“Formula retail” has been a popular buzz phrase in San Francisco this year, as restrictions over formula retail (more commonly known as chain stores) have thwarted such businesses as American Apparel,Chipotle and Jack Spade from opening locations in certain areas of the city.
Backlash against chain stores is not a new phenomenon. Between 1980 and 2000, for example, a number of communities attempted to keep out “big-box” retailers typified by Wal-Mart, using their zoning power to limit the square footage of certain retailers. Formula retail restrictions target a broader range of businesses than just big-box retailers, capturing even smaller local brands. San Francisco’s formula retail restrictions were passed in 2004 based on the desire to both benefit the community by supporting small businesses and to maintain the distinctive character of the city’s neighborhoods. The city defines “formula retail” as a retail sales activity or establishment with at least eleven retail sales establishments in the United States and two or more of the following features: “a standardized array of merchandise, a standardized facade, a standardized decor and color scheme, a uniform apparel, standardized signage, a trademark or a servicemark.”
Though the definition of “formula retail” applies citywide, additional restrictions may apply and vary across zoning districts, resulting in a patchwork of restrictions on formula retail across San Francisco’s neighborhoods. Some zoning districts have banned all forms of formula retail, while others have passed more limited restrictions by the size of the proposed use or type of use. Where not outright banned, formula retail is typically subject to “conditional use authorization,” which requires the city’s Planning Commission to make a final determination based on a variety of criteria, including the existing concentration of formula retail in the district, the availability of other similar uses within the district and the impact of formula retail use on the aesthetic character of the zoning district.
This year, merchants in the city’s popular Mission District waged a successful campaign against Jack Spade from occupying the space of a former bookstore, with signs posted across numerous storefronts saying “Support Local Business, Oppose Jack Spade.” After the Planning Commission initially determined that Jack Spade was not “formula retail” under the statutory definition, the issue was appealed to the Board of Appeals, which hears appeals of zoning determinations in San Francisco. Though the Board of Appeals initially determined that Jack Spade was not “formula retail,” despite arguments that its association with Kate Spade caused it to meet the eleven establishment threshold in the formula retail definition, Jack Spade cancelled its plans to open in the Mission after the Board of Appeals decided to rehear the question.
While San Francisco is the largest city in the United States to have adopted formula retail restrictions, there are a number of other cities and neighborhoods that have promulgated formula retail restrictions, including Malibu, California, Nantucket, Massachusetts, and Fairfield, Connecticut. These formula retail restrictions tend to be structured similarly to those in San Francisco, defining formula retail by the number of establishments and presence of standardized features, and imposing similar bans such as an outright ban or requiring a special permit, similar to the conditional use authorization in San Francisco. Formula retail has been especially controversial in Malibu, California, as proposed formula retail regulation in the city’s Civil Center Commercial District has met with considerable backlash that has resulted in the lessening of formula retail controls in recent drafts of the ordinance.
There are undoubtedly benefits to having a brand with standardized, recognizable features – indeed, there’s a certain comfort in knowing what to expect when you see “golden arches” anywhere around the world. However, these brands also compete in areas where nostalgia for the prototypical “mom and pop store” is both deep and widespread. San Francisco’s recent experience is instructive that, even if a brand doesn’t view itself as a chain store, a litmus test of the community’s opinion of chains that includes a review of formula retail and similar zoning restrictions is one of the key to a successful launch.