Chains Ruin Everything Around Me

Want to Open A Chain Store in the Mission? Get in Early.

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]

Comments (23)

This article acts like there’s some kind of a problem here, maybe I missed it?

“Oh no!  We’ve managed to ban already-successful businesses from our beloved vacant storefronts, but we forgot about the other, more insidious menace: <i>small local businesses that become successful later!</i>  What kind of message are we sending to our children?!”

Clearly, we must make all proprietors of Mission-based businesses sign a contract promising that they’ll never become _too_ successful or profitable at what they do.

And make sure they don’t cross their fingers behind their back when they do it, too.

Your argument such as it is forgets that the reason we prioritize small local business is that their impact on the economy is so vastly larger and better than chains we shouldn’t even have chains at all.

Local business owners source locally, pay taxes locally, and hire better locally. Now we won’t have the Erica Tanov’s of the world, thanks to people like you who afraid of unused retail space.  We can address vacant storefronts by making owners make them pretty or find a tenant. Anti bilght laws are common and foundational to cities. Much like zoning. 

” the reason we prioritize small local business is that their impact on the economy is so vastly larger and better than chains we shouldn’t even have chains at all.”

But complaints like this just venture into the absurd. The implication is that we should disapprove of a truly local business that succeeds opening other outlets elsewhere. Are we supposed to punish a taqueria with a long history in the neighborhood if they get big enough to open an outlet or two in LA? (Maybe LA should act to preserve its own local character instead, but ultimately that’s that city’s business, not ours.)

Come on boys and girls. Mr. Morse is getting at an obvious point, and ya’ll are playing dumb. The law’s intent is to give mom-n-pops a leg up for high-demand retail space, over and above chain stores. What’s the diff between a company with 10, versus 11, locations? Not much. Consider this: Many homes are rent-controlled, but retail space isn’t. Could be, that ballooning rents will make it so almost-chains are the only businesses that possess the capital to put down roots here while skirting formula retail laws. If so, I’d call the law ineffective.

I don’t think Mr. Morse is railing on those who would pursue “success.” But even if he was, I’d ask you: is there a point where success, merely for its own sake, isn’t justfiable in the marketplace’s zero-sume game? Why not allow, or even encourage, a Walmat to set up shop in the Mission District?

But what would you do about this issue? A city-mandated eviction after reaching X-number of outlets? I think that might constitute a “taking,” at least of the goodwill the business has in the location, and that would be a significant expense the City would have to cover. 

Not sure if there’s a better option; this could be the least-bad. None are good, IMAO. I *do* think the city should extend rent control to retail space in many areas. Shoulda done that a while ago. And in at least some instances, the city should force vacancy control (both residential and retail). I agree that mandated biz evictions are a no-no. But, what about giving businesses with X-or-fewer locations a certain tax exemption, which’d be revokable if the business built beyond X? I could see something like that happening. Seems like the kind of thing SF would already possess… I must confess this isn’t my area of expertise.

Just in case you’re unaware, commercial rent control is prohibited by state law, so it’s not something the City can do without statewide action. I imagine it would be pretty hard to make that happen. I think there are logistical problems with it, as well, but that’s another matter.

With enough environmental pressure, just about anything becomes politically feasible. The Ellis Act was on the table recently, in a big way. Didn’t happen. But almost.

“Why not allow, or even encourage, a Walmat to set up shop in the Mission District?”

Because that’s totally what this is about.

Taqueria Cancun has a few outlets now, so clearly they’re cleverly exploiting a formula retail ban. Let’s hope that they don’t suddenly get ambitious and open one or two more, lest they become _exactly_ like a Walmart.

Someone should go back in time and stop Levi from trying to sell his jeans

Just to be clear, the City’s formula retail rules, at least in the Mission, do not prohibit chains, they simply subject them to a heightened review process. Now, that review process may be politicized in a way that makes for a de facto ban, but in theory, it’s just a hurdle (and expense) that needs clearing.

The problem is that the review process is expensive and time consuming. Although the fee for a conditional use permit is only $1-2k, the tenant is usually expected to pay rent while waiting for a process that can take around 6-9 months without any guarantee that they’ll actually be able to open. This ends up disadvantaging smaller chains with less capital rather than larger chains.

This article fails to mention that CREAM is actually a pretty big company’s new venture, It’s-It!

Wait, Cream is actually our beloved, and I mean SF’s beloved It’s-It?  Awesome.  Actually I think there should be one in ever neighborhood, especially since they’re from SF originally.

and bastardizing Wu-tang….fuck that place.

I don’t understand how this awful place got approved. I guess the Bridge and Tunnelers love it.

The point of the post is that it didn’t have to be “approved,” because it’s under the chain store threshold. Accordingly, it was able to move in like any other business, with a simple transaction between the business and the landlord.

the one unassailable truth in all this is that CREAM is completely disgusting

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