The Future of Formula Retail

How we accommodate formula retail or “chain stores” in San Francisco has been a subject of much debate for more than a decade. After many months of discussion and study, the city’s Planning Commission and Board of Supervisors are preparing to weigh in on recommendations from the Planning Department to modify existing policies and redefine where and how formula retailers can operate in our city moving forward.

The city deserves credit for undertaking such a thorough evaluation. In addition to numerous meetings and hearings on the matter, the city commissioned two independent studies to understand the impacts of retail on our neighborhoods and economy. Both studies show the need for flexibility when it comes to regulating retail in San Francisco. And both underscore how important clear and justifiable regulations will be to our city’s future economic vitality.

According to the research, the presence of formula retail is valued differently in each neighborhood. In the Upper Fillmore, boutique shops have helped brand the district as a high-end shopping destination. In the Outer Mission, neighborhood-serving businesses of all sizes are the most prevalent.  In some areas, formula retail serves as an important anchor for neighborhood shopping revitalization. Clearly, there is not a one-size-fits all approach to formula retail in our city.

The presence of formula retail also provides a tradeoff between prices and spending. According to the City Controller, prices are generally lower at formula retail stores that can leverage economies of scale.  Smaller retailers are more likely to locally source business services, increasing overall economic spending. This dynamic bodes well for the city’s current conditional-use process, which evaluates new retail on a case-by-case basis.

And according to the recent research, that process is working. While the majority of formula retail conditional use permits have been approved in the city, they are sometimes denied in neighborhoods where there is consensus that it is not the best fit.  The conditional use process is engaging communities in discussions about formula retail and empowering them to influence the outcomes.

Like the city, the Chamber has dedicated much time and energy into understanding the needs of retailers in our communities and the optimal controls that will preserve both the character of our neighborhoods and a climate in which businesses can innovate and expand. For example, important factors not referenced in either study are the notable contributions of many formula retailers that are investing broadly in our city through charitable donations, workforce development, volunteerism and other efforts.

The Planning Department’s guidance on formula retail policy could not come at a better time. Earlier this week, Supervisor Eric Mar introduced blanket legislation to restrict formula retail citywide without neighborhood-based nuances that address many important issues revealed in the city’s recent research.

As the future of formula retail is redefined in San Francisco, the Chamber continues to encourage a balanced approach that ensures a place in our city for both small businesses and large retailers, based on the needs of each unique neighborhood and commercial corridor. We urge the city to keep the focus on using formula retail controls to preserve neighborhood character and promote economic prosperity, not to prevent healthy competition.