which currently has eight locations with a ninth on the way, is by any common-sense definition a chain. Its eight locations feature “a standardized array of merchandise, a standardized facade, a standardized decor and color scheme, a uniform apparel, standardized signage, a trademark or a servicemark”— defining characteristics of formula retail according to the San Francisco Planning Department. What CREAM did not feature, at the time, was “eleven or more other retail sales establishments located in the United States.”
Falling just under the eleven store threshold allowed the franchise to expand to 16th Street. And make no mistake: CREAM is a franchise with plans to grow. In addition to its soon-to-be-opened ninth location in Elk Grove, CREAM aggressively courts franchised expansion. From CREAM’s website:
Opening a CREAM franchise is an excellent value for your money! A start-up cost of only $30,000 combined with 6% in royalties makes CREAM one of the best business opportunities available! […]
As a franchisee you will be thoroughly trained by our CREAM team, who will show you how to run your CREAM franchise efficiently and rewardingly. We have established an extensive support system that will aid you through every step of the process, especially in the initial months of operation.
With a sizable Silicon Valley expansion in the works, CREAM will shortly surpass the eleven locations threshold used by the Planning Department to determine whether or not a store falls into the category of formula retail. But by that point, it won’t matter, as CREAM is already firmly ensconced on 16th Street.
The technique of formula retail getting in early, before opening up eleven locations, is not unique to the Mission. The San Francisco Chronicle reports on how this strategy has rapidly changed Fillmore Street:
Brands with multiple brick-and-mortar locations also don’t want to be shut out by the neighborhood’s chain store laws, so they’re getting in now, before they reach the cutoff mark. Eleven or more locations puts them in violation of the “formula retail” regulation that exists in some S.F. neighborhoods, including the Fillmore, Mission and Hayes Valley. Rag & Bone, for example, paid $25,000-a-month rent on an empty space for seven months while waiting for the San Francisco Planning Commission to decide whether they were formula retail. […]
[Not] everyone has embraced the changes. Bay Area designer Erica Tanov closed her Fillmore Street shop in late 2013 after six years in business.
“The profile of the street has changed since I opened, from an independent-store-owner-type neighborhood to a more corporate mix of multinational-type brands, which is a very different kind of shopper,” Tanov said. “Unfortunately, when a handful of corporate brands open up shop, it then attracts other corporate brands and then snowballs. A new kind of customer then follows — one that is attracted to well-known labels rather than specialized, local brands.”
Of course, there’s really no way to prevent this skirting of San Francisco’s formula retails laws. Unless we decide we want to ban retailers that have on-the-book plans to operate eleven or more locations, we just have to accept that San Francisco neighborhoods have become the testing grounds of tomorrow’s formula retailers.
[Photo: Tom K. / Foursquare]