In 2004, San Francisco’s Board of Supervisors adopted San Francisco’s first “formula retail” use controls, adding Section 703.3 (“Formula Retail Uses”) to San Francisco’s Planning Code to establish a definition of formula retail and a regulatory framework “to protect a diverse retail base with distinct neighborhood retailing personalities comprised of a mix of businesses.”
The Ordinance established the existing definition for formula retail as “a type of retail sales activity or retail sales establishment which, along with eleven or more other retail sales establishments, maintains two or more of the following features: a standardized array of merchandise, a standardized façade, a standardized décor and color scheme, a uniform apparel, standardized signage, a trademark or a servicemark.” This first identification of formula retail in the Planning Code provided the following controls:
1. Mandated Neighborhood Notification for most permitted uses in Neighborhood Commercial Districts (NCDs); 2. Required Conditional Use (CU) authorization for operation in specific blocks and lots in the area of Cole and Carl Streets and Parnassus and Stanyan Streets; and, 3. Established a prohibition on all formula retail uses within the Hayes-Gough Neighborhood Commercial District.
The 2004 Ordinance established a precedent for formula retail controls; a number of amendments in quick succession added districts in which formula retail uses require CU authorization, including: 2005 amendments that added the Haight Street NCD and the small-scale NCD along Divisadero Street between Haight and Turk Streets, and a 2006 amendment that added the Japantown Special Use District (SUD). In addition, a 2005 amendment added a prohibition on formula retail uses in the North Beach NCD. In 2006, Section 803.6 was added to the Planning Code, requiring CU authorization for formula retail uses in the Western SoMa Planning Area SUD.
In 2007, formula retail controls were further expanded when San Francisco voters approved Proposition G, the so-called “Small Business Protection Act,” which amended the Planning Code by adding Section 703.4, requiring CU authorization for formula retail uses (as defined in the Code) proposed for any NCD.
The passage of Proposition G set the stage for a series of further amendments to the Planning Code that have further limited formula retail uses in a range of zoning districts, through CU authorization requirements and prohibitions, as mapped above.
In 2007, a study by Ridley & Associates compared the economic impacts of “local stores” vs. “chain stores” and established three major findings:
First, formula retailers provide goods and services at a more affordable cost and can serve as retail anchors for developing neighborhoods. Second, these formula retailers can also attract new customers, and offer a greater selection of goods and services. Third, conversely, independent businesses generate a higher investment return, and overall economic growth, for the local economy in comparison to formula retailers…because they tend to pay higher wages; purchase goods and services from local businesses at twice the rate as chain stores; and employees and owners tend to live in the local area, therefore returning their earnings back to the local community.
In addition to seven other proposed or pending modifications to San Francisco’s formula retail controls which are already in the works, this week San Francisco’s Planning Commission is slated to consider a draft Ordinance from Supervisor Cohen to create the Third Street Formula Retail Restricted Use District along Third Street from Williams Avenue to Egbert Avenue and require Conditional Use authorization for any new formula retail use within said District.
With Formula Retail defined as more than eleven (11) locations, keep in mind that Blue Bottle Coffee, which now has six locations in the Bay Area and five in New York, would be prohibited from opening up a store on Third Street between Williams and Egbert without a hearing and special authorization from the Planning Commission.